The 2010 Sourcebook
The 2010 edition of the Fuel Oil News SourceBook has been significantly revised to make it easier for respondents to provide accurate, useful feedback, but not be overwhelmed in the process. And, in fact, our overall response was improved with more individuals working through every question than had been the case with previous surveys. While much does remain the same this year, there are some notable differences.
The goal was to cull the survey down to a subset of the most useful data for our readers, and add in some additional questions in areas not covered previously while removing much of the clutter. For example, questions that provided repetitive data were removed, such as some of the “ranking” tables that were eliminated. As was the case last year, the breakouts by region were not included because the response rates from some areas, such as the South, can be so low that quality data specific to a regional perspective often could not be produced. This year we also rounded up to whole numbers.
As is always the case, the mix of respondents changes year to year. While there is general consistency, it should be treated more as a snapshot with demographics provided up front that should provide, for personal comparison, a good idea of the respondent group.
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. For our readers’ personal comparisons, when practical this year, we worked to provide two sets of data: one based on the overall average for the group, and another with the outliers removed (generally companies that well exceeded twice the full-group average).
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. This year, we had a fewer respondents than we typically see from the West which saw 6.6% representation last year.
Geographical Region
Percent
NEW ENGLAND: Maine, New Hampshire, Vermont, Connecticut, Massachusetts, Rhode Island
35%
MID-ATLANTIC: New York, New Jersey, Pennsylvania, Maryland, West Virginia, Delaware, Washington, D.C.
42%
SOUTH: Kentucky, Virginia, Tennessee, North Carolina, South Carolina, Louisiana, Mississippi, Alabama, Georgia, Florida
8%
MIDWEST: Ohio, Indiana, Illinois, Michigan, Minnesota, Iowa, Missouri, Arkansas, North Dakota, South Dakota, Nebraska, Kansas, Wisconsin
12%
WEST: Oklahoma, Texas, Montana, Wyoming, Colorado, New Mexico, Idaho, Utah, Arizona, Nevada, Washington, Oregon, California, Alaska, Hawaii
3%
Revenue
From a revenue standpoint, the overwhelming numbers of respondents (49%) enjoy revenues between $1 million and $5 million. Some 39% had higher revenues and 12% had lower revenues.
Revenue
Response Percent
less than $1 million
12%
$1 to $5 million
49%
$5 to $10 million
15%
$10 to $25 million
10%
$25 to $50 million
8%
more than $50 million
6%
Number of Employees
The average operation for the full group featured about 32 employees. This was definitely driven by several companies that had many times the average in total number of employees, but not extraordinary figures for delivery drivers and service technicians. Also, since not all companies had service technicians the total average skews that number lower. The second figure (included in parentheses) moves away from the total average to just include the average for companies that actually had service technicians for those interested in an ‘apples to apples” comparison with their operations.
.
Number of employees, including yourself
Number of service technicians
Number of delivery drivers
32
6 (7)
7
As noted, some of the respondents were far larger than what would be considered a typical fuel oil dealer. The adjusted table provides an industry perspective closer to the typical dealer with the largest operations (at least twice as large as the gross average) removed.
(adjusted)
Number of employees, including yourself
Number of service technicians
Number of delivery drivers
19
4 (5)
6
Number of Customers
The second figure included in parentheses moves away from the gross average to just include the average for the companies that serve those specific customers.
Number of home-heating customers
Number of commercial/industrial customers
Number of propane customers
2940 (3008)
232.7 (263)
686.4 (2746)
As noted, some of the respondents were far larger than what would be considered a typical fuel oil dealer. The adjusted table provides an industry perspective closer to the typical dealer with the largest operations (at least twice as large as the gross average) removed. The second figure included in parentheses moves away from the gross average to just include the average for the companies that serve those specific customers.
(adjusted)
Number of home-heating customers
Number of commercial/industrial customers
Number of propane customers
1813 (1859)
128 (146)
368.3 (1678)
Sources of Revenue
When looking at sources of revenue, it’s not surprising that 92% of respondents provided retail fuel oil. Nearly 40% provided bulk fuel. Some 17% provided propane service and 73% HVAC sales and service. Other revenue sources not listed included retail and bulk diesel sales.
Revenue Sources
Retail fuel oil
92%
Bulk fuel oil
32%
Retail gasoline
21%
Bulk gasoline
19%
LGP/LNG, retail or bulk
17%
Heating equipment sales
72%
Air-conditioning equipment sales
51%
Fuel Oil Sales by Volume
When looking at the percentage of fuel oil sales by volume, it is similarly not surprising that roughly 82% of that volume goes to residential customers. The second figure included (in parentheses) moves away from the gross average to just include the average for the companies that serve those specific customers.
