Downstream

• Sponsorship of UK downstream oil market
•  Refining
•  Petroleum products market
•  Prices
•  Taxation
• Environmental standards and product quality
• Health and safety legislation (including licensing of petrol stations)
• Competition
• Useful contacts and sources of information (including recent select committee reports)

Sponsorship of UK downstream oil market

The UK Government's main objective for the UK downstream oil sector is to promote open and competitive markets. This policy is set within the overall policy framework of creating strong and competitive energy markets that will ensure the UK has secure, diverse and sustainable supplies of energy at competitive prices.

The Department of Trade and Industry (DTI) is the sponsoring UK Government department for the downstream oil industry, covering the refining and oil products markets. It represents the industry's views in UK and EU policy formulation. This includes regular consultation with oil companies, industry trade associations and other players.

The DTI does not lead within the UK Government on regulation as the majority of regulation covering the refining and oil products markets covers environmental and health and safety areas, which are the responsibility of the Department of the Environment, Transport and the Regions (DETR), the Environment Agency (EA) and the Health and Safety Executive (HSE). Competition policy is the responsibility of the Office of Fair Trading (OFT). Please refer to the separate sections covering these areas and the section on useful contacts and sources of information.

Petroleum products market

The UK oil products market mainly consists of motor fuels, gasoil and kerosene primarily for space heating, and heavy fuel oil primarily for space heating and power generation. This section will primarily cover the largest UK products market, the retail market for motor fuels.

Data on information relating to petrol retail sites are given in Table 1. This information is taken from the Institute of Petroleum's "UK Retail Marketing Survey" published as a supplement to its "Petroleum Review" magazine each March (www.petroleum.co.uk). Since 1990, the number of petrol sites in the UK has fallen from 19,465 to 13,043 a reduction of almost a third. Most of the closures have come from the smaller independently-owned dealer-owned sector. The proportion of company owned sites and average site throughputs have increased (for reasons of efficiency). The number of sites classified as "self service" (no pump attendants) has declined slightly in recent years after increasing during the early part of the decade. Around 80 per cent of all petrol retailing outlets have "convenience" shops (some also have restaurants) which explains why non-petrol revenues have grown in importance during the 1990s.

The petrol retailing market is still dominated by the oil companies - Esso, BP, Shell, TotalFinaElf, Texaco and Conoco account for around 58 per cent of total UK petrol retailing sites. The supermarkets now have around 1,041sites, or 8 per cent of the total. This compares with just 290 sites in 1990 (or 1.5 per cent of total). Supermarket sites are generally larger than those of the oil companies, having almost twice the number of fuelling positions. The smaller petrol retailing companies typically have 100-500 retail outlets, whilst there are around 900 unbranded, privately owned retail sites.

Retail sales of petrol totalled 28 billion litres in 2000 (retail sales of DERV fuel were 8½ billion litres), slightly lower than in 1999. Average site throughput of petrol (see Table 1) has increased steadily through the 1990s, from 1.62 million litres in 1990, to 2.12 million litres in 2000. Further statistics on the UK petroleum products market are available from DTI's monthly "Energy Trends" publication, http://www.dti.gov.uk/epa/et and its annual "UK Digest of UK Energy Statistics", http://www.dti.gov.uk/epa/dukes. If you want to subscribe to "Energy Trends", please contact Gillian Purkis, tel. 020 7215 2697, Gillian.Purkis@dti.gsi.gov.uk.

Prices

The DTI publishes monthly average petroleum product prices in "Energy Trends" (link). Latest provisional average prices are published in the monthly "Advance Energy Statistics" press notice issued on the first Tuesday of each month. Historical price information is published in "The UK Digest of Energy Statistics", http://www.dti.gov.uk/epa/dukes.

Taxation

Taxation of petroleum products is the responsibility of HM Treasury and HM Customs and Excise. Duty rates for hydrocarbon oil products are available from Customs and Excise press notice BN107/01 of 7 March 2001: "Hydrocarbon Oils: Changes in duty rates" available from http://www.hmce.gov.uk.

VAT of 17.5 per cent is incurred on oils used in motor vehicles. The rate for heating oils such as kerosene, gas oil and LPG is 5 per cent. A useful table (table 9.16) chronicling historical rates of duty and VAT is included in the "UK Digest of Energy Statistics", http://www.dti.gov.uk/epa/dukes.

