Motor fuel markets prices & taxes

0
Abbian House, Tower Street, Tain, Ross-shire, IV19 1DY
Tel: 01862 892734
Email: LoudenDW@aol.com
Motor Fuel Markets
Prices & Taxes
Annual Review 2014
© Derek W Louden
May 2014
Published by Derek W Louden. All rights reserved.
May not be reproduced in whole or in part
without the permission of the author.
While every effort has been made to ensure the accuracy of the information
included in this book, the author makes no
warranty, express or implied, nor does he assume any liability for its
accuracy or completeness.
ISBN 978-0-9928748-0-3

1
Contents
1) Executive Summary
2) Introduction to the UK Motor Fuel Market
3) The Motor Fuel Market in the Highlands & Islands of Scotland
4) Explaining the Urban / Rural Price Dichotomy
5) Laissez-faire and the Motor Fuel Market
6) Environmental Policy & the Fuel Duty Escalator
7) Prices and Markets in the EU
8) Squaring the Circle - Conclusions and Recommendations
Bibliography

2
1) Executive Summary
This book grew from research undertaken by the author working for the Highlands & Islands
Action Group on Hydrocarbons, commonly known as HIAG. It simultaneously tackles a
number of problems in different policy areas and presents a holistic summary of the state of
motor fuel retailing in the Highlands & Islands of Scotland, in the UK and in the European
Union. It presents policy makers with a framework on which to base future strategy. This
2014 edition has been updated to take account of fuel price rises and duty escalation.
Main Findings
 Vehicle ownership figures both at home and abroad continue to rise due to increasing
affluence.

 Retail fuel sales peaked in 2007, constrained in part by the fuel duty escalator.

 The motor fuel industry has become increasingly concentrated in fewer hands at both the
retail and the wholesale levels.

 Cleaner fuels have driven out dirtier fuels.

 The retail fuel network is shrinking as independent sites are forced to close.

 Wholesalers & Retailers earned up to three times as much selling a litre of fuel in the
Highlands & Islands as they did on average in the UK.

 The excess in 2010 was £35 million gross, over ten years it has been £350 million gross.

 The OFT maintains Highlands & Islands motorists are “not paying over the odds.”

 Higher margins in rural Scotland are not explained by higher costs.

 Small independent sites pay far more for fuel than supermarkets.

 In this regard, oil companies apply “dissimilar conditions to similar transactions.”

 Regulation by the OFT has been inadequate and characterised by inaction.

 Each of the players in motor fuel retailing blames the others for price problems.


3
 The Fuel Duty Escalator raised prices & tax receipts but didn’t cut urban pollution.
 Taxes are too high in rural areas to reflect the pollution caused.

 Congestion charging not higher excise duty on motor fuels is needed to reduce pollution
in urban areas.

 Europe has done a good job on reducing pollution through Directives on fuel quality and
through agreements with motor manufacturers on engine emission reductions.

 Government support for public transport has been inadequate.

 Motor fuel prices in the UK are too high and put us at a competitive disadvantage in
relation to our European Union competitors.
Recommendations
The following recommendations have been proposed for the various policy areas:
Fuel Taxation
 Scrap the Fuel Duty Escalator;
 Scrap annual Budget increases to take account of inflation;
 Reduce excise duty in rural areas through agreement in the European Council of
Ministers;
Competition Policy
 Appoint a full-time Regulator for the fuel supply industry;
 Ensure continual monitoring of prices and markets;
 Implement Price Caps in rural areas;
 End price discrimination against rural motorists;
 Establish a purchasing co-operative for independent filling stations;
Transport Policy
 Increase parking charges in urban areas (and cut fuel duty nationally);
 Introduce tolls on all city centre roads (and cut fuel duty nationally);
 Increase coverage & availability of public transport in urban & rural areas;
 Increase frequency of services;
 Improve subsidies for public transport;
 Resurface crumbling non-trunk roads;
Social Policy
 Provide funds to scrap older vehicles;
 Re-open access to LPG conversion grants;

4
Environmental Policy
 Scrap the Fuel Duty Escalator;
 Tackle congestion in cities through parking charges and tolls;
 Improve subsidies for public transport;
 Accelerate the introduction of cleaner fuels including zero emission Hydrogen;
 Reduce taxes on LPG;
Regional Policy
 Guarantee no more filling station closures in rural areas;
 Fund tank replacement & installation of LPG tanks at all remaining independent sites;
 Add rural taxis and hauliers to “essential users” list;
 Use fuel duty receipts to cut prices in rural areas;
 Levy high volume fuel sites to support low volume ones;
 Cap fuel prices in rural areas;
 Allow Local Authorities in rural areas to wholesale & retail fuels
 Subsidise rural filling stations and/or improve payment terms for rural sites.

5
2) Introduction to the UK Motor Fuel Market
This Chapter deals with the structure of the UK Motor Fuel Market. It will look at:
* Vehicle ownership patterns
* Trends in the Demand for Motor Fuels
* The Structure of Supply
* Supplier Retailer and Consumer Associations
* Special Features
* Recent Developments
and will round off with a brief summary.
Vehicle Ownership 1968 1973 1983 1995 2000 2005 2010
000’s of Private Cars 9,285 11,738 15,543 20,505 23,196 26,208 27,018
Ave Distance Travelled Kms 26,141 25,946 23,847 27,194 24,125 23,078 21,601
Table 2.1
Sources:
Department of Transport (2009) "Transport Statistics of Great Britain", London, HMSO (Page 14, Table 1.1)
Department of Transport (1997) (1999) (2003) "Vehicle Licensing Statistics", London, HMSO (Page 1, Table 1)
Department of Transport (2010) "Vehicle Licensing Statistics 2009", London, HMSO (Page 13-14, Table 6)
Vehicle Licensing Statistics http://www.dft.gov.uk/statistics/series/vehicle-licensing Table VEH0102
The above table and the following column chart (fig 2.1) show that private vehicle ownership
in Great Britain has almost trebled since 1968. Over the period between 1968 and 2010,
passenger kms travelled by Cars, Vans and Taxis more than doubled from 279 Bn kms per
annum to 680 Bn kms per annum, (Source: Department of Transport
www.dft.gov.uk/statistics/releases/tsgb-2011-modal-comparisons). The table in "Social
Trends" also showed that this increase was entirely due to a growth in car travel, and that
there had been a significant fall in the number of passenger kilometres travelled by coach.

7
Trends in Demand
Fuel economy figures are assumed to have improved significantly over the last twenty years.
The Royal Commission on Environmental Pollution, Eighteenth Report (1994) "Transport
and the Environment," London, HMSO, showed a significant fall from 9 litres per hundred
kilometres in 1978 to around 7.4 litres per hundred kilometres in 1987. Thereafter,
consumption began to rise again due to a number of factors, namely a rise in car body weight,
a rise in average engine size from 1396cc in 1973 to 1540cc in 1992, both of these being
reflected in a switch in consumer preferences in favour of big four wheel drive MPV's.
Following a slow down in growth in car numbers in the early 1990's, during a major
recession, private car registrations have been increasing again in recent years. The following
graph (fig 2.2) "UK Total Fuel Sales," shows that fuel deliveries are higher than when we last
looked at the market in 2001. The effect of drastic increases in duty, under successive
Government's Fuel Duty Escalator have started to reduce the demand for fuel which fell by
almost 10.00% between 2007’s peak at 39.47m tonnes and 2011.
Petrol purchases were a weekly average of £9.55 per UK household in 1993 (CSO, "Social
Trends," op cit., table 12.23). By 1996, household expenditure had risen to £10.73 per
household per week (Source: Rural Scotland Expenditure Survey, quoted in EKOS Ltd.
(2000) "Economic Impacts of Road Fuel Prices in the Highlands and Islands," Inverness,
EKOS). Since the last time we looked at this market, retail fuel sales (fig 2.3) have increased
significantly. Over the same period since 1995, commercial fuel sales have fallen (fig 2.4).

11
Structure of Supply
The structure of supply in the UK motor fuel market has three key elements. These are
refining, wholesale distribution and retailing. Refining has been a major problem area for oil
companies in recent years. Excessive investment in the 1960's and early 1970's has left the
market with a legacy of over capacity. The sector is frequently mentioned as a problem area
in company reports. In a relatively flat market, the oversupply of motor fuel products has
increased over time by a decrease in demand induced by duty rises. This has led to a wave of
downstream consolidation and closure of several refineries across Europe. Mergers of their
downstream interests were undertaken by the likes of BP and Mobil which were aimed at
improving economics in the European market. Further company mergers followed and
in recent years, market concentration has increased still further. Exxon and Mobil merged,
forcing BP to end its marketing agreement with Mobil. The merger of Total and Fina
to form Total Fina was followed by the Total Fina takeover of Elf Aquitane. As Mathieu
Zajdela and Souna Kang of the Paris based Petroleum Finance Company commented:
"Two factors in particular are likely to constrain the potential for further improvement of
retail profitability. First, the structural surplus of refined product (particularly for gasoline),
as well as the wealth of logistical infrastructure, has remained largely unaffected. Only a
substantial reduction of refining capacity could lead to an appreciable shift in the
supply/demand balance. Second, although oil companies still control three-quarters of the
motor fuel retail market, they remain vulnerable to the strategy pursued by hypermarket
operators - retail price standards (and thus margin levels) are set by hypermarket forecourts."
(quoted in "Petroleum Review" (2000) "UK Retail Marketing Survey," London, Institute of
Petroleum). It remains the case that there is too much supply. This has led to a re-assessment

12
by oil companies as to what they gain from being in the refining business and a decision by a
number of them to get out.
BP sold the Grangemouth Refinery to Ineos in December 2005 in a deal which valued the site
at $9Bn.
BP also sold the Coryton Refinery to Petroplus in June 2007 for £714.6 million. Petroplus has
filed for bankruptcy due to problems at this and all its other refineries round Europe.
Shell sold the Stanlow Refinery to Essar Energy from India in 2011 for a reported $1.3Bn.
Also in 2011, Chevron sold the Pembroke Refinery to the American Valero Corporation for a
reported £750 million.
There are several factors at play here. Firstly, there is the general problem of oversupply in
the European marketplace. Secondly, there are issues with the price of crude oil which
provides the feedstock for the refineries. This has risen steeply in recent years caused by
increases in global demand from China in particular and also from more local factors such as
the rapid and irreversible decline in North Sea output. Thirdly, the retail sector is increasingly
dominated by the supermarket firms who seek to drive down refinery margins to increase
their own. Oil Majors are increasingly choosing to focus on Exploration and Production and
will spend less and less time and money on capital intensive refinery operations offering poor
rewards.

15
Wholesaling
The 1990 investigation by the Monopolies and Mergers Commission identified over seventy
wholesalers operating in the UK market (MMC (1990) "The Supply of Petrol," London,
HMSO). These fell into three distinct categories, Majors, Mini-majors and non-refining
wholesalers. The five largest wholesalers, classed as majors: Esso, Shell, BP, Texaco and
Mobil together supplied 65.6% of the retail market in 1998. The mini-majors: Conoco, Total,
Petrofina, Gulf, Amoco and Murco supplied a further 19.9%. The remaining 14.5% was
supplied by the non-refining wholesalers, principally Burmah, Elf and Kuwait.
Comparative figures are shown to demonstrate the major movements in retail networks since
the MMC Report in 1990. These are shown on the attached graph, (fig 2.7). No figures are
available for volumes supplied by each wholesaler. This information is commercially
confidential and closely guarded. Some of the more significant features are highlighted.
Mobil, Gulf, Amoco and Burmah all withdrew from the market between 1988 and 1999.
UK and Save entered the market post 1988. UK then expanded their network between 1995
and 1999, whereas Save saw a large reduction in the number of sites under their control. UK
is now run by GB Oils who also run the former Gulf network. Save has ceased to trade. Elf
and Fina disappeared as brands following their takeover by Total. Q8 has also dropped out in
recent years. BP has moved from third to first place in the list of Company sites supplied in a
market in which the number of sites continues to decline.

