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The 2014 Sourcebook

It’s time once again for the annual Fuel Oil News Sourcebook. The goal is to offer a snapshot of our readership (relative to the specific respondents that year) that represents a comparison benchmark. We comb though the data to eliminate failed survey responses. Within the accepted data, some respondents might be smaller dealer operations, and others larger marketer/wholesaler operations that are far from typical and that might only operate home heating oil delivery and service as a division of a much larger and more diversified operation. This survey is confidential and we cannot (nor would we) specifically identify the companies that provided a response, but a thoughtful look at the outliers would suggest the above assumptions are accurate. However, both the typical smaller fuel oil dealer and large regional diversified petroleum and fuel oil specific marketers are part of the industry’s competitive landscape.


Outliers that are significantly skewed in either direction are removed and in some cases the responses are averaged with previous year if that specific question failed to elicit a notable response rate. Regional Demographics From a regional perspective, and as is typically the case, the vast majority of respondents were from New England or the Mid-Atlantic states. Geographical Region Percent

NEW ENGLAND: Maine, New Hampshire, Vermont, Connecticut, Massachusetts, Rhode Island 46%
MID-ATLANTIC: New York, New Jersey, Pennsylvania, Maryland, West Virginia, Delaware, Washington, D.C. 36%
SOUTH: Kentucky, Virginia, Tennessee, North Carolina, South Carolina, Louisiana, Mississippi, Alabama, Georgia, Florida 0%
MIDWEST: Ohio, Indiana, Illinois, Michigan, Minnesota, Iowa, Missouri, Arkansas, North Dakota, South Dakota, Nebraska, Kansas, Wisconsin 9%
WEST: Oklahoma, Texas, Montana, Wyoming, Colorado, New Mexico, Idaho, Utah, Arizona, Nevada, Washington, Oregon, California, Alaska, Hawaii 9%
Revenue

From a revenue standpoint (and as has been the case for several years now), the overwhelming numbers of respondents (42%) enjoy revenues between $1 million and $5 million. Revenue Response Percent less than $1 million 10% $1 to $5 million 42% $5 to $10 million 17% $10 to $25 million 20% $25 to $50 million 3% more than $50 million 8%


Number of Employees

The average operation for the full group featured about 17 employees.

Number of employees, including yourself 17
Number of service technicians 6
Number of delivery drivers  6
Number of Customers

Number of home-heating customers 3720
Number of commercial/industrial customers 45
Number of propane customers 1333
Sources of Revenue

Retail fuel oil was, not surprisingly, a primary source of income for 97% of respondents. Some 25% provided bulk fuel oil and 86% HVAC sales and service. Propane and gasoline (retail and bulk) jumped this year likely because a number of the current respondents appear to be more diversified petroleum marketers.


Revenue Sources

Retail fuel oil 97%
Bulk fuel oil 25%
Retail gasoline 32%
Bulk gasoline 30%
LGP/LNG, retail or bulk 43%
Heating equipment sales 86%
Air-conditioning equipment sales 75%
Fuel Oil Sales by Volume

When looking at the percentage of fuel oil sales by volume, it is similarly not surprising that roughly 87% of that volume goes to residential customers.


Percentage Breakdown of Annual Fuel-Oil Sales, by Volume

Residential 87%
Commercial 12%
Industrial 1%

Biofuel and Ultra Low Sulfur


There has been a strong movement in the industry towards biofuel-based heating oil and ultra low sulfur diesel. This has been driven for a range of reasons’these green fuels tend to appeal to residents in the primary heating markets; they can significantly simplify heating appliance maintenance; and they represent an opportunity to be an acceptable fuel in any low carbon fuel standard that might be set in key heating oil markets. One-third of respondents (33%) sold a biofuel blend. In addition to biofuel, 61% sold a heating fuel with ultra low sulfur content, which was a decrease from last year (which might have reflected more New York respondents).


Petroleum Futures, Price Protection and Online Ordering

Some 73% with this year’s participate in the futures market and 71% offer price protection programs. Of those that offer price protection 38% of their customers take advantage of the opportunity. Some 43% of respondents charge a fee for the program and 31% a buyout option. A total of 67% offer their customers online ordering.


Fuel Margin

The average fuel margin was fairly consistent among respondents and in line with the goal from last year. What is your goal margin on fuel oil?

