As promised, the Office of Fair Trading has completed its study into competition within the heating oil market and has made its findings public. However, it doesn't make pleasing reading for oil buyers; the press release from the OFT is entitled Off-grid energy suppliers need consumer law enforcement not regulation.
The OFT's main finding is that a regulatory framework would make very little difference in this market, as the retail mark-up is typically only around 10-15%. The bulk of the wholesale price of heating oil is the crude oil itself, and the fluctuations in the price of crude are beyond the scope of the OFT's report.
Following analysis over time of heating oil prices in conjunction with crude oil prices and outdoor temperatures, the OFT concludes that heating oil prices do indeed fall in line with crude oil prices as long as demand isn't increased by low temperatures. See annexe G, on page 71 onwards of the OFT Market Study Annexes.
It states in its Off-grid energy Q&A that the largest single supplier accounts for only 20% of the market, and that virtually all households can be served by at least four different suppliers. One might infer from this that the OFT is unaware of just how many suppliers are owned by the same conglomerate, but they do go on to say that their analysis is based on the number of firms operating, not the number of brands. These figures will come as a great surprise to many consumers, who have the definite impression that most suppliers in their area are owned by the same firm.
The only criticisms this report raised in relation to the heating oil supply industry were:
- a lack of transparency about brand ownership;
- some suppliers that charge a different price on delivery to the one quoted
It comes as no surprise that the Federation of Petroleum Suppliers (FPS) reveals double standards when defending its heating oil supply members. On the one hand "its members want to do everything they can to help consumers in rural areas", yet on the other it acknowledges failings identified by the OFT and has launched a new Code of Conduct which aims to raise standards in the industry and encourage the implementation of best practice. (Source: OilFiredUp, 18 October 2011) So are oil suppliers trying to work in their customers' interests, or aren't they?
To summarise, you won't see any changes to the market at all, but there may be more sympathetic handling of complaints by the heating oil suppliers. If you want the best price, you will need to haggle as usual and hope that the suppliers are operating independently from each other. If you do suspect something when getting a quote, then you can contact Consumer Direct (a Government funded advice service) for help. Consumer Direct can be contacted on 0845 404 0506, or visit www.consumerdirect.gov.uk.
by Kevin Bennetts
on 20 October 2011 Reply
I have read the OFT report and am impressed with their grasp of an industry that like the proverbial curates egg is very good in parts.
I was featured in the now notorious Sunday Times article that triggered this investigation as my firm refused to raise prices being typically 20 ppl cheaper than many others.
The most significant thing from my perspective was the way prices crashed overnight when the heat came on.
Overnight the worst offenders undercut my prices by a significant margin which proves there is competition even if it is sometimes desperate... suicidal even.
Two issues still concern me which are covered by consumer law... companies that are part of a group of brands should state who they are owned by rather than continue to promote themselves as pseudo local family firms and once a price is quoted it should never be raised... after all a deal is a deal.
Customers are not blamless they cancel orders having found a cheaper supplier but they should have done their homework before placing an order and entering into a contract.
The other pet hate is those who order off several firms... with the first one to get there making the delivery... they only do that to us once.
Overall the high level of customer satisfaction says a lot... as usual a few malcontents can and do raise a hue and cry out of all proportion.
I am comfortable that most operators in our industry are ethical and highly professional delivering good value to their customers, remember if we hack too many customers off we would have no business... our customer base is a major asset to be abused at our peril.
We have recieved a major boost from last winter as many of those who we helped back then have returned to become regulars this has translated into a reasonable summer ahead of normal expectations.
That said we still get the occasional caller who having saved £200 on 1000 litres of heating oil last December storms off in a huff because they have been quoted 50p less on a 1000 litres by Glug Oils who let them down so badly in their hour of need... cie la vie.
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by Chris Best
on 19 October 2011 Reply
Outrageous. The management chain to this part of North Yorkshire seems to be: Dublin-based DCC > Warrington-based GB Fuels > Ripon-based CPL Fuels > local suppliers including Bowes, Bayfords,etc, etc.
If the market really is that tough and profit margins so lw, then how come we now see almost a dozen different-liveried tankers.
The chain above drags the true independents up because the big boys set the bottom line.
I must read the report but suspect it'll be short on hard analysis.