17
The chart fails to show the importance of the entry of supermarkets. They have established a
network of outlets with very high levels of throughput. The Office of Fair Trading has
estimated that the average throughput at a supermarket site is three times that of a company
owned site and eight times that of a dealer owned site. They estimated market share
enjoyed by supermarkets to be 23% of the total UK market in year 2000. This has continued
to grow in recent years reaching 41% by 2012.

18
ESSO
13.2%
MURCO
1.7%
SHELL
14.9%
BP
10.9%
GULF
1.8%
TEXACO
7.1%
JET/CONOCO
5.4%
MOBIL
4.6%
TOTALFINA/ELF
11.3%
Q8 (KUW AIT)
5.6% AMOCO
1.4%
BURMAH
7.3%
OTHER
14.8%
Source: Adapted from MMC Report (1990) "T he Supply of Petrol"
Retail Outlets Supplied (1988)
Percentage Share of UK Market
fig (2.7m/1)

19
fig (2.7m/2)
ESSO
12.5%
MURCO
2.9%
SHELL
11.7%BP
8.4%
Q8 (KUWAIT)
3.3%
SAVE
7.0%
TEXACO
6.1%
UK
5.0%
JET/CONOCO
4.4%
MOBIL
4.3%
TOTALFINA/ELF
10.6%
GULF
2.7%
OTHER
20.9%
Source: Adapted from "Petroleum Review" (1996) Retail Marketing Survey

20
fig (2.7m/3)
ESSO
11.8%
MURCO
2.8%
SHELL
10.1%
BP
11.1%
SAVE
3.2%
TEXACO
9.9%
UK
6.3%
JET/CONOCO
4.2%
TOTALFINA/ELF
10.5% Q8 (KUWAIT)
2.9%
OTHER
27.3%
Source: Adapted from "Petroleum Review" (2000) Retail Marketing Survey

22
Retailing
The situation in the retailing sector is attested to by the following graphs, (figs 2.8, 2.9 and
2.10). The first clearly shows the decline in the number of sites selling petrol in the UK
between 1986 and 2011. This is to a large extent accounted for by the rise of supermarket
outlets. These have increased in number from zero in 1964 to an estimated 1,316 in 2011.
The second graph also reflects their arrival, it shows site petrol throughput between 1986 and
2011 and details the rise in volume to a peak in 2007 followed by a decline as motorists
switched to diesel. The third chart (fig 2.10) shows the huge increase in Diesel sales over the
period. These quadrupled between 1996 and 2011.
The most important change in the retail sector over the period is the move from a high
number of low volume sites to a low number of high volume sites. The supermarket
sites were estimated to have increased the market share of the supermarket sector from 5% in
1990 to 45% in 2011. It is anticipated that this trend will moderate over the next few years.
Supermarkets in the UK now enjoy a market share which those in France achieved in 1995.
As part of the process of change, oil majors have continued to prune their networks, closing
unprofitable sites and concentrating on a small number of strategically located high volume
outlets. Where they find outlets, particularly independently owned ones supplied by them
offering low returns, they will continue to allow these sites to close. If their overall returns
from the downstream sector fail to satisfy, then as we have seen above they will exit the
market. Burmah, Mobil, Gulf, Amoco, Q8, Texaco and Chevron have all pursued this
strategic option in recent years.
The Total-Fina-Elf combination was an attempt to find economies from merging with
competitors and finding synergies. This approach has now been superseded by outright sales.

25
A variety of graphs are used to show the change in the structure of the market in recent

26
years. Major movements in retail networks are shown in fig 2.7. A second graph 2.7s attests
to the arrival of the supermarkets.
Following these charts are four showing company percentage shares of the UK sites over
the period, the first shows the position in 1988, the second in 1995, the third in 1999 and the
final one in 2011. The analysis reflects the proliferation of small wholesalers supplying
networks of small independent filling stations and their subsequent squeezing out. Included in
the "other" category are supermarket sites, the importance of whom in terms of volume of
throughput is belied by their small number. The final (2011) chart shows these individually.
Product Sold in the UK Motor Fuel Market
There has been a major shift in the composition of demand for the various products in the
UK market. In 1986, Four-star Leaded Petrol accounted for 65.3% of the UK market, with
Diesel taking 26.8% of the market, Two-star 7.5% and Three-star 0.4% (see fig 1.11). When
we next looked at the market, the position had already begun to change. In 1995, Four-star's
share of the market had shrunk to 23.1%, Diesel accounted for 37.9% and the new grade,
Unleaded, accounted for 39.0% (see fig 1.12). The 1999 position reflected further change,
the share enjoyed by Unleaded was 51.3%, Diesel accounted for 39.7% of the market, and
the share now being passed on by Four-star to Lead Replacement Petrol is 9.0%.
Diesel in 2011 accounted for 57% of the UK market with Unleaded accounting for 41% and
Super Unleaded the remaining 2%. Diesel is expected to continue to increase its share of the
market at the expense of petrol due to the better fuel economy figures it offers in a climate of
rising crude oil prices and the fuel duty escalator.

27
65.3%
0.4%
7.5%
26.8%
Four Star Three Star Two Star Derv
Source : Adapted from Petroleum Review (1996) "UK Retail Marketing Survey"
fig (2.11)
UK Motor Fuel Sales
1986 : Market Share

28
39.0%
23.1%
37.9%
Unleaded Four Star Derv
Source : Adapted f rom Petroleum Rev iew (1996) "UK Retail Marketing Surv ey "
fig (2.12)
UK Motor Fuel Sales
1995 Market Share

29
51.3%
9.0%
39.7%
Unleaded Four Star Derv
Source : Adapted f rom Petroleum Rev iew (2000) "UK Retail Marketing Surv ey "
fig (2.12a)
UK Motor Fuel Sales
1999 Market Share

32
Retail Price Trends
Trends in retail prices can be looked at in a variety of ways. Two methods are used here.
Firstly, we look at the trend in prices of 4-star leaded/LRP petrol, unleaded petrol and diesel
from figures supplied by the Department of Trade & Industry (DTI). These are presented in a
chart format (figs 1.13, 1.14, and 1.15) covering the period from 1960 onwards (from 1989 in
the case of unleaded). These show the effect of oil price shocks in 1974 and 1979, and
subsequent rises attributable to high inflation and tax increases. The peak in 1986 was
followed by a collapse in oil prices, the effect of which can clearly be seen in the four-star
and diesel diagrams. Since 1989, largely as a result of the dual pressures of government
revenue requirements and environmental concerns, prices have again been rising quickly. In
the last year, the effect of the fuel duty escalator has been reinforced by the rise in crude oil
prices. These have doubled over the last year, and the chart reflects the rapid run-up in retail
fuel prices which followed on from this.
The second set of diagrams, (figs 1.16, 1.17 & 1.18) looks at a breakdown in the total
revenue generated from petrol sales. They show three components. The amount earned by
the supply chain (refiner, wholesaler and retailer), the fuel duty charged per litre, and the
VAT element charged on top. The diagrams show the continued effect of the fuel duty
escalator. The main beneficiary for many years was clearly the government. The latest year's
figures show vastly increased returns to the supply chain in part through higher crude prices.
The final charts show the decline in the share of the retail market held by independent filling
station owners (figs 1.19, 1.20, 1.20a). The independent category includes the supermarket
sector, so the decline in truly independent sites will in reality be even more marked. In urban
areas, where supermarkets are continuing to compete with oil major sites, prices will remain

40
33.5%
66.5%
Company Independent
Source : Adapted from MMC, (1990), The Supply of Petrol
fig (2.19)
UK Retail Site Ownership
1988 Market Share

41
41.2%
58.8%
Company Independent
Source : Adapted from Petroleum Review, (1996), UK Retail Marketing Survey
fig (1.20)
1995 Market Share

42
43.8%
56.2%
Company Independent
Source : Adapted from Petroleum Review, (2000), UK Retail Marketing Survey
fig (2.20a)
1999 Market Share

43
low. In rural areas, sites will continue to disappear. Where independent sites remain, they
will continue to suffer from purchasing diseconomies of scale and consequently prices will
remain high. The supermarkets' advantages of attractive locations, high volumes of
throughput, insignificant overheads, delayered cost structure, low advertising costs & lower
distribution costs will allow them to continue to grow their market share.

44
Supplier and Retailer Organisations
The supply chain’s mouthpiece in the UK is the Petroleum Industry Association (PIA), who
are a collective organisation putting forward position papers and briefing the press on behalf
of its membership. They collate statistics covering the industry, some of which are released
into the public domain, and some of which are kept for the exclusive use of their members
and remain out of site of the general public. Apart from acting as a mouthpiece, they counter
criticism from environmental bodies, and the general public and its representatives, seeking
to present the industry in a more positive light.
See their website at: http://www.ukpia.com/home.aspx
Since the last edition, the Petrol Retailer’s Association has been reborn as RMI Petrol,
managed by Head of Petrol Julian Phillips, and chaired by RMI Chief Executive Rob
Foulston. A new RMI Petrol Executive committee has been formed.
In November 2009 Brian Madderson, Managing Director of Kent-based Top 50 independent
George Hammond Group, was named the first RMI Petrol chairman, aiming to “Reinforce
the position of RMI Petrol as the association for independent forecourt retailers, who own
and operate more than 60% of the sites around the UK”.
A brief discussion of the different categories of filling station may be appropriate at this
stage, (for a fuller treatment of these distinctions, see Caffarra, C, (1994) "Vertical Contracts
in Petrol Retailing," Oxford, Oxford Institute for Energy Studies). An agent, or commission
agent, is a person, authorised by the owner of a motor fuel retail outlet to sell that owner's
motor fuels at that outlet on a commission basis. A tenant operates a retail site on behalf of
the owner, under a tenancy agreement which can be renewed or terminated at the discretion
of the owner. The licensee agreement is similar to the agency deal but here, the licensee
purchases the product from the wholesaler and owns the product in the tanks in the ground.

45
The licensee shoulders the financial obligation of stocking the premises occupied. These
three types of agreements are the operator agreements referred to above. Where the oil
company owns a site and does not set up such an agreement, then they will simply appoint a
salaried manager.
Finally, consumer interests are looked after by the motoring organisations such as the AA and
the RAC, who act as lobbyists and campaign for a fair deal for motorists. The AA have run a
promotion publishing details of the breakdown in retail fuel prices, showing that it is the
government which pockets over 80% of the retail price. They have also published figures
comparing retail prices in Europe, showing that the UK has the highest retail prices in the
EU. The AA has called for an end to the fuel duty escalator, and has also called for more
of the revenue raised to be used for the construction and repair of roads.
Special Features - Solus Ties
The Solus Tie is a distribution contract between the wholesaler and the retailer which binds
the latter to purchase his or her supplies solely from the wholesaler. In such circumstances
retailers will, subject to the terms of the contract, be given a discount off the wholesale list
price for petrol. Alternatively, the retailer may receive a cash lump sum ostensibly to improve
the appearance of the filling station or stations being operated. If the local market is not
disrupted by the unwelcome approach of new competition, then the retailer would have him
or herself a reasonable deal. Should the retailer's position unravel with the arrival of
supermarket competition, then the outlet, as Norman Motors found out, (see below) can be
left devoid of the required support. In such circumstances, the solus tie is effectively a
suicide note for the retailer. He or she is prevented by a legally binding contract from seeking
alternative and cheaper supplies, despite the fact that the oil major may be supplying his
competitors at a much lower price (News of the World, (15/10/95) "Tanks a bundle Esso,").