Retail $0.69
Commercial $0.32
Propane $1.17
Bulk Plant Operations

Some 48% of respondents operated a bulk plant with an average storage capacity of 152,500 gallons. Some 67% of respondents stored other petroleum products in their bulk plants and 93% had substantially upgraded their bulk plants in the past 10 years.


Fuel Additives

Some 84% of the respondents used fuel oil additives. The additives were blended in a variety of manners that often overlapped: Where Blended Bulkplant tanks 32% On trucks 48% Directly into customer tanks 57%


The Service Department

Roughly 90% of respondents operated a serviced department.
Service Department Service calls 1,672
Service inventory $87,212
Service vans 8

Some 26% of respondents indicated they were considering the purchase of new service vehicles in the coming year. Delivery Trucks For delivery trucks, the optimal desired storage capacity among respondents averaged out at 2,887 gallons.


Trucks Owned and Leased

Owned and leased 9
How many are Class 7? 8
How many are Class 8? 2
Number of trailers 3

Some 30% of respondents indicated that they would likely be buying a new truck in the coming year and 14% indicated that they would be buying a new tank amount on existing chassis.


Diesel Exhaust Fluid

New environmental regulations require that diesel engines offer enhanced emissions technology. This involves either selective catalytic reduction (SCR) or exhaust gas recirculation (EGR). SCR technology provides a notable boost in fuel efficiency and power compared to EGR, but requires the use of diesel exhaust fluid (DEF) that is stored in a separate tank. SCR technology is seen as being the dominant technology between the two alternatives. Respondents were asked to identify how they were going to meet the DEF requirements for their fleets of vehicles. DEF Solutions:

Jugs 31%
55 gallon drums 36%
IBC totes 3%
Don’t understand the question 21%

Unfortunately, as was the case last year, 21% of this year’s respondents are apparently unaware of the new requirement.


Customer Tanks

Respondents reported that 90% of their home heating customers had 275 gallon tanks, 9% had 550 gallon tanks and 1% had a tank of a different size.


Delivery Technology

Where delivery technology is concerned, cellular phones continue to play a dominant role in the delivery process. However, two-way radio equipment, GPS tracking and dispatch support software each has a solid user base among respondents. For Deliveries, Do You Use:

Two-way radio equipment 39%
Cellular phones 86%
Pagers 6%
GPS tracking devices 39%
Dispatch support software 30%
HVAC Equipment and Service

Roughly 86% of respondents install and/or service heating and cooling equipment. As would be expected, oil related appliances were heavily sold, installed and serviced (with 100% of respondents selling oil burner equipment). However, 16% were involved with solar heating, 14% with wood pellet systems, 89% with air-conditioning, 14% with electric resistance and 75% with gas burners.


Do you sell, install or service any of the following equipment?

(Select all that apply)

Oil burners 100%
Furnaces (gas/oil/electric) 98%
Domestic hot-water systems 88%
Warm-air systems 80%
Radiant heating systems 67%
Gas burners 75%
Boilers (oil/gas/electric) 96%
Hydronic systems 89%
Solar systems 16%
Wood pellet systems 14%
Air-conditioning 89%
Electric resistance 14%

The vast majority of the HVAC business was residential ‘ 90%. Some 67% of respondents noted an increase in residential business in the previous year while 44% of respondents noted an increase in commercial business during the previous year. A total of 96% of respondents noted they recommended a brand name to their customers when a replacement was required.


Other Business Operations

A total of 17% of respondents reported having significant business operations outside of residential and commercial heating.


Marketing and Promotion

Aside from contributions to associations for group campaigns, 68% of respondents conducted their own advertising. This included the local paper, email marketing, direct mail, TV, radio and billboards. Some 73% specifically cited using direct mail. A total of 58% of respondents leveraged public relations to help with their marketing that included: charitable events, local political activity, FaceBook and Twitter. Some 88% of respondents were members of industry trade associations and 63% of those indicated at least some involvement with the associations’ legislative support activities.


The Natural Gas Threat

As might be expected, 80% of respondents believed natural gas posed a serious threat to their operations. Some 89% of respondents reported losing customers to natural gas conversions. The average number of customers lost was reported as 79. Some 50% are aggressively working to counteract the threat. Respondents provided information on how they work to counter this threat. With current high oil prices many responses were fairly pessimistic. On a more proactive front, the responses included:

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