Petroleum and Petroleum Products Wholesalers, Except Bulk Stations and Terminals

SIC 5172

Companies in this industry

Industry report:

Companies that wholesale petroleum and petroleum products from bulk liquid storage facilities are in SIC 5171: Petroleum Bulk Stations and Terminals.

Industry Snapshot

According to statistics compiled by the U.S. Census Bureau, the number of firms engaged in the wholesale distribution of petroleum and petroleum products has been contracting since the early 1980s. Between the mid-1980s and the middle years of the first decade of the 2000s, the number of firms fell off by nearly one-third. Consolidation continued into the 2010s. Nevertheless, more than half of the 2,740 firms operating in the industry in 2009 were small, with 60 percent employing fewer than 20 employees. Small and midsize firms, with 10 to 250 employees, generated over 75 percent of revenues. Texas, Florida, and Oklahoma were home to the largest number of firms and generated approximately 43 percent of industry revenues. The total value of this industry in the United States was approximately $296 billion.

Organization and Structure

Although most large retail suppliers buy directly from refineries, many smaller retailers, such as truck stops, convenience stores, and farming operations, purchase their petroleum products from a petroleum wholesaler. Approximately 90 percent of retail gasoline distribution in the United States is sold by independent retailers and wholesalers; only 10 percent is operated by large petroleum company chains. The wholesaler purchases product directly from the refineries, stores it, and then resells it to these traditionally smaller operations.

From an overall petroleum industry perspective, the transactions between wholesalers and the retail level are among the least efficient components of the supply chain, due to the sheer number of transactions and their fixed order and delivery costs. As a result, the cost per transaction tends to be higher. Thus, the wholesale channel was a major target of the industry's efforts at consolidation as an attempt to boost overall efficiency and cost savings, leading to the industry's contraction.

Moreover, the majority of wholesalers remained relatively small and thus lacked the economies of scale to afford high-level electronic data and tracking equipment that would more thoroughly and systematically track their activities through the supply chain. As the petroleum industry consolidated and moved toward integrating supply chains among all trading partners, from the refinery stage to retail, the pressures on distributors continued to grow.

The industry is served by the Society of Petroleum Engineers (SPE), which conducted extensive research into methods of transport for oil and gas, among many other endeavors. The American Petroleum Institute (API) and the National Petroleum Council (NPC) were also crucial to industry players.

Background and Development

The petroleum industry underwent a major consolidation wave in the early years of the first decade of the 2000s as key oil companies restructured and joined forces to boost their efficiency and leverage. Through 2006, major oil firms, meanwhile, continued to enjoy record profits as a result of high energy prices and cost-cutting measures stemming from merger activity. The continuing impact of the Iraq war, Hurricanes Katrina and Wilma in the Gulf Coast in 2005, and problems with the Alaskan pipeline all contributed to the record high crude oil prices in 2005 and 2006. By the summer of 2006, U.S. refineries were paying approximately $68 per barrel of oil, compared to $31 per barrel in early 2004. Market conditions improved slightly by the end of 2006, with prices dropping to about $60 per barrel.

Due to a myriad of economic and political factors, the price of oil per barrel skyrocketed during 2007, reaching a record high of $147 per barrel in July 2008, placing the industry--and the U.S. economy--in an uproar as prices at the pump rose to over $4 per gallon. However, by November 2008, the price experienced a sudden collapse, falling to approximately $65 per barrel. By June 2009, prices were at around $70 per barrel, and at the end of 2010 they stood at around $80 per barrel.

Current Conditions

By the second decade of the twenty-first century, the petroleum wholesaling industry in the United States was considered to be in a state of decline, according to a report by market research firm IBISWorld. Profit margins were falling, and the ability to adjust to the constantly changing prices of oil was difficult for all but the largest firms. The trend toward more fuel-efficient and alternative-fuel vehicles was also expected to lessen demand for petroleum.

Other industry experts agreed that the extreme volatility of prices in this industry resulted in significant swings in revenues and suggested that the larger firms would be better positioned to withstand the ebbs and flows of the market in the future. In addition, they were better positioned to negotiate with the refineries for the best prices, which the Energy Information Association predicted would continue to increase at an annual rate of 2.3 percent through the next two decades, with the price of imported crude oil reaching approximately $133 a barrel (in 2010 dollars) by 2035. The financial state of their customers was also expected to play a significant role in the state of the petroleum wholesaling industry in the United States through the 2010s and beyond. The wholesalers expected to survive were those with the greatest technological sophistication and strong relationships with the major oil companies and retailers, and especially those that could bolster their distribution operations with value-added services. In an increasingly consolidated industry obsessed with streamlining its overall supply chain, the role of the traditional wholesale distributor was anticipated to be progressively more open to reinterpretation. Thus, wholesalers were expected to face pressure to broaden their focus to remain viable and attractive in the eyes of the major oil companies.

Industry Leaders

World Fuel Services Corp., located in Miami, Florida, reported revenues of $19.1 billion in 2011 and employed 1,500. The firm was a global operation, with 50 offices in 20-some countries. It provided services to aircraft, ships, and petroleum distributors. In the early 2010s the company held an estimated 10 percent of the marine petroleum distribution market and had a strong presence in the aircraft segment, especially small- to mid-sized planes, charter, and private planes.

Global Partners LP, located in Waltham, Maine, was a major player in the Northeast heating oil sector as a wholesale distributor of such products as heating oil, gasoline, diesel oil, and kerosene. The company, which owned 24 bulk terminals with a capacity of 10.2 million barrels, reported revenues of $7.8 billion in 2011.

Mansfield Oil, located in Gainesville, Georgia, operated 650 retail locations and 900 supply locations, primarily serving the eastern half of the United States. A private company, with control still in the hands of the founding family, Mansfield Oil reported revenues of $4.2 billion in 2011.

Blueknight Energy Partners LP (formerly SemGroup Energy Partners LP), located in Tulsa, Oklahoma, covered the gathering, transporting, and storage of crude oil in a region that included Texas, Kansas, and Oklahoma. The firm's main customer was Vitol in the Netherlands. Blueknight's revenues for 2011 were $152 million.

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