46
Another such case, the Bedminster case, was reported by the House of Commons Trade &
Industry Committee, (House of Commons, Trade & Industry Committee, (1996), p17).
Such a system seems illogical when legal redress could only arrive far too late for
it to be of any possible benefit to the, by then, bankrupt retailer was checked out and
approved by the UK regulatory triumvirate of the DTI, MMC (now the Competition
Commission) and OFT.
The "umbrella exemption" granted to the oil companies by European Commissioner Mario
Monti (22/12/99) meant that the old "block exemption" for exclusive distribution
agreements had effectively been renewed in all but the most extreme cases, where one
company has over 30% of national market share. The then PRA Director Ray Holloway
commented that he was "disappointed" by the decision, which will prevent service stations
shopping around for fuel and will assist in the continuing decline of the independent retail
sector (reported in "Petroleum Review" Feb 2000, London, Institute of Petroleum).
Since that date a further 5,000 sites have closed, rather proving his point.
Selective Price Support
The Norman Motors case referred to above is an illustration of why the price support is
referred to as "selective." Selective Price Support (SPS), operates mainly in urban markets
where retailers are under competitive pressure from other retail outlets and more importantly,
from supermarkets. The above example, taken from a Sunday newspaper, shows the effect on
an independent retailer of the withholding of SPS by the wholesaler. In the example given,
Norman Motors operating in Ferndown, Hants. found itself opposite to and in direct
competition with a Sainsbury's outlet across the road. Norman Motors price was 15.4ppl
higher. Not surprisingly, given the juxtaposed alternative supply, customers were thin on the
forecourt. The point Chris Norman, proprietor of Norman Motors made is one we can all

47
readily appreciate and sympathise with:
"Let's put it this way - motorists who stop at Sainsbury's over the road pay less for their fuel
than I pay Esso for mine."
Without effective price support from Esso, Norman Motors could never survive. This
scenario will have been repeated up and down the country over the last few years. The nature
of SPS is that it is paid solely at the discretion of the oil company. If they want to support the
retailer, then the system will work fine. If not, then the outlet is bound to close. In such
circumstances, one would expect the retailer to shop around in search of a cheaper source of
supply. As we now know however, this option is not available to the independent retailer, as
his solus tie allows the oil company either to pay price support or not as it chooses. If the oil
company decides to, it is all too easy for them to harry independent retailers into exiting the
market.
Recent Developments
Arguments continue over the role of the Esso "PriceWatch" campaign. Originally launched as
an attempt by Esso to compete head-on with the supermarkets on price. The campaign
intensified price competition and the fears of the independent sector's spokesman at the time
would appear to have been fully justified in hindsight. Bruce Petter of the PRA had
commented:
"If, as we expect, thousands of small, independent filling stations are forced out of business,
motorists will find that they have to drive longer and longer distances to refuel." ("Forecourt,"
(Feb 1996) Rugby, PRA)
The report by the OFT into the Supply of Petrol, (OFT, (May 1998) "Competition in the
supply of petrol in the UK," London, OFT) found that the supply of petrol in the UK was
competitive and that it acted in the public interest. They found, inter alia, that that, "in the

48
current climate of low margins, pricing and price competition is largely supplier driven and
that the role of the retailer is limited."
They go on:
"The MMC found that wholesalers' influence over the price of independents was less than for
company-owned sites. This would appear to be less true in the current situation where
margins are low."
This would appear to be a tacit acceptance that the wholesaler is, de facto, or de jure, setting
the price for the independent retailer, a situation known as Resale Price Maintenance.
According to the OFT, "RPM [Resale Price Maintenance] can have direct effects on
competition. Where prices are fixed absolutely, or minimum prices are specified, there will
be no price competition between the retailers affected. The Director General expects to find
all such restrictions in breach of the Chapter I prohibition and unlikely to benefit from an
exemption." (OFT, (Sept 1999) "The Competition Act 1998, Assessment of Individual
Agreements and Conduct," London, OFT 414, page 19)
They also state, with regard to vertical agreements such as exist between wholesalers and
retailers:
"vertical agreements....can produce appreciable effects on competition when combined with
market power. They can also represent an abuse when imposed by dominant undertakings."
However, in the 1998 report, the OFT responded to the crisis facing the independent sector as
follows:
"the OFT does not believe that independent retailers provide any significant benefits for
competition, [c]onsequently, we do not believe that any market restructuring which saw
independent retailers being disproportionately affected would necessarily be a cause for
concern." (OFT (1998) "Competition in the supply of petrol in the UK," op cit., p100)
It would appear from the above commentary, that the OFT would be perfectly happy if

49
pressure on the independent sector resulted in a 100% mortality response, despite the
manifest unfairness of the contractual position in which independent retailers find
themselves.
OFT Reviews 2011 - 2013
The OFT conducted a further review of the market in rural areas in 2011. Titled “Price and
Choice in Rural Communities – Call for Evidence”.
Source: http://www.oft.gov.uk/shared_oft/consultations/remote-communities/OFT1420.pdf
The results of the review are presented in Office of Fair Trading publication OFT1475 which
was published in January 2013. The OFT concluded: “Overall, on the basis of the evidence
collected, it appears that competition in the UK road fuels sector is working relatively
effectively. The UK has some of the cheapest prices in Europe before tax and duty, and
increases in the pump prices of petrol and diesel over the past 10 years have been caused
largely by higher crude oil prices and increases in tax and duty. The margins being made by
UK refiners, wholesalers and retailers do not appear to have contributed as significantly to
increases in pump prices.”
Source: http://www.oft.gov.uk/shared_oft/markets-work/oft1475.pdf
The findings led to a follow up investigation “Petrol and Diesel Pricing in the Scottish
Islands” – OFT1432 to which the author submitted evidence. We await the results with some
interest.
Source: http://www.oft.gov.uk/shared_oft/markets-work/OFT1432.pdf
Conclusions
The UK motor fuel market continues to deliver lower petrol prices for urban areas whilst
charging much higher prices in rural and island communities. Market concentration appears

50
to be increasing rather than decreasing, with non-refining wholesalers and independent
retailers continuing to vanish from the UK market. The OFT retain the view that the entire
independent sector could vanish without any action by them being appropriate. These
independent sites remain tied under solus agreements to purchase exclusively from their
competitors. In such circumstances life expectancy has been unsurprisingly short for
these independent retailers.

51
3) The Motor Fuel Market in the Highlands & Islands of Scotland
This section deals with the motor fuel market in the Highlands and Islands of Scotland. It
will look at:
* Population and Geography
* Vehicle Ownership
* The Demand for Motor Fuels
* The Structure of Supply
* Special Features of the Highlands and Islands market
* Petrol Prices
and will round off with a brief conclusion.
Population and Geography
The Highlands & Islands Scotland European Regional Development Fund Programme
Document (2007-13) states:
“One of the key challenges for the region is its settlement pattern. The Highlands & Islands
has a population density of 9.3 people per km2
(based on a geographic area of 39,050 km).
Excluding the city of Inverness, the population density for the region falls to 7.8 people per
Km2
, compared to the Scottish average of 64.8 and the UK figure of 242.4. Low population
density has produced a settlement pattern of small communities, often distant from each
other, key markets and services, resulting in additional costs in the provision of goods and
services due to a lack of economies of scale and a corresponding enterprise base – an
important development constraint recognised in previous Cohesion policy through Objective
6 where the qualifying threshold was 8.
Peripherality is further exacerbated in the Highlands & Islands by the extent of the island-
based population. In 2001, the inhabited islands had a combined population of 99,494 people
living on 90 islands, some 23% of the total Highlands & Islands population. The rate of

52
population decline has been more significant on the islands with smaller populations. Thus,
while islands with a population of more than 5,000 in 2001 experienced an overall
population increase of 3% since 1961, islands with populations of less than 500 experienced
an overall fall of 20% in population over the same period. Depopulation, particularly in
fragile areas, has been shown to have an adverse effect on community confidence and service
sustainability, increasing the vulnerability of communities already experiencing acutely the
problems of high-cost service provision and market access.”
The current population of the area covered by the ERDF and ESF Programmes is as shown
in the table below:
LEC Area Population
2009
Area (square
kilometres)
Population
Density
Argyll & the Islands 70,543 6,965 10.1
Caithness & Sutherland 38,113 7,717 4.9
Inner Moray Firth 144,375 8,065 17.9
Lochaber 19,193
Skye 12,655 9,940 3.8
Wester Ross 6,154
Moray 87,660 2,238 39.2
Orkney 19,960 989 20.2
Shetland 22,210 1,438 15.4
Innse Gall 26,180 2,999 8.7
Highlands & Islands Total 447,043 40,351 11.1
Table 3.1
Source:
(1) Highlands & Islands Partnership Programme, (1999) Highlands & Islands Special Programme, Plan 2000-
2006, page 28, HIPP, Inverness
(2) HIE (2011) Area Profiles.
Inverness the capital of the region has a population of over 65,000 and continues to grow at a
rapid rate. The European Commission decided to exclude Inverness from the area to be
covered by the Special Programme for 2000 to 2006. Remove Inverness from the equation,
and the true emptiness of the remaining landscape begins to become clear.

53
Vehicle Ownership
Various studies have looked at the issue of car dependency in rural areas (for instance, see
Farrington et al (1998) Car Dependence in Rural Scotland, University of Aberdeen). The
area is poorly provided for in terms of access to public transport, and this has resulted in a
very high degree of reliance upon the car as the only practical method of transport in the
Highlands and Islands.
The following table has been revised to provide the most up-to-date figures available for
vehicle ownership in the Highlands and Islands, Scotland and the UK as a whole.
Local Authority Area
Private &
Light Goods
Total
Vehicles
Vehicles Population per capita
Argyll & Bute 45,200 51,400 89,200 0.58
Highland 119,400 137,900 221,630 0.62
Moray 46,400 53,700 87,720 0.61
Orkney 11,900 15,200 20,110 0.76
Shetland 13,400 15,500 22,400 0.69
Western Isles 14,500 16,800 26,190 0.64
Highlands & Islands 250,800 290,500 467,250 0.62
Scotland Total 2,364,300 2,684,700 5,222,100 0.51
GB & NI Total 32,505,734 35,170,581 62,262,000 0.56
Table 3.2
Source:
Scottish Transport Statistics (2011) Table 1.3, page 52.
GB figures from: Vehicle Licensing Statistics (http://www.dft.gov.uk/statistics/series/vehicle-licensing/)
NI figures from (2011) Transport Statistics of Northern Ireland 2010-2011Table 1.1, Page 21
Population UK population 57.7 million.
The above numbers show that car ownership in the Highlands & Islands is above the UK per
capita figure, and significantly exceeds the per capita figure for Scotland as a whole.
The Demand For Motor Fuel
The previous version of this report (2001) made an estimate of the levels of motor
fuel demand in the Highlands and Islands. A more accurate attempt will be possible this time,

54
given the considerable level of interest shown in this topic over the last few years, a variety
of statistics have come to light which can assist us. Table 3.2 above shows the number of
vehicles in the Highlands and Islands as being 290,500 out of a UK population of 35,170,581.
This would give the Highlands and Islands 0.826 of 1 percent of the UK motor fuel market if
we assumed that motor vehicles in the Highlands and Islands travelled only the UK average
number of kilometres per annum. Scottish Transport Statistics 2011 gives us the following
information in table 5.4:
Local Authority Area
Million
Vehicle
%age of
Scotland
Kms Total
Argyll & Bute 884 2.03%
Highland 2,586 5.95%
Moray 714 1.64%
Orkney 135 0.31%
Shetland 202 0.46%
Western Isles 203 0.47%
Highlands & Islands 4,724 10.86%
Scotland Total 43,488
UK Total 487,900
Table 3.3
Source:
(1) Scottish Transport Statistics 2011 Edition Table 5.4
(2) Department of Transport Traffic (http://www.dft.gov.uk/statistics/series/traffic) Table TRA0203
In 2010, 16,262 kms per vehicle were travelled on roads in the Highlands and Islands
compared with 16,198 kilometres per vehicle at the Scottish level. The Region accounts for
10.86% of Scottish road kilometres travelled but only 8.95% of the country's total population.
Scottish kms travelled account for 8.91% of the UK total. The Highlands and
Islands share of motor fuel demand using these measures would be:
UK Motor Fuel Demand = 45,019,102,787 litres(1)
of which
Scottish Motor Fuel Demand (8.91%) = 4,011,202,058 litres(2)