The main legislation covering duty policy on hydrocarbon oils is the Hydrocarbon Oil Duties Act 1979, and subsequent regulations (available from The Stationery Office, http://www.ukstate.com.  Further information on this legislation and other duty issues is available from HM Customs and Excise (please see section on "Useful Contacts and Sources of Information (including Select Committee reports).

Environmental standards and product quality

EU Auto Oil Programme

The Auto-Oil programme has brought together the oil and automotive industries and the European Commission to agree tighter fuel specifications to reduce greenhouse gases and other pollutants. Under the Auto Oil I programme, which resulted in directive 98/70, specifications were agreed for 2000, which came into effect on 1 January 2000 (the directive is available from the European Commission website, www.europa.eu). The directive was transposed into UK law by the Motor Fuel (Composition and Content) Regulations 1999 (SI. 1999/3107, available from The Stationery Office Ltd, http://www.ukstate.com. The main specifications for petrol were 150 ppm sulphur and 42% vol. max for aromatics and for diesel, 350 ppm sulphur and 845 kg per cubic metre max. density.

The directive also agreed some specifications for 2005: 50 ppm sulphur and 35% vol.max. aromatics for petrol and 50 ppm sulphur for diesel and banned the general sale of leaded petrol from 1 January 2000.

Other EU Directives

The Sulphur Content of Liquid Fuels Directive (1999/32/EC) was implemented in the UK by regulations that came into force on 27 June 2000. These limit the sulphur content of gas oil, including that for marine use, to 0.2 per cent from 1 July 2000 (no change apart from marine) and to 0.1 per cent from 1 January 2008. Similarly, heavy fuel oil sulphur content will be limited to 1 per cent from 1 January 2003 as compared to a current specification of 3.5 per cent, with the option of having a limit on total sulphur dioxide emissions rather than fuel sulphur. This is important to oil refineries which burn sulphur free gas as well as fuel oil. Although fuel oil now represents a very small part of UK demand, this further tightening will reduce the flexibility to process higher sulphur crude in future and therefore increase reliance on North Sea crude sources.

Motor Fuel Standards

Four main types of fuel are sold at UK petrol retail sites. These are:

• 95 octane unleaded petrol;
• 97 octane unleaded petrol (super-unleaded);
• lead replacement petrol (LRP);
• diesel (DERV).

The European Fuels Directive 98/70/EC, implemented into UK law by the Motor Fuels (Composition and Content) Regulations 1999, covers the technical requirements for these fuels, including chemical composition. The fuels also meet the requirements of the following British Standards ( http://www.bsi-global.com ):

• 95 octane unleaded - BS EN 228:2000;
• 97 octane unleaded - BS 7800:2000;
• DERV - BS EN 590:2000.

Ultra low sulphur fuels are required to meet the following additional requirements:

• Petrol - for those grades listed above, a maximum sulphur content of 50 parts per million (ppm) as opposed to 150 ppm allowed in 98/70/EC, and a maximum aromatics content of 35 per cent volume as opposed to 42 per cent in 98/70/EC;
• DERV - maximum sulphur content of 50 ppm as opposed to 350 ppm allowed in 98/70/EC, and a maximum density of 835 kg/m3 as opposed to 845 kg/m3.

In addition the requirements for autogas (liquid petroleum gas) are covered by BS EN 589:2000.

Health and safety legislation (including licensing of petrol stations)

Control of Major Accident and Hazards

The main current legislation covering the downstream oil sector are the Control of Major Accident and Hazards (COMAH) regulations 1999 implemented by the Health and Safety Executive (HSE).

Licensing of Petrol Stations

UK motor fuels outlets are subject to a licensing regime under the Petroleum (Consolidation) Act (PCA) 1928, and subsequent regulations, which is the responsibility of the HSE. The PCA is enforced by local authorities, which have individual petroleum licensing officers. The existing PCA licensing regime is currently being reviewed by the Health and Safety Commission (HSC) as part of a project to implement the EU Chemical Agents Directive. For further information, please visit the HSE website, http://www.hse.gov.uk.

Competition

The UK downstream oil market is subject to competition law. The Director General of Fair Trading (DGFT) has responsibility under the Competition Act 1998 and the Fair Trading Act 1973 to investigate allegations of anti-competitive agreements and abuses of dominant market positions. The Office of Fair Trading (OFT) is responsible for enforcing competition law in the UK.

