Posted by: @jamespa

↑

Someone who used to work in BP finance told me just a few weeks ago that they lose money on forecourt sales.  I don't know if it's true, but if it is it will be by design

It has always been the case that oil companies make very little margin in fuel sales. The main job of fuel is to draw people into the shop since the markup on what they sell there is far higher.

I struggle to accept that the likes of BP or She’ll are making their huge profits on the back of upselling a mars bar or king skins to the local pot heads! If so, they wouldn’t have introduced payment at the pump. 

Posted by: @papahuhu

↑

I struggle to accept that the likes of BP or She’ll are making their huge profits on the back of upselling a mars bar or king skins to the local pot heads! If so, they wouldn’t have introduced payment at the pump. 

Profits are made upstream, in discovery and pumping the stuff out of the ground. The further downstream you go, the lower the profits get (even oil refineries struggle to make a profit, hence the dwindling number of them in the UK). I have no clue why oil majors even bother with service stations, other than maybe product placement / advertising. Even then, I'm not sure why an oil major would be concerned with advertising - would you stop buying petroleum based products if Shell or BP stopped advertising tomorrow?

I've known a couple people who have run service stations, and the profit on fuel is almost non-existent, especially where they are trying to price match against others who are clearly able to view it as a loss leader (supermarkets), whereas people will pick up a £1 Mars bar whilst waiting in the queue to pay (which probably seems insignificant when handing over £80 for the fuel). Same thing with pubs - beer is the loss leader, penny a pint product, that gets people through the doors and then they buy crisps, or a meal, or maybe and orange juice or one of those fancy fruity ciders in a bottle.

Posted by: @jamespa

↑

Someone who used to work in BP finance told me just a few weeks ago that they lose money on forecourt sales.  I don't know if it's true, but if it is it will be by design.

yes and no I think. Franchising does not count, right? 😉

the public thinks its BP employees..

Posted by: @old_scientist

↑

Posted by: @papahuhu

↑

I struggle to accept that the likes of BP or She’ll are making their huge profits on the back of upselling a mars bar or king skins to the local pot heads! If so, they wouldn’t have introduced payment at the pump. 

...I have no clue why oil majors even bother with service stations, other than maybe product placement / advertising. Even then, I'm not sure why an oil major would be concerned with advertising - would you stop buying petroleum based products if Shell or BP stopped advertising tomorrow?

...

That's largely, I believe, because all the others are doing it. If BP stopped running or franchising service stations, those stations would be adopted by a competitor and the fuel sold there would not be from BP. Advertising to the oil giants is just a cost, but they're not promoting themselves; they're just avoiding being squeezed out.

You can see the same effect when a ban came into effect on advertising for tobacco products; the tobacco companies actually made a bigger profit since they didn't have to spend on marketing and so that budget became pure profit. Market share, however, didn't change since the ban was industry-wide.

Posted by: @old_scientist

↑

...

I've known a couple people who have run service stations, and the profit on fuel is almost non-existent, especially where they are trying to price match against others who are clearly able to view it as a loss leader (supermarkets), whereas people will pick up a £1 Mars bar whilst waiting in the queue to pay (which probably seems insignificant when handing over £80 for the fuel). Same thing with pubs - beer is the loss leader, penny a pint product, that gets people through the doors and then they buy crisps, or a meal, or maybe and orange juice or one of those fancy fruity ciders in a bottle.

Absolutely. With fuel, people don't actually want to buy it; it's a distress purchase. They will happily drive a few miles more to somewhere that sells it cheaper (or fill up earlier if they see a good price whilst out driving), so any attempt to get a higher profit from fuel simply leads to fewer customers. Once those customers are in the shop, however, the markup on other products is far higher. That Mars bar being discussed can be bought wholesale for under 30p but seems to be retailing normally at around £1.20, so don't underestimate the profit from the shop IF they can get the customer on the forecourt in the first place.