55
of which
Highland Motor Fuel Demand (10.86%) = 435,616,543 litres(3)
Sources:
(1) Adapted from Institute of Petroleum, (2012) UK Retail Marketing Survey, page 10.
(2) Author’s own calculation as per 2001 edition.
(3) Author’s own calculation as per 2001 edition.
The above figures demonstrate that, as a consequence of the greater distances travelled in the
Highlands and Islands, the market for motor fuel represents 0.968 of one percent of the UK
market. This is a slightly higher figure than was previously estimated, but as all of the above
figures are official it is an estimate in which we can have total confidence.
The Structure of Supply
The next section in this chapter deals with the structure of supply in the Highlands and
Islands motor fuel market. Within this market, there are three major distributors
represented; Scottish Fuels (now part of GB Oils), Gleaner Oils and Highland Fuels. Since
the last time we looked at this market, BP has acquired its former All Product Distributor
(APD) S & JD Robertson and has sold the business on to the Irish company Scottish Fuels.
Our last look at this market concluded that S & JD Robertson appeared to be making higher
profits than were the norm in the industry, and this we felt was worthy of investigation.
The OFT did investigate the Highlands and Islands market in general and the Western Isles
market in detail. The conclusion the reached was:
“Higher petrol prices at the pumps in rural areas reflect lower sales volumes,
proportionately higher unit costs and higher costs of distribution. For example, most of the 4
to 5 p per litre differential in price between North West Scotland and the rest of the UK is
accounted for by this, the rest being accounted for by the intense competition in urban areas
that has developed in recent years.”
Source: OFT (1998) “Competition in the Supply of Petrol in the UK”, Page 3
Scottish Fuels
Scottish Fuels is now part of GB Oils Limited a business with a turnover of over £3Bn in the

56
year to 31/03/2011. Profits in the same year amounted to over £40m. The network now
covers the whole of the UK and attempts to dis-aggregate the Highlands and Islands
operation from the rest to assess whether or not excess profits have been earned could only be
done by a UK regulator such as the OFT.
Gleaner Oils
Shell operate in the area through Gleaner Oils Ltd, and previously, through its subsidiary
Gleaner Oils (Highland) Ltd. Shell supplied 113 of the 319 sites listed in the 1990 MMC
Report. Gleaner's activities were restricted to the mainland, although Shell sites were to be
found on the Western and Northern Isles. These sites are supplied by Scottish Fuels under a
swap arrangement where BP receives the fuel back elsewhere in the UK. Gleaner's
arrangement with Shell appears to have altered somewhat in recent years. Gleaner now
operate a number of branded sites in Ross-shire and Sutherland. These are predominantly
small sites in rural areas. Major independent sites will contract directly with Shell and have
their product delivered by Gleaner. In the Institute of Petroleum (2000) UK Retail Marketing
Survey, page 4, Gleaner were listed as operating 40 sites in North Scotland, the Highlands,
West Highlands and Islands. The 2012 Survey from the now Energy Institute shows Gleaner
operating 69 sites throughout Scotland. Gleaner’s network has expanded over the last decade
to support Shell. Gleaner had a turnover of £117 million in the year to 31st
March 2010 which
earned them a pre-tax profit of £670,432. At the time of writing the first draft (March 2012)
the business had just been put up for sale by the owners who are seeking to retire.
Highland Fuels
The third major found in the area is Esso. They operate in the Highlands through Highland
Fuels, an Authorised Distributor. In common with Gleaner, Highland Fuels have a number of
sites under their own control. The Institute of Petroleum (2000) Retail Marketing Survey,

57
quoted above identified Highland Fuels as operating 7 sites in the Highlands and Islands area.
The 2012 Survey from the now Energy Institute shows Highland Fuels operating 12 sites.
Highland Fuels has entered the market in the Western Isles with a dramatic reduction being
seen in the price of fuel at the site they supply. This gives lie to the claims of Scottish Fuel
that they were not price gouging in the Western Isles. Highland Fuels actions are to be
commended in this regard.
Wholesale Market Concentration
At this stage, we should pause briefly to look at two measures of concentration in the supply
of motor fuels. The first of these is the Three-Firm Concentration Ratio. For the UK market
as a whole, this came out as 48.3% in 1988. When the OFT looked at the market again in
1997, the Three-Firm Concentration Ratio was 61.5%. This means that the three largest firms
in the industry then supplied 61.5% of the sites retailing petrol. Since that time a number of
refineries have been sold in the UK as the oil majors divested themselves of their low-margin
downstream business. These sales mean that the market will have become much less
concentrated as time has gone on.
Source: OFT (1998) Competition in the Supply of Petrol in the UK, Report No. OFT 230, Table 8.5, page 30.
In 2001 in the Highlands and Islands, the entire market was supplied by one or other of BP,
Shell and Esso. The Three-Firm Concentration Ratio in the Highlands was consequently
100%.
Since then BP, Shell and Esso have all withdrawn from the market. Independent retailers now
have to source supply from our three local wholesalers Scottish Fuels, Gleaner and Highland
Fuels. Here too the entry of supermarkets has served to greatly reduce concentration in
the industry. Concentration has fallen, price differentials have also declined in the Inner
Moray Firth. The position in more remote mainland locations and in the Northern and

58
Western Isles have not followed suit.
The second method used to measure market concentration was the Herfindahl Index. This
index, referred to as the Hirschman-Herfindahl Index in the above 1998 OFT Report provides
a measure by taking the sum of the squared value of each company's market share. The MMC
calculated this at 1,069 for the UK market in 1988. For the Highlands and Islands, the figure
was 4,071. By either of the above measures, it is clear that the motor fuel market in the
Highlands and Islands is considerably more concentrated than in the UK as a whole.
Retailing
The attached graph (fig 2.1) shows the extent of the crisis in rural petrol retailing in the
Highland Council (HC) area. It shows that between 1975 and 2011, the number of filling
stations collapsed from 348 to 97. There are three appendices to this chapter, Appendix 1
gives a map of the closures between May 1975 and Dec 2011. Appendix 2 is a list of the
sites closed over this period. Appendix 3 is a copy of the map showing sites opened and
closed between 1992 and 2011, and of the sites still in existence in 2011. At the time of the
original report in October 1996, we commented "The decline...appears set to continue, if not
to accelerate in the future" events have shown that this was indeed the case. The problem of
low levels of petrol throughput affecting sites in the Highland Council area is shown in fig
2.2. A further chart (fig 2.3) shows the age distribution of filling station tanks. This is a
problem which has been recognised by the Scottish Executive. Some funding has been
allocated under the Executive's rural transport fund to help rural filling stations with tank
replacement and groundwater problems. Expenditure in year 1998/99 was £400,000 and in
the year 1999/2000 was £700,000. This scheme was subsequently discontinued. The fund
helped a number of sites over its 10 year life. Alternative allocations will be required to
fully rectify the problem. In addition to the above help, filling stations have also benefited
from a derogation from the EU Petrol Vapour Recovery Directive. Local authorities also

59
have the power to grant discretionary rate relief of up to 100%. As can be seen from the chart
of filling station numbers, further action will need to be taken if all but a handful of sites are
not to disappear. The majority of sites have tanks which are more than 25 years old and
single skinned. Included in this category are a large number of sites which are over 40 years
old. Retailers face a choice between replacing these tanks, at very considerable cost, or
shutting down their operations entirely. In the last few years, a large number of site owners
have opted for the second option.

62
fig (3.3)
Age of Tanks (Years)
0
20
40
60
80
100
120
NumberofSites
0-5
6-10
11-15
16-20
21-25
26-30
31-35
36-40
41+
Source : Highland Council, Protective Services
AGE OF EXISTING TANKS
(Highland Region)

63
The map of remaining filling stations (Appendix 3) highlights the particularly vulnerable
nature of the provision in the more remote rural areas. In evidence to the Enterprise and
Lifelong Learning committee of the Scottish Parliament on Monday 31st January 2000,
Councillor Alison Magee commented:
"Unleaded fuel in Lochinver costs 83.5p per litre. The next nearest filling station is 40 miles
away."(1)
Giving evidence to the same committee Councillor Donald Maclean gave a similar example:
"A petrol station closed at Horgabost, at the south end of Harris, with the result that anyone
from the south of Harris has to travel 23 miles in each direction merely to fill their tanks."(2)
Source (1)&(2): Scottish Parliament (31/1/00) Official Report, Enterprise and Lifelong Learning Committee,
Cols. 457 & 458.
The change in shopping patterns with the development of a regional shopping hub in
Inverness has posed further challenges for motor fuel sites within easy travel distance of the
centre. Further pressure exists from the various new Tesco sites which have sprung up in the
Highlands over the last few years. Unlike Asda which has a policy of keeping prices the same
throughout the UK, Tesco has a policy of setting prices to compete locally. This won’t reduce
prices dramatically when new stores open. Prices will fall where Asda stores open.
Special Features
We have already drawn attention to the problems of peripherality and insularity in this
chapter, but what about special features in petrol retailing?
In the UK market as a whole, independent retailers make up 60% of all motor fuel outlets.
Source: http://79.170.40.172/rmif.co.uk/index.php?op=page&id=35
In the Highlands and Islands, this figure is much higher. A study by Halcrow Fox estimated
solus-tie independent sites made up 79% of the filling stations in the Highlands.
Source: Halcrow Fox (1996) Economic and Social Impact Assessment: Petroleum Prices and Distribution in the
Highlands and Islands, Edinburgh, Halcrow Fox.

64
The OFT survey in 1997 found that "(a)lmost all the petrol retailers in the region are
solus-tie independents."
Source: OFT (1998), op.cit. S11.5, page 70.
Nearly all of the above filling stations will be tied to an oil company through a solus
agreement for a period of three to five years. These agreements are confidential and access to
them is extremely difficult to obtain. Those seen (not attached for reasons of confidentiality)
allowed the oil company total discretion over setting the level of price support, rebates and
discounts, as well as any block grants which the retailer might expect. In addition, should the
retailer fail to be supported by the oil major, rather than this allowing the retailer to cancel
the agreement, the contract allows the oil company to charge the retailer for release, that
portion of the block grant outstanding. Where the retailer may have sunk this into the
business prior to opening, he may be unable to find sufficient funds, particularly in the early
part of a five year contract, to permit his release.
Two further features of this market should be considered. The first is the interdependency of
garage and shop retailing. The Halcrow Fox Report above also found that over 50% of
Highland motor fuel outlets had a shop on the same site. If the filling station were to close,
the village might well also lose its shop. Where these petrol stations close, the viability of the
whole community may be called into question. Those areas most at risk are on the west coast
(see the map Appendix 3) and in the islands, where increasingly only one outlet survives due
to closures in recent years. The final point concerns the existence of localised monopolies in
petrol retailing in the Highlands and Islands. We identified in the last report, a major failing
of the 1990 MMC Report on the supply of petrol was the conclusion reached that the UK
market was one market, with one structure, and that the competitive model found in urban
locations could be considered to also apply in rural ones. The position of the competition

