Petrol retailing, however, is a fiercely competitive business and becoming even more so because of several factors, ranging from environmental legislation to changing consumer trends.
These pressures are forcing the industry into a fundamental rethink of its approach to petrol retailing that is likely to cost about pounds 500m in the next three years.
By any standards, the market is big, with more than pounds 19bn spent on motor fuels in Britain last year. However, the industry has been struggling with slow growth in petrol demand, partly because of more fuel-efficient cars. This has been exacerbated by a substantial over-capacity in refining and a glut of cheap petrol, enabling a new competitor to muscle in on a prime patch: supermarkets.
As a result, returns for the oil firms from refining and selling petrol have been low. According to a report in 1990 by the Monopolies and Mergers Commission, oil companies achieved an average return of 2 per cent on invested capital over five years, compared with 22 per cent for food retailers.
Not surprisingly, most big oil companies have been scaling back their networks. The number of petrol stations in the UK has fallen by almost a quarter to 18,500 in the past decade and could drop to about 11,000 over the next five years due to intensifying competition.
Industry estimates suggest that supermarket chains, led by Tesco and Sainsbury's, have built up a 16 per cent market share in the past five years, with the biggest gain coming over the past three.
Most industry pundits believe the supermarkets' share will climb to about 25 per cent by the end of the decade. Much of their success has been based on selling fuel at prices that are about 15p per gallon cheaper than those offered by oil companies.
However, many oil firms complain that they are fighting a tough battle at a huge disadvantage. Because of the far greater number of people who pass through supermarkets, their petrol forecourts enjoy customer volumes three times the size of trade at an average site.
'The petrol market has been competitive for a long time,' said David Pirret, general manager of Shell UK's retail division.
'The difference that supermarkets have brought is that they do not operate from the same base. Whereas oil companies have to look at potential traffic volumes into their forecourts, hypermarkets attract their own traffic and don't face the same risks in making a wrong judgement about a site.'
Large oil companies also claim that supermarkets can offer lower prices because their petrol is of basic quality and does not contain additives and detergents that prolong engine life and improve performance and fuel efficiency. Independent research appears to bear out these claims: a recent test concluded that Shell's petrol was about 300 times cleaner than supermarket fuel.
So far, only Esso, Shell and British Petroleum - Britain's top three petrol companies - provide the additives as standard in all their fuels. But their claims - backed by a multi-million-pound advertising campaign - have stung Sainsbury's into starting to offer better-quality fuel, although it remains to be seen whether the price differentials will narrow.
Intense lobbying by oil companies earlier this year also forced supermarkets to maintain a strategic reserve of petrol for security. For many decades, oil companies have been required by law to hold large stock levels, but supermarkets had managed to avoid that obligation.
Another bone of contention is that supermarkets concentrate on locations offering a high turnover, while oil firms say they have been under a social obligation to run costly service stations in remote areas. They warn that such sites are increasingly becoming untenable on commercial grounds.
One reason is the mounting cost of complying with environmental laws, which range from the replacement of underground petrol tanks with new double-skinned vessels, to proposals on vapour recovery that could cost well over pounds 1bn. If the expense of improving Europe's oil refineries is included, the total bill could top pounds 5bn.
Faced with pressure from all sides, oil companies have come up with a range of strategies to win custom. While price competitiveness will remain a key feature of the petrol market, it will become less important. Instead, brands and the forecourt shop are now the main battlegrounds.
'Oil companies have been slow to manage their brands and have not been as aggressive as some other sectors,' Mr Pirret said.
As a result, one company's petrol has been perceived as a homogenous commodity with nothing to differentiate one product from another. Moreover, research carried out by companies showed that petrol stations were regarded by many consumers as unfriendly.
But by improving forecourt design and converting station shops into 24-hour convenience stores, oil companies have gained an opportunity to boost non-petrol revenues and enhance their brand appeal.
'We have seen a huge shift in shopping habits over the past decade. The traditional high-street shop has been in steady decline because most people do their main shopping at a supermarket and then frequently 'top up' their purchases at convenience stores,' said Declan Collier, Esso's shops manager.
Some oil companies have overhauled their strategy and hired retailing experts to redesign forecourts at a cost of hundreds of millions of pounds. Esso, advised by Sir Terence Conran, has converted most of its 1,000 company- owned shops to a new format, while Shell is investing about pounds 350m over three years to introduce a new retail format in its 2,350-strong network.
The most radical approach has been taken by Texaco, which has also turned its forecourts inside out. Helen Clark, brand manager, said: 'We believe the shops are the main profit centre for the future because petrol is a very competitive business. We have taken branding much further than introducing a new colour scheme. We have looked at the fundamentals of design. Our research showed that all petrol stations were seen as being the same, so we've tried to change that.'
The revamp inside the petrol shops is equally marked, with most companies boasting a product line of about 3,000, ranging from fresh fruit and fast food to on-site bakeries. Most new-style forecourts also provide toilets and some boast cash dispensers. This shift has been complemented by a heavy marketing spend on sales promotions, petrol coupons and television and press advertising. The benefits have proved dramatic, with some new stores generating nearly half their revenue from groceries.
Overall, it is estimated that petrol companies have captured about a quarter of the pounds 5bn convenience store market in the UK. That share could rise much further were the Government to allow forecourts to sell alcohol, as in the US and some Continental European countries.
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