Recent Reports

Details of the reports below are available from the OFT website, http://www.oft.gov.uk.

(i) "Competition in the supply of petrol in the UK - a report by the Office of Fair Trading (May 1998).

Competition authorities in the UK have held a number of inquiries into the UK petrol market over the past decade. The OFT published the last major review of the market, "Competition in the supply of petrol in the UK", in May 1998 (please see OFT press notice 23/98 of 18 May 1998). The review did not find any evidence to suggest that petrol prices across the UK reflected either predatory or collusive behaviour on the part of suppliers or retailers. Overall, it was found that the market was operating competitively for the benefit of the consumer and did not warrant any intervention now, although the OFT would monitor the market to ensure that this situation did not change.

(ii) "Petrol and Diesel in the Highlands and Islands - an Office of Fair Trading review of petrol and diesel prices in the Highlands and Islands (July 2000").

The second comprehensive OFT inquiry into the price of petrol and diesel in the Highlands and Islands in recent years concluded that, with the possible exception of the Western Isles, that were was no evidence of anti-competitive behaviour and that pump prices reflected the conditions of the market (please see OFT press notice 28/00 of 13 July 2000).

(iii) "Office of Fair Trading inquiry into wholesale petrol and diesel prices in the UK (November 2000)"

Following allegations by independent petrol retailers of oil company differential wholesale pricing, the OFT carried out an inquiry into wholesale petrol and diesel prices and he announced its findings on 21 November 2000 (please see OFT press notice 47/00). The DGFT said that a combination of high world oil prices and public pressure on UK retail prices had resulted in a squeeze on diesel and petrol margins, rather than anti-competitive behaviour on the part of the major oil companies.

The DGFT said the Office of Fair Trading would continue to monitor the UK motor fuels market very closely and would not hesitate to take action if it found that firms in the industry were deliberately damaging competition.

Useful contacts and sources of information

• Oil companies and major petrol retailers (by retail market share)
• Trade associations
• Government departments and agencies
• Other useful contacts List of relevant legislation covering UK downstream oil market

Oil companies and major petrol retailers (by retail market share*).

Trade associations

Government departments and agencies

Other useful contacts

List of relevant legislation covering UK downstream oil market

Competition

• Fair Trading Act 1973.
• Competition Act 1998.

• Sale of Goods Act 1979.
• Trade Descriptions Act 1968.

• Hydrocarbon Oil Duties Act 1979, and subsequent regulations.

• Environment Protection Act 1990 and subsequent regulations.
• Environment Act 1995.
• Groundwater Regulations 1998.

• Clean Air Act 1993, and subsequent regulations.
• Motor Fuel (Composition and Content) Regulations 1999.

• Control of Major Accident Hazard Regulations 1999.
• Health and Safety at Work Act 1974.

• Petroleum (Consolidation) Act 1928, and subsequent regulations.

• Pipelines Act 1962.
• Pipeline Safety Regulations 1996.

The above legislation is available from The Stationery Office Ltd, Tel. 0870 600 5522, http://www.ukstate.com

Recent Select Committee Reports Covering Downstream Oil Industry

• "House of Commons Session 1995-96 Trade and Industry Committee Sixth Report - Petrol Retailing (HC 527), 17 July 1996".
• "House of Commons Session 1996-97 Replies From The Government And From The Director General Of Fair Trading To The Sixth Report From The Trade and Industry Committee, Session 1995-96, On Petrol Retailing (HC 527), 16 December 1996".
• "House of Commons Session 2000-01 Trade and Industry Select Committee Fifth Report - Impact On Trade and Industry Of Motor Fuel Taxation, 6 March 2001".
   

Back | Title | Table of Contents
Appendix 1 | Appendix 2 | Appendix 3 | Appendix 4 | Appendix 5 | Appendix 6 | Appendix 7 | Appendix 8 | Appendix 9
Appendix 10 | Appendix 11 | Appendix 12 | Appendix 13 | Appendix 14 | Appendix 15 | Appendix 16 | Appendix 17
Index Map | Plate 1 | Plate 2W | Plate 2E | Plate 3W | Plate 3E | Plate 4W | Plate 4E | Plate 5 | Plate 6
Plate 7 | Plate 8W | Plate 8E | Plate 9W | Plate 9E | Plate 10W | Plate 10E | Plate 11 | Plate 12 | Legend