65
authorities on this matter has been altered to take account of the reality of the situation. The
OFT Review in 1997 included some analysis done by National Economic Research
Associates (NERA) to determine, on the basis of correlation coefficients whether the market
for motor fuels in the United Kingdom could be construed as a single market or whether it
was made up of a collection of regional markets which did not display similar price
characteristics. A fuller description of the methodology involved is provided in Office of Fair
Trading Research Paper 1, "Market Definition in UK Competition Policy" produced for the
OFT by NERA in February of 1992. Their analysis compared the movement of retail margins
in 38 towns against each other town in the series. They thus compared margins in 741 pairs
of towns. If the margins in towns move together, you would generate a figure of 1. If margins
are not moving together, a lower figure will be returned. The lower the coefficient, the less
likely it is that the two towns are part of the same market. Their work concluded:
"The low levels of correlation found for Belfast, Oban and Inverness are easy to reconcile
with there being distinct markets for the retailing of petrol in Northern Ireland....and the
Highlands and Islands of Scotland...NERA concluded that there is a separate market for
petrol retailing in...the Highlands and Islands of Scotland, particularly north west of the
Great Glen."
Source: OFT (1998) op. cit. pages 112-113.
The work done by NERA bears out what HIAG's research has been claiming. That there is a
separate market for motor fuels in the Highlands and Islands of Scotland. It is a more
profitable market, earning much higher margins for the supply chain than are the case in the
rest of the UK. The evidence which follows on prices in the Highlands and Islands bears this
out. Local monopolies exist in this market, they allow high retail prices to be set without
these higher prices having the effect of reducing the level of demand. In technical terms, the
price elasticity of demand in rural areas is lower than that found in urban areas. A site in a

66
city which increased its prices would rapidly go out of business, as a variety of alternative
sources of supply are readily available. In such circumstances, economic theory recognises a
low price strategy would be most appropriate. A site in a rural area would not be so
constrained. They would be free to set prices at a higher level without losing volume. In
terms of the theory, this site would have price inelastic demand. In such circumstances, a
high price strategy will yield the best returns. There is clear evidence on prices which bears
this out. The 1990 MMC Report (MMC, (1990) op. cit. p303) commented that:
"Were steps taken to reduce wholesale and retail prices to those prevailing elsewhere in the
United Kingdom we think it likely that this would call into question the continued involvement
of the three wholesalers and certainly result in the closure of sites."
The MMC decided to take no action on high rural prices. The rural sites far from being
protected by higher prices have been disappearing at an alarming rate. Thanks to the
inactivity of the regulators we have the highest motor fuel prices in the world and a vanishing
network of retail motor fuel outlets. We would not alter our previous assumption that the
excuse likely to be given for this turn of events would be that had it not been for the freedom
of action provided by the government's laissez-faire approach, which the oil majors have
exploited to engage in price discrimination and earn monopoly profits, the rate of closures
would have been even worse.
Petrol Prices
In this section, we consider the findings, over an extended period of time of the Rural
Scotland Price Survey (RSPS) produced by Mackay Consultants in Inverness. The RSPS
compares, amongst other things, the average price of lead replacement petrol, unleaded
petrol, and diesel with the average prices of the same motor fuels elsewhere in Scotland. This
has shown the existence of a large, and growing disparity in prices over an extended period
of time. A full listing is attached covering the period up to and including the Winter

67
1999-2000 survey. Lead Replacement Petrol prices are covered in Table 2.4 and fig 2.4
attached. These show that the highest price differentials ever recorded were following
publication of the OFT Report in 1998. This report cleared the oil majors of operating a
cartel and also cleared them of operating any anti-competitive practices. Following the
announcement of a further OFT enquiry into the Highlands and Islands market, the
differential reduced. I wrote at that time:
If the presently awaited report (May 2000) again clears the oil majors of operating a cartel,
or of operating anti-competitive practices, we would expect the differentials to resume their
upwards path.
Source: Derek Louden (2001) “Motor Fuel Markets Prices and Taxes”, Page 62
Since this was written in 2001 the differential has soared.
Unleaded prices are covered in Table 2.5 and fig 2.5. Diesel prices are covered in Table 2.6
and fig 2.6. Further figures are provided to illustrate the movement of prices on the Western
and Northern Isles (figs 2.6a, and 2.7 to 2.17). These have been updated using Highland
Council Planning & Economic Development Committee figures, and numbers from the
“Press & Journal”.
All but two of the series of charts show that price differentials have widened since we last
looked at the market.

68
LEAD REPLACEMENT PETROL PRICES
Highlands UK Difference % Above
Average ppl Average ppl ppl UK Average
SUMMER 1986 39.12 35.58 3.54 9.95
WINTER 1986 38.68 37.44 1.24 3.31
SUMMER 1987 39.78 37.94 1.84 4.85
WINTER 1987 39.78 37.11 2.67 7.19
SUMMER 1988 39.78 37.88 1.90 5.02
WINTER 1988 40.66 37.22 3.44 9.24
SUMMER 1989 44.40 42.34 2.06 4.87
WINTER 1989 42.64 40.52 2.12 5.23
SUMMER 1990 46.38 43.61 2.77 6.35
WINTER 1990 46.60 45.65 0.95 2.08
SUMMER 1991 53.41 50.28 3.13 6.23
WINTER 1991 53.07 48.34 4.73 9.78
SUMMER 1992 56.21 51.37 4.84 9.42
WINTER 1992 55.94 51.41 4.53 8.81
SUMMER 1993 58.30 55.18 3.12 5.65
WINTER 1993 57.65 55.14 2.51 4.55
SUMMER 1994 62.37 56.95 5.42 9.52
WINTER 1994 63.75 58.07 5.68 9.78
SUMMER 1995 66.70 60.43 6.27 10.38
WINTER 1995 65.50 60.43 5.07 8.38
SUMMER 1996 66.80 59.80 7.00 11.70
WINTER 1996 72.30 65.35 6.95 10.64
SUMMER 1997 71.90 65.39 6.51 9.96
WINTER 1997 76.50 69.55 6.95 9.99
SUMMER 1998 79.30 72.37 6.93 9.58
WINTER 1998 78.40 69.64 8.76 12.58
SUMMER 1999 83.50 78.26 5.24 6.70
WINTER 1999 87.20 80.86 6.34 7.84
SOURCES :
Highlands : MacKay Consultants (Rural Scotland Price Survey)
UK : DTI - Up to & Including Winter 1996 (Summer Mean - May,June,July :
Winter Mean - Nov, Dec, Jan)
: DTI - June 1997 onwards price from DTI Energy Policy & Analysis Unit
File:
LEAD100.WK4 Table 3.4

69
fig (3.4)
Source: Adapted from (1) PHH (1996) “All-star Price Survey” and (2) Mackay Consultants (2000) “Rural
Scotland Price Survey”

70
UNLEADED PETROL PRICES
Highlands UK Difference % AboveAverage ppl Average ppl ppl UK Average
WINTER 1989 39.78 37.94 1.84 4.85
SUMMER 1990 43.52 40.71 2.81 6.90
WINTER 1990 43.96 42.66 1.30 3.05
SUMMER 1991 49.89 46.75 3.14 6.72
WINTER 1991 49.54 44.82 4.72 10.53
SUMMER 1992 51.54 46.96 4.58 9.75
WINTER 1992 51.25 47.24 4.01 8.49
SUMMER 1993 53.30 50.31 2.99 5.94
WINTER 1993 52.38 50.33 2.05 4.07
SUMMER 1994 56.17 51.53 4.64 9.00
WINTER 1994 58.55 52.60 5.95 11.31
SUMMER 1995 60.50 54.56 5.94 10.89
WINTER 1995 60.20 54.53 5.67 10.39
SUMMER 1996 61.70 54.71 6.99 12.77
WINTER 1996 67.40 60.53 6.87 11.35
SUMMER 1997 67.40 59.86 7.54 12.60
WINTER 1997 71.50 63.89 7.61 11.91
SUMMER 1998 73.10 66.04 7.06 10.69
WINTER 1998 72.80 62.90 9.90 15.74
SUMMER 1999 77.10 70.98 6.12 8.62
WINTER 1999 82.00 75.40 6.60 8.75
SUMMER 2011 142.39 132.71 9.68 7.29
FEB 2012 141.80 134.90 6.90 5.11
SOURCES :
Highland Council (16/03/11) PED Committee Report PED22/11, Appendix 1
Press & Journal (29/02/2012) Ups and Downs of pump prices
UK : DTI -Up to & Including Winter 1996 (Summer - May, June, July :
UK : DTI - June 1997 onwards price from DTI Energy Policy & Analysis Unit
File: UNLD100.WK4
Table 3.5

71
fig (3.5)
Source: Adapted from (1) PHH (1996) “All-star Price Survey”, (2) Mackay Consultants (2000) “Rural Scotland
Price Survey”, (3) Highland Council (16/03/11) PED Committee Report PED22/11, Appendix 1,
(4) Press & Journal (29/02/12) “Ups and Downs of Pump Prices”,
(5) http://www.decc.gov.uk/en/content/cms/statistics/energy_stats/prices/prices.aspx Monthly Table QEP 4.1.1

72
DIESEL PRICES
Highlands UK Difference % Above
Average ppl Average ppl ppl UK Average
WINTER 1996 70.50 61.82 8.68 14.04
SUMMER 1997 72.60 60.60 12.00 19.80
WINTER 1997 73.50 64.06 9.44 14.74
SUMMER 1998 74.50 66.94 7.56 11.29
WINTER 1998 71.60 63.96 7.64 11.94
SUMMER 1999 82.80 73.81 8.99 12.18
WINTER 1999 84.50 77.78 6.72 8.64
SUMMER 2011 147.94 137.81 10.13 7.35
FEBRUARY 2012 149.60 142.83 6.77 4.74
SOURCES :
Highland Council (16/03/11) PED Committee Report PED22/11, Appendix 1
Press & Journal (29/02/2012) Ups and Downs of pump prices
UK : DTI - Up to & Including Winter 1996 (Summer Mean - May,June,July :
: DTI - June 1997 onwards price from DTI Energy Policy & Analysis Unit
Table 3.6

73
fig (3.6)
Price Survey”, (3) Highland Council (16/03/11) PED Committee Report PED22/11, Appendix 1,

74
Price Survey” (3) Press & Journal (29/02/12) “Ups and Downs of Pump Prices”,
(5) Highland Council (16/03/11) PED Committee Report PED22/11, Appendix 1,

75

76

77

78

79

80

81

82

83
JULY1995
AUGUST1995
SEPTEMBER1995
OCTOBER1995
NOVEMBER1995
DECEMBER1995
JANUARY1996
FEBRUARY1996
MARCH1996
APRIL1996
MAY1996
JUNE1996
JULY1996
fig (3.15)
0
1
2
3
4
5
6
7
PRICEDIFFERENCE(ppl) LEADED PETROL PRICES
SHETLAND PRICE > UK PRICE (PPL)

84
JULY 1995
AUGUST 1995
SEPTEMBER 1995
OCTOBER 1995
NOVEMBER 1995
DECEMBER 1995
JANUARY 1996
FEBRUARY 1996
JANUARY 2000
fig (3.16)
1
2
3
4
5
6
7
8
9
10
PRICEDIFFERENCE(ppl)
LEADED PETROL PRICES
ORKNEY PRICE > UK PRICE (PPL)

85
JULY 1995 NOVEMBER 1995 JANUARY 1996 MARCH 1996 APRIL 1996 JUNE 1996
fig (3.17)
0
1
2
3
4
5
6
7
8
9
10
11
PRICEDIFFERENCE(ppl)
LEADED PETROL PRICES
W. ISLES PRICE > UKPRICE (PPL)

86
We should continue this section by looking at the worst case scenario. In Coll unleaded fuel
was recorded at £1.52 per litre as early as July 2008. The UK average at the same time was
119 pence per litre. The differential for unleaded was therefore 33 pence per litre, or 27.7%
above the UK average. Coll also had the highest price for diesel, 165 pence per litre in July
2008. The UK average at the same time was 133 pence per litre. The differential for diesel
was therefore 32 pence per litre, or 24.1% above the UK average.
The OFT view of the market, given in the 1998 Report, Section 11.11 (page 72) was:
"It appears that consumers are not paying over the odds for their petrol in North West
Scotland. The higher prices are a function of the extra costs of supply and the fact that there
is less intense competition there than in other areas. At present, there is no evidence of the
operation of cartels in the region"
The highest fuel prices in the world apparently do not constitute paying "over the odds."
When we last looked at the market in 1998, figures were produced by this author for HIAG
which look at the price differentials net of duty and VAT. These showed in rather more stark
terms why it was that price discrimination is practised in the area. Differences were found,
which have subsequently been widely reported, both in the national press and in the evidence
given to the Scottish Parliament by HIAG which showed that the differentials in prices net of
duty and VAT have been as high as 74% in the case of Lead Replacement Petrol (see Table
3.9), 88% in the case of unleaded petrol (see Table 3.12), and 91% in the case of Diesel (see
Table 3.15). We cannot conceive in light of this evidence how the OFT could have concluded
that Highlands and Islands motorists were "not paying over the odds" their assertion was
incredible and untenable. Over the last decade the differential appears to have fallen in
percentage terms. The supply chain now makes far more on every litre sold, not just those in
the Highlands and Islands. Commenting on a World in Action investigation into the activities
of Stagecoach, the then opposition Transport Minister, Brian Wilson remarked, "Competition
Law is just a joke...it is a paper tiger." It is sad to reflect, that little has changed since this
programme was made in 1995.

