Re: petrol margins
I've thought about buying into the petrol station business in the future. But i've since decided against that. Some of my concerns (excluding those mentioned before by myself and others) whould include:
a) Consolidation within the industry & increased market share of a few major players. The number of stations in the country has declined from 4,700 in 1970 to a present level of 2,500. Tesco's price war has damaged margins considerably (as I mentioned earlier). I would expect Statoil, Tesco and perhaps Texaco (Maxoil and esso are gradually closing/selling off company owned stations, Top never really established much of a foothold in the market) to dominate the industry over the next few years. Now you could argue that they don't own many of their stations (except tesco), meerly act as brands - but they are the suppliers and fewer suppliers will inevitably lead to tougher margins.
b) Clustering in businesses/multiple services. Today many of the stations in urban centers are not just fuel stations, they transgress several industries - obviously the conivence food sector, fast food sector and general car services (car wash) - but often they encompass others; hotels, retail warehouses and the newest additional service - the supermarket. One of the