Percentage Breakdown of
Annual Fuel-Oil Sales, by Volume
Residential
82% (84%)
Commercial
16% (17%)
Industrial
2% (5%)
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. Nearly a third of respondents (29%) sold a biofuel blend. Of those selling a blend, 100% of the respondents sold B5 (5% mixture), and 25% sold B20 (25% mixture). Other blends sold, but not quantified in the survey, included B2 (2% mixture) and B99 (99% mixture). In addition to biofuel, 64% sold a heating fuel with ultra low sulfur content.
Petroleum Futures, Price Protection and Online Ordering
There is a roughly even split among respondents between the companies that participate in the futures market and those that don’t, with 47% participating. A similar split occurs with price protection programs, only 51% offering such a program to their customers. Of those that offer price protection 25% of their customers take advantage of the opportunity. Some 33% of respondents charge a fee for the program and 23% a buyout option. Slightly less than one third of respondents (31%) offer their customers online ordering.
Fuel Margin
The average fuel margin was fairly consistent among respondents; however several fuel oil marketers had goals almost twice as high as the average. The number in parentheses reflects removing these companies from the totals. That was not the case with the propane respondents which were far more consistent.
What is your goal margin on fuel oil?
Retail
$0.69 ($0.66)
Commercial
$0.51 ($0.42)
Propane
$0.99
Bulk Plant Operations
Some 55% of respondents operated a bulk plant with an average storage capacity of 396,273 gallons. As with other areas, several large players provide storage capacity considerably beyond the average figure. At the top end of the scale several respondents had roughly 2.5 million gallons of storage while a number many had 20,000 to 50,000 gallons. When the largest players are removed, the average storage capacity comes out to 156,211 gallons. An even 50% of respondents stored other petroleum products in their bulk plants and 68% had substantially upgraded their bulk plants in the past 10 years.
Fuel Additives
A total of 86% of respondents used fuel oil additives. The additives were blended in a variety of manners that often overlapped:
Where Blended
Bulkplant tanks
68%
On trucks
37%
Directly into customer tanks
58%
The Service Department
Roughly 77% of respondents operated a serviced apartment.
Service Department
Service calls
1,452
Service inventory
$112,333
Service vans
6
As noted, some of the respondents were far larger than what would be considered a typical fuel oil dealer. The adjusted table provides an industry perspective closer to the typical dealer with the largest operations (at least twice as large as the gross average) removed.
(Adjusted)
What is your goal margin on fuel oil?
Service calls
560
Service inventory
$39,000
Propane
4
The figures for service vans track well with the number of service technicians noted earlier in the survey. Some 51% 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 2,920 gallons. For Class 8 trucks, the second figure included (in parentheses) moves away from the gross average to just include the companies that actually operate Class 8 trucks.
Trucks Owned and Leased
Owned and leased
8
How many are Class 7?
7
How many are Class 8?
1 (4)
As noted, some of the respondents were far larger than what would be considered a typical fuel oil dealer. The adjusted table provides an industry perspective closer to the typical dealer with the largest operations (at least twice as large as the gross average) removed.
(Adjusted)
Trucks Owned and Leased
Owned and leased
6
How many are Class 7?
5
How many are Class 8?
1 (2)
Some 37% 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. The number of trailers reported tracks the reported number of Class 8 tractors.
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. The new engines are more expensive than the previous engines and many engine manufacturers worked overtime to make sure there was a healthy supply of 2009 engines in the marketplace during the 2010 ‘switchover” model year. These engines have largely worked their way through the supply chain and, moving forward, it will be difficult to purchase a diesel truck that does not use one of the new emission technologies. With SCR being the most produced engine solution, 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
34%
IBC totes
8%
Don’t understand the question
27%
Unfortunately, 27% of respondents are apparently unaware of the new requirement, which represents a continuing educational goal for the magazine.
Customer Tanks
Respondents reported that 80% of their home heating customers had 275 gallon tanks, 15% had 550 gallon tanks and 5% had a tank of a different size.
Delivery Technology
Where delivery technology is concerned, cellular phones still play a critical role in the delivery process. However, two-way radio equipment, GPS tracking and dispatch support software each have a solid user base among respondents.
For Deliveries, Do You Use:
Two-way radio equipment
39%
Cellular phones
95%
Pagers
9%
GPS tracking
36%
Dispatch support software
30%
HVAC Equipment and Service