87
Lead Replacement Petrol - Net UK Price
Net Price Duty VAT Period Gross Price
10.90 19.38 5.30 Summer 1986 35.58
12.48 19.38 5.58 Winter 1986 37.44
12.91 19.38 5.65 Summer 1987 37.94
12.20 19.38 5.53 Winter 1987 37.11
11.80 20.44 5.64 Summer 1988 37.88
11.24 20.44 5.54 Winter 1988 37.22
15.59 20.44 6.31 Summer 1989 42.34
14.05 20.44 6.03 Winter 1989 40.52
14.63 22.48 6.50 Summer 1990 43.61
16.37 22.48 6.80 Winter 1990 45.65
16.94 25.85 7.49 Summer 1991 50.28
15.29 25.85 7.20 Winter 1991 48.34
15.93 27.79 7.65 Summer 1992 51.37
15.96 27.79 7.66 Winter 1992 51.41
16.38 30.58 8.22 Summer 1993 55.18
13.79 33.14 8.21 Winter 1993 55.14
15.33 33.14 8.48 Summer 1994 56.95
14.16 35.26 8.65 Winter 1994 58.07
15.29 36.14 9.00 Summer 1995 60.43
12.31 39.12 9.00 Winter 1995 60.43
11.77 39.12 8.91 Summer 1996 59.80
13.94 41.68 9.73 Winter 1996 65.35
10.55 45.10 9.74 Summer 1997 65.39
14.09 45.10 10.36 Winter 1997 69.55
12.33 49.26 10.78 Summer 1998 72.37
10.01 49.26 10.37 Winter 1998 69.64
13.72 52.88 11.66 Summer 1999 78.26
15.94 52.88 12.04 Winter 1999 80.86
File: Tab3_7f
Date: 17/09/00
Table 3.7
Source: Deirdre Taylor, DTI Energy Policy, Technology, Analysis & Coal 4d

88
Lead Replacement Petrol - Net Highlands Price
13.91 19.38 5.83 Summer 1986 39.12
13.54 19.38 5.76 Winter 1986 38.68
14.48 19.38 5.92 Summer 1987 39.78
14.48 19.38 5.92 Winter 1987 39.78
13.42 20.44 5.92 Summer 1988 39.78
14.16 20.44 6.06 Winter 1988 40.66
17.35 20.44 6.61 Summer 1989 44.40
15.85 20.44 6.35 Winter 1989 42.64
16.99 22.48 6.91 Summer 1990 46.38
17.18 22.48 6.94 Winter 1990 46.60
19.61 25.85 7.95 Summer 1991 53.41
19.32 25.85 7.90 Winter 1991 53.07
20.05 27.79 8.37 Summer 1992 56.21
19.82 27.79 8.33 Winter 1992 55.94
19.04 30.58 8.68 Summer 1993 58.30
15.92 33.14 8.59 Winter 1993 57.65
19.94 33.14 9.29 Summer 1994 62.37
19.00 35.26 9.49 Winter 1994 63.75
20.63 36.14 9.93 Summer 1995 66.70
16.62 39.12 9.76 Winter 1995 65.50
17.73 39.12 9.95 Summer 1996 66.80
19.85 41.68 10.77 Winter 1996 72.30
16.09 45.10 10.71 Summer 1997 71.90
20.01 45.10 11.39 Winter 1997 76.50
18.23 49.26 11.81 Summer 1998 79.30
17.46 49.26 11.68 Winter 1998 78.40
18.18 52.88 12.44 Summer 1999 83.50
21.33 52.88 12.99 Winter 1999 87.20
File: Tab3_7f
Date: 17/09/00
Table 3.8
Source: (1) Mackay Consultants (Various Dates) Rural Scotland Price Survey
(3) Press & Journal (29/02/12) “Ups and Downs of Pump Prices”

89
UK v Highlands & Islands Lead Replacement Petrol Price Net of Duty & VAT
UK Highlands Price Difference Price Difference
Net Fuel Price Net Fuel Price (ppl) (Percent)
Summer 1986 10.90 13.91 3.01 28%
Winter 1986 12.48 13.54 1.06 8%
Summer 1987 12.91 14.48 1.57 12%
Winter 1987 12.20 14.48 2.28 19%
Summer 1988 11.80 13.42 1.62 14%
Winter 1988 11.24 14.16 2.92 26%
Summer 1989 15.59 17.35 1.76 11%
Winter 1989 14.05 15.85 1.80 13%
Summer 1990 14.63 16.99 2.36 16%
Winter 1990 16.37 17.18 0.81 5%
Summer 1991 16.94 19.61 2.67 16%
Winter 1991 15.29 19.32 4.03 26%
Summer 1992 15.93 20.05 4.12 26%
Winter 1992 15.96 19.82 3.86 24%
Summer 1993 16.38 19.04 2.66 16%
Winter 1993 13.79 15.92 2.13 15%
Summer 1994 15.33 19.94 4.61 30%
Winter 1994 14.16 19.00 4.84 34%
Summer 1995 15.29 20.63 5.34 35%
Winter 1995 12.31 16.62 4.31 35%
Summer 1996 11.77 17.73 5.96 51%
Winter 1996 13.94 19.85 5.91 42%
Summer 1997 10.55 16.09 5.54 53%
Winter 1997 14.09 20.01 5.92 42%
Summer 1998 12.33 18.23 5.90 48%
Winter 1998 10.01 17.46 7.45 74%
Summer 1999 13.72 18.18 4.46 33%
Winter 1999 15.94 21.33 5.39 34%
File: Tab3_9f
Date: 17/09/00
Table 3.9
Sources: DTI (op cit) and Mackay Consultants (op cit)

90
Summer1986
Winter1986
Summer1987
Winter1987
Summer1988
Winter1988
Summer1989
Winter1989
Summer1990
Winter1990
Summer1991
Winter1991
Summer1992
Winter1992
Summer1993
Winter1993
Summer1994
Winter1994
Summer1995
Winter1995
Summer1996
Winter1996
Summer1997
Winter1997
Summer1998
Winter1998
Summer1999
Winter1999
file: Tab3_9f
0
5
10
15
20
25
PetrolPriceNetofVATandDuty
Net Highland Price
Net UK Price
fig 3.18
UK and Highland Lead Replacement Petrol
Net Retail Proceeds

92
Unleaded Petrol - Net UK Price
14.57 17.72 5.65 Winter 1989 37.94
15.16 19.49 6.06 Summer 1990 40.71
16.82 19.49 6.35 Winter 1990 42.66
17.38 22.41 6.96 Summer 1991 46.75
15.73 22.41 6.68 Winter 1991 44.82
16.55 23.42 6.99 Summer 1992 46.96
16.78 23.42 7.04 Winter 1992 47.24
17.06 25.76 7.49 Summer 1993 50.31
14.51 28.32 7.50 Winter 1993 50.33
15.54 28.32 7.67 Summer 1994 51.53
14.33 30.44 7.83 Winter 1994 52.60
15.99 30.44 8.13 Summer 1995 54.56
12.11 34.30 8.12 Winter 1995 54.53
12.26 34.30 8.15 Summer 1996 54.71
14.65 36.86 9.02 Winter 1996 60.53
10.66 40.28 8.92 Summer 1997 59.86
14.09 40.28 9.52 Winter 1997 63.89
12.22 43.98 9.84 Summer 1998 66.04
9.55 43.98 9.37 Winter 1998 62.90
13.20 47.21 10.57 Summer 1999 70.98
16.96 47.21 11.23 Winter 1999 75.40
52.64 57.95 22.12 Summer 2011 132.71
54.47 57.95 22.48 February 2012 134.90
File: Tab3_10f
Date: 17/09/00
Table 3.10
Source: (1) Deirdre Taylor, DTI Energy Policy, Technology, Analysis & Coal 4d (up to Winter 1999)

93
Unleaded Petrol - Net Highlands Price
- - - - -
16.14 17.72 5.92 Winter 1989 39.78
17.55 19.49 6.48 Summer 1990 43.52
17.92 19.49 6.55 Winter 1990 43.96
20.05 22.41 7.43 Summer 1991 49.89
19.75 22.41 7.38 Winter 1991 49.54
20.44 23.42 7.68 Summer 1992 51.54
20.20 23.42 7.63 Winter 1992 51.25
19.60 25.76 7.94 Summer 1993 53.30
16.26 28.32 7.80 Winter 1993 52.38
19.48 28.32 8.37 Summer 1994 56.17
19.39 30.44 8.72 Winter 1994 58.55
21.05 30.44 9.01 Summer 1995 60.50
16.93 34.30 8.97 Winter 1995 60.20
18.21 34.30 9.19 Summer 1996 61.70
20.50 36.86 10.04 Winter 1996 67.40
17.08 40.28 10.04 Summer 1997 67.40
20.57 40.28 10.65 Winter 1997 71.50
18.23 43.98 10.89 Summer 1998 73.10
17.98 43.98 10.84 Winter 1998 72.80
18.41 47.21 11.48 Summer 1999 77.10
22.58 47.21 12.21 Winter 1999 82.00
60.71 57.95 23.73 Summer 2011 142.39
60.22 57.95 23.63 February 2012 141.80
File: Tab3_10f
Date: 17/09/00
Table 3.11
Source: (1) Mackay Consultants (Various Dates) Rural Scotland Price Survey

94
UK versus Highlands Unleaded Price Net of Duty & VAT
Period Net Price Net Price (ppl) (Percent)
Winter 1989 14.57 16.14 1.57 11%
Summer 1990 15.16 17.55 2.39 16%
Winter 1990 16.82 17.92 1.10 7%
Summer 1991 17.38 20.05 2.67 15%
Winter 1991 15.73 19.75 4.02 26%
Summer 1992 16.55 20.44 3.89 24%
Winter 1992 16.78 20.20 3.42 20%
Summer 1993 17.06 19.60 2.54 15%
Winter 1993 14.51 16.26 1.75 12%
Summer 1994 15.54 19.48 3.94 25%
Winter 1994 14.33 19.39 5.06 35%
Summer 1995 15.99 21.05 5.06 32%
Winter 1995 12.11 16.93 4.82 40%
Summer 1996 12.26 18.21 5.95 49%
Winter 1996 14.65 20.50 5.85 40%
Summer 1997 10.66 17.08 6.42 60%
Winter 1997 14.09 20.57 6.48 46%
Summer 1998 12.22 18.23 6.01 49%
Winter 1998 9.55 17.98 8.43 88%
Summer 1999 13.20 18.41 5.21 39%
Winter 1999 16.96 22.58 5.62 33%
Summer 2011 52.64 60.71 8.07 15%
February 2012 54.47 60.22 5.75 11%
File: Tab3_12f
Date: 17/09/00
Table 3.12

96
Diesel - Net UK Price
15.75 36.86 9.21 Winter 1996 61.82
11.29 40.28 9.03 Summer 1997 60.60
14.24 40.28 9.54 Winter 1997 64.06
12.98 43.99 9.97 Summer 1998 66.94
10.44 43.99 9.53 Winter 1998 63.96
12.61 50.21 10.99 Summer 1999 73.81
15.99 50.21 11.58 Winter 1999 77.78
56.89 57.95 22.97 Summer 2011 137.81
61.08 57.95 23.80 February 2012 142.83
File: Tab3_13f
Date: 17/09/00
Table 3.13
Source: Deirdre Taylor, DTI Energy Policy, Technology, Analysis & Coal 4d

97
Diesel - Net Highlands Price
23.14 36.86 10.50 Winter 1996 70.50
21.51 40.28 10.81 Summer 1997 72.60
22.27 40.28 10.95 Winter 1997 73.50
19.41 43.99 11.10 Summer 1998 74.50
16.95 43.99 10.66 Winter 1998 71.60
20.26 50.21 12.33 Summer 1999 82.80
21.70 50.21 12.59 Winter 1999 84.50
65.33 57.95 24.66 Summer 2011 147.94
66.58 57.95 24.90 February 2012 149.43
File: Tab3_13f
Date: 17/09/00
Table 3.14
Source: Mackay Consultants (Various Dates) Rural Scotland Price Survey

98
UK versus Highlands Diesel Price Net of Duty & VAT
Period Net Price Net Price (ppl) (Percent)
Winter 1996 15.75 23.14 7.39 47%
Summer 1997 11.29 21.51 10.22 91%
Winter 1997 14.24 22.27 8.03 56%
Summer 1998 12.98 19.41 6.43 50%
Winter 1998 10.44 16.95 6.51 62%
Summer 1999 12.61 20.26 7.65 61%
Winter 1999 15.99 21.70 5.71 36%
Summer 2011 56.89 65.33 8.44 15%
February 2012 61.08 66.58 5.50 9%
File: Tab3_15f
Date: 17/09/00
Table 3.15
Sources: DTI (op cit) and Mackay Consultants (op cit)

100
The above figures did not attempt to isolate the ex-refinery fuel cost included in the supply
chain's earnings. Removing this element would have the effect of lifting the final barrier to a
true understanding of the dichotomy in prices between urban and rural areas. That is what we
must do now. Let's look again at the worst differentials recorded net of duty and VAT. Table
3.18 shows the effect of removing the cost of fuel ex-refinery from our calculations. It shows
that it is possible for the wholesale and retail elements of the supply chain to earn between
two and two and a half times as much from the sale of one litre of motor fuel in the
Highlands and Islands market as they can earn in the rest of the UK. In our opinion, the
conclusion that Highlands and Islands consumers are "not paying over the odds" is
ridiculous.
Table 3.16 gives the cost to the Highlands and Islands of the higher fuel prices being charged.
It shows that in the last year (2011), when compared with UK prices, the differential was £35
million pounds. This finding is in agreement with a 1998 EKOS study, which compared
Highlands and Islands prices with Scottish average prices. Over a decade the figure would be
approximately £350 million pounds from higher prices in less than 1% of the UK motor fuel
market.
Over the last twelve years the network has been controlled by S & JD Robertson, BP,
Scottish Fuels and GB Oils. Each sale results in Capital Gains for the vendor and a lower rate
of Return on Assets and Return on Capital Employed as the acquisition cost is now part of
product cost. Much higher prices can be charged to end customers without attracting attention
from the regulator. With no alternative supply chain offering competition price differentials
are entrenched. Establishing such a network will be necessary to bring down prices as was
achieved by Highland Council Harbours in the market for Marine Gasoil. The market for
home heating oil (kerosene) is like petrol & diesel an unregulated private monopoly.

101
COST OF HIGHER PETROL PRICES TO HIGHLAND CONSUMERS
YEAR ROAD FUEL
CONSUMED IN
THE HIGHLANDS
(LITRES)
HIGHLANDS AS
A % OF UK
MARKET
ROAD FUEL
CONSUMED IN THE
UK (LITRES)
TOTAL PETROL
CONSUMED IN THE
UK (LITRES)
TOTAL DIESEL
CONSUMED IN THE
UK (LITRES)
1986 369,667,976 0.0093 39,749,244,780 29,091,432,660 10,657,812,120
1987 386,269,104 0.0093 41,534,312,295 30,059,114,040 11,475,198,255
1988 411,048,568 0.0093 44,198,770,745 31,502,641,610 12,696,129,135
1989 428,973,912 0.0093 46,126,227,080 32,416,421,090 13,709,805,990
1990 440,605,411 0.0093 47,376,925,955 32,943,249,155 14,433,676,800
1991 437,459,207 0.0093 47,038,624,460 32,548,232,780 14,490,391,680
1992 443,261,871 0.0093 47,662,566,730 32,579,096,970 15,083,469,760
1993 448,260,886 0.0093 48,200,095,230 32,202,955,745 15,997,139,485
1994 450,594,721 0.0093 48,451,045,295 30,952,222,995 17,498,822,300
1995 445,484,624 0.0093 47,901,572,470 29,728,071,280 18,173,501,190
1996 461,167,581 0.0093 49,587,911,975 30,103,022,815 19,484,889,160
1997 469,130,242 0.0093 50,444,112,085 30,151,625,310 20,292,486,775
1998 466,147,191 0.0093 50,123,353,898 29,604,526,568 20,518,827,330
1999 464,671,871 0.0093 49,964,717,273 30,141,824,718 19,822,892,555
2011 435,616,543 0.00968 45,019,102,787 19,379,168,766 25,639,934,021
25,106,213,496
Sources:
Column 3: see pages 44-45 above.
Columns 4,5&6 : Adapted from Petroleum Review, Retail Marketing Survey 1996, 1997, 1998, 1999, 2000 and
2012
YEAR TOTAL FUEL
CONSUMED IN
THE HIGHLANDS
(LITRES)
PRICE
DIFFERENCE :
HIGHLANDS Vs
UK (ppl)
EXTRA COST OF
HIGHLAND
MOTORING (£'S)
1986 369,667,976 2.390 £8,835,065
1987 386,269,104 2.255 £8,710,368
1988 411,048,568 2.670 £10,974,997
1989 428,973,912 2.090 £8,965,555
1990 440,605,411 1.923 £8,472,842
1991 437,459,207 3.930 £17,192,147
1992 443,261,871 4.515 £20,013,273
1993 448,260,886 2.669 £11,964,083
1994 450,594,721 5.410 £24,377,174
1995 445,484,624 5.753 £25,628,730
1996 461,167,581 6.945 £32,028,089
1997 469,130,242 8.681 £40,725,196
1998 466,147,191 8.039 £37,473,573
1999 464,671,871 6.902 £32,071,653
2011 435,616,543 8.218 £35,798,968
Sources:
Column 3: see Table 3.17 (following)
Table 3.16

102
Weighted Average Price Difference (ppl) UK versus Highlands & Islands
Year Price
difference
Four Star
Price
difference
Unleaded
Price
difference
Diesel
Total price
difference
Volume
Four Star
(Tonnes)
Volume
Unleaded
(Tonnes)
Volume
Diesel
(Tonnes)
Total
Volume
(Tonnes)
1986 2.390 2.390 19,156,313 19,156,313
1987 2.255 2.255 20,101,674 20,101,674
1988 2.670 2.670 21,146,649 21,146,649
1989 2.090 2.090 18,907,111 18,907,111
1990 1.860 2.060 1.923 16,057,216 7,330,108 23,387,324
1991 3.930 3.930 3.930 14,152,826 8,696,072 22,848,898
1992 4.685 4.295 4.515 12,775,179 9,846,014 22,621,193
1993 2.815 2.520 2.669 11,262,604 11,039,688 22,302,292
1994 5.550 5.295 5.410 9,681,119 11,812,658 21,493,777
1995 5.670 5.805 5.753 8,158,625 12,839,007 20,997,632
1996 6.975 6.930 6.945 7,193,236 14,313,698 21,506,934
1997 6.730 7.575 10.720 8.698 6,250,232 16,001,890 14,976,005 37,228,127
1998 7.845 8.480 7.600 8.039 4,685,970 17,162,389 15,143,046 36,991,405
1999 5.790 6.360 7.855 6.902 3,323,404 18,921,485 14,629,441 36,874,330
2011 8.440 8.070 8.218 14,259,874 21,348,821 35,608,695
File: Tab3_17f
Date: 17/09/00
Table 3.17

103
UK UK Highlands Highlands Price Difference Highland Price
Net Fuel Price Net Fuel Price Net Fuel Price Net Fuel Price
Ex. NWE CIF
Price
as a percentage
Inc NWE CIF
Price
Ex. NWE CIF
Price
Inc. NWE CIF
Price
Ex. NWE CIF
Price
(ppl) of UK price
(ppl) (ppl) (ppl) (ppl)
15/02/12 Unleaded Petrol Price 54.47 3.99 60.22 9.74 5.75 244%
15/02/12 Diesel Price 61.07 5.63 66.57 11.13 5.50 198%
Spot $ Exch Rate Spot £ L/Tonne Ppl
NWE CIF Diesel $1023.25 1.5694 £652.00 1,176 55.44ppl
NWE CIF Petrol $1,056.00 1.5694 £672.87 1,333 50.48ppl
File: Tab3_18f
Date: 17/09/00 Table 3.18

104
Conclusions
In this Chapter we have seen that:
* Population density in the region is amongst the lowest in Europe.
* Car dependency is and will remain high.
* Public transport links are poor and often non-existent.
* The region has a higher number of vehicles per capita than Scotland & the UK
* Motor Fuel demand is 0.968 of one percent of the UK market.
* Supply to independent sites is a highly concentrated private monopoly
* The number of sites in the Highland Council area has collapsed from 348 in 1975 to only
97 in 2011.
* Scottish Government assistance with tank replacement has been removed.
* Much more assistance will be required to prevent the site network shrinking further.
* Solus Ties do not deliver cheap motor fuel in rural areas.
* Rate relief for garage shops could help sustain filling stations.
* Price differentials rose to record levels following the OFT Report in 1998.
* Retail prices on islands are up to 33% higher than UK prices in recent years.
* Refiner, wholesaler and retailer margins have been up to 91% higher than the UK.
* Wholesaler and retailer margins are up to two-and-a-half times higher than the UK.
* The OFT conclusion that consumers are "not paying over the odds" is unsustainable.
* The differential with UK prices in 2011 was over £35 million pounds.
* The differential in the last decade can be estimated at more than £350 million pounds.

105
Appendices
1) Map of Filling Station Closures since 1993
2) List of Filling Station Closures up to early 1993
3) List of Filling Station Closures since early 1993
4) Map of Filling Stations Remaining Open – May 2013
5) List of Filling Stations Remaining Open – May 2013

111
Premises Closed Since 1993 Address 1 Address 2 Address 3 Address 4 Address 5 Last Licenced
Aultbea Hotel Aultbea Nr Achnasheen Ross-shire IV22 2HX 1993
McConcheys Millbank Road Thurso Caithness KW14 8PS 1993
Kishorn Filling Station Kishorn Filling Station Kishorn Strathcarron 1993
D & H Ferguson Camusterrach Applecross 1993
Inverewe Service Station Inverewe Service Station Inverewe Poolewe Wester Ross 1994
MESSRS HICKS Castlehill Dunbeath Caithness KW6 6EY 1994
A & N Smith Chapel Road Grantown on Spey Inverness-shire 1994
A L Grant Woodside Service Station Grantown on Spey Inverness-shire 1994
Kinlochlaggan Filling Station Kinlochlaggan Laggan Newtonmore 1994
Motorway Tyres and Access. Ltd Miller Street Wick Caithness 1994
Royal Garage Royal Garage King Street Nairn 1995
Castlevue Filling Station Mey Caithness KW14 8XH 1995
Mr J L Cameron Cameron's Garage Onich FORT WILLIAM PH33 6RY 1995
Brian MacGregor & Son Haugh Garage 33 Haugh Rd Inverness IV2 4SD 1995
R G & S Wicks Hastigrow Filling Station Bower By Wick Caithness 1995
Mr I Chisolm Ballachulish Filling Station Albert Road Ballachulish PA39 4JR 1996
McConechy's Tyre Service Ltd Craig Road Dingwall IV15 9LE 1996
Burnside Garage Long Road Avoch Ross-shire IV9 8AJ 1996
M Smith The Garage Marybank Muir of Ord Ross-shire IV6 1996
R W Stapley Nethybridge Service Station Nethybridge Inverness-shire 1996
K A MacKenzie Minch View Port Henderson Gairloch IV21 2AS 1996
C Sutherland & Son The Garage Reay Thurso Caithness KW14 7RE 1996
Mr Peter Foster Riverford Service Station Ord Road Conon Bridge IV6 7XL 1997
Lochluichart Estate North The Aultguish Inn Aultguish Garve Ross-Shire IV23 2PQ 1997
Burnside Garage Long Road Avoch Ross-shire IV9 8AJ 1997
K A MacKenzie Minch View Port Henderson Gairloch IV21 2AS 1997
Lybster Portland Arms Filling Station Quatre Braes Lyster Caithness KW3 6BW 1997
John Bain and Sons The Garage North Erradale Gairloch Ross-shire IV21 2DS 1997

112
Ord Filling Sation Great North Road Muir of Ord Ross-shire IV6 7UA 1997
Sutherland Transport and Trading Main Street Lairg Sutherland 1997
Loch Shiel Hotel Loch Shiel Hotel Acharacle Argyll PH36 4JL 1998
Mr Philip Cameron Viewfield Filling Station Newtonmore Road Kingussie 1998
Norman Cordiner Ltd 33 Harbour Road Longman Inverness IV1 1UG 1998
Mr & Mrs I Bartlett Spa Service Station Strathpeffer IV14 9BX 1998
Mace The Stores Main Road Hill of Fearn Ross-shire IV20 1TG 1998
Mr Philip Cameron Viewfield Filling Station Newtonmore Road Kingussie 1998
Richard's Garage Ltd (*OLD SITE*) Francis Street Wick Caithness 1999
Mr William D A Swanson Northern Motors Couper Square Thurso Caithness KW14 8AS 1999
MacRae & Dick Seaforth Filling Station Station Road Dingwall Ross-Shire IV15 9JE 1999
Mr Keith Pickard White Heather Garage Mill Street Ullapool Ross-shire IV26 2UN 1999
Sutherland Transport & Trading South Bonar Filling Station Bonar Bridge Sutherland IV24 3AN 1999
Mr & Mrs T M Sutherland Sutherland Arms Garage Old Bank Road Golspie Sutherland KW10 6SR 1999
BP Oil Ltd Cromwell Tower Filling Station Chapel Street Inverness IV1 1NA 1999
Mr & Mrs I Bartlett Spa Service Station Strathpeffer IV14 9BX 1999
Dulnain Bridge Filling Station Dulnain Bridge Morayshire 1999
Crossroads Filling Station 17 Arabella Tain Ross-shire IV19 1QH 1999
Caberfeidh Guest House Caberfeidh Guest House Caberfeidh Smoo, Durness Sutherland IV27 4QA 2000
Spar Shop Main Street North Kessock Ross-shire IV1 1XW 2000
Mr Archie Campbell Cuillin View Caravan Site Breakish Isle of Skye IV42 8PY 2000
Mace The Stores Main Road Hill of Fearn Ross-shire IV20 1TG 2000
A L Grant Woodside Grantown on Spey 2001
Mrs Jean Macrae Tomatin Filling Station Tomatin Inverness IV13 7YP 2001
Alistair MacGregor Spean Bridge Filling Station Spean Bridge Fort William 2001
Hugh C Johnston Dornoch Filling Station The Square Dornoch Sutherland IV25 3SD 2001
Inverarnie Stores Inverernie Filling Station Inverarnie Stores Inverarnie Farr IV1 2XA 2001
Forsinard Hotel Forsinard Hotel Forsinard Sutherland KW13 6YT 2002
Mathers Shop The Shop Sangomore Durness, By Lairg Sutherland IV27 4PZ 2002

113
Tarvie Services Tarvie Services Tarvie Strathpeffer Ross-shire IV14 9EJ 2002
Mr Allan Michael Peat. Bridgend Stores Aultbea Ross-shire IV22 2JA 2002
Ramko Raigmore Service Station Millburn Road Inverness IV2 3TR 2002
Spar Shop Main Street North Kessock Ross-shire IV1 1XW 2002
Kylesku Hotel Kylesku Hotel Kylesku Lairg IV27 4HW 2003
W Mowatt Mowatt's Garage George Street Wick Caithness KW1 4DG 2003
Highland Fling Scotland Ltd Balmacara Filling Station Balmacara Kyle of Lochalsh IV40 8DH 2003
Friars Bridge Filling Station Friars Bridge Filling Station 16 Telford Street Inverness IV3 5JZ 2003
Achness Hotel Rosehall By Lairg IV27 4BD 2003
Inchnadamph Hotel Inchnadamph Hotel Assynt Lairg IV27 4HN 2003
Henderson Group Midmills Garage 56 Midmills Road Inverness IV2 3PA 2004
Aird Motors Ltd (Petrol site closed) High Street Beauly Inverness-shire IV4 7BP 2004
Millerton Filling Stations Co 16 Glenurquhart Road Inverness IV3 6JL 2004
Gleaner Oils Ltd. Park Street Dingwall Ross-Shire IV15 9JG 2004
Mr Alan M MacLeod Moss Filling Station Moss Road Ullapool Ross-shire IV26 2TG 2004
J & E Madden Spinningdale Stores Ardgay Sutherland IV24 3AD 2004
Station Garage Station Road Golspie Sutherland KW10 6SR 2004
Achness Hotel Rosehall By Lairg IV27 4BD 2004
Nicolson Bus Company Ltd Borve Filling Station Borve Portree Isle of Skye IV51 9PE 2005
Ian MacPhail Conon Service Station Main Road Conon Bridge Ross-shire IV7 8HA 2005
MacRae & Dick Cairngorm Service Station Main Road Aviemore PH22 1PT 2005
Somerfield Petrol Station King Street Nairn IV12 4DN 2005
Dun-Alscaig Est.Management Ltd Ardgay Services Ardgay, Sutherland IV24 3DJ 2005
Mr Stephen J Plowman Achnasheen Filling Station Achnasheen Ross-shire IV22 2EE 2005
Highland Fling Scotland Ltd Balmacara Filling Station Balmacara by Kyle of Lochalsh IV40 8DH 2005
Highland Trading Post Fort William Road Kinlochleven PH50 4QL 2006
Mr J P Martin Lochewe Service Station Poolewe Ross-shire IV22 2JU 2006
Rhiconich Hotel Rhiconich By Lairg Sutherland IV27 4RN 2006
Friars Bridge Filling Station Friars Bridge Filling Station 16 Telford Street Inverness IV3 5JZ 2006

114
Dun-Alscaig Est.Management Ltd Ardgay Services Ardgay, Sutherland IV24 3DJ 2006
The Torridon Torridon By Achnasheen Ross-shire IV22 2EY 2007
Mr M D Cox Alness Service Station Obsdale Road Alness Ross-Shire IV17 0TU 2007
Mr J P Martin Lochewe Service Station Poolewe Ross-shire IV22 2JU 2007
Mrs Ann Gunn Elm Tree Filling Station George Street Wick Caithness KW1 4DG 2008
Mr & Mrs M B Quin Edinbane Shop Edinbane Isle of Skye IV51 9PL 2008
Esso Highlander Service Station Highlander Service Station Millburn Road Inverness IV2 3TR 2008
Corpach Hotel Corpach Fort William PH33 7JJ 2008
Fearn Service Station Fearn Service Station Main Road Hill-of Fearn Ross-shire IV20 1TE 2008
The Altnaharra (Sporting Hotel) Ltd By Lairg Sutherland IV27 4UE 2009
Motorway Cars Petrol FS Camanachd Crescent Fort William Inverness-shire PH33 6XZ 2009
Lochshell Filling Station Lochshell Filling Station by Wick Caithness KW1 4TB 2010
Esso Highlander Service Station Highlander Service Station Millburn Road Inverness IV2 3TR 2010
Alistair MacGregor Spean Bridge Filling Station Spean Bridge by Fort William 2010
Source: Highland Council (2013) Planning & Economic Development

116
Name of Premises Still Open May 2013 Address 1 Address 2 Address 3 Address 4 Address 5
William Dunnet & Co Ltd Petrol Filling Station Mansons Lane Thurso Caithness KW14 8EP
Ian & Lynn Stewart The Shop Reay Caithness KW14 7RG
Mrs C Matheson Old Post Office House Auckengill By Wick KW1 4XP
Pennyland Service Station Pennyland Service Station Scrabster Road Thurso Caithness KW14 7JU
J & G Sutherland and Spraytech The Garage Crescent Street Halkirk KW12 6XN
William Dunnet & Co Ltd Francis Street Wick KW1 5PZ
MacKays Garage Ltd Main Street Castletown Caithness KW14 8TU
Alan & Elizabeth Bamber Bridgend Filling Station Bridgend Thurso Caithness KW14 8PP
Post Office John O'Groats Caithness KW1 4YR
Allan's of Gillock Central Garage Watten Caithness KW1 5XG
Richard Mackay & Sons (Durness) Ltd Durine Durness By Lairg Sutherland IV27 4PN
Mr P & Mrs S Malone Bettyhill General Merchants Bettyhill Thurso KW14 7SP
G A & D E Skene Peter Burr Stores Tongue by Lairg IV27 4XF
Inverinate Service Station Inverinate Service Station Inverinate By Kyle of Lochalsh Ross-shire IV40 8HB
The Stop Shop Carbost Isle of skye IV47 8SR
Ewen MacRae (West End Garage) Ltd Dunvegan Road Portree IV51 9HD
Johnston Bros Petrol Station Mallaig Industrial Estate The Pier Mallaig Inverness-Shire PH41 4PX
The Co-operative Group Ltd Petrol Station Broadford Isle of Skye IV49 9AB
Road to the Isles Filling Station Lochybridge Fort William Inverness-shire PH33 6TQ
Onich Services Onich Fort William PH33 6RZ
MacKenzie Stores Lynton Staffin Isle of Skye IV51 9JS
Morar Motors Ltd The Garage Morar Inverness-shire PH40 4PA
Ben Service Station North Road Fort William PH33 6TQ
Gleaner Oils Filling Station North Road Fort William PH33 6FS
Portree Filling Station Viewfield Road Portree IV51 9EU
Glengarry Filling Station Invergarry Inverness-shire PH35 4HL
Sleat Community Trust Petrol Station Armadale Ardvaser, Isle of Skye IV45 8RS
Uig Filling Station/Cafe Uig Isle of Skye IV51 9 X X
Mr John MacPhie Atholl Service Station Dunvegan Isle of Skye IV55 8WA

Motor fuel markets prices & taxes

Motor fuel markets prices & taxes

Recommended

Recommended

More Related Content

What's hot

What's hot (10)

Viewers also liked

Viewers also liked (14)

Similar to Motor fuel markets prices & taxes

Similar to Motor fuel markets prices & taxes (20)

More from Derek Louden

More from Derek Louden (20)

Recently uploaded

Recently uploaded (20)

Motor fuel markets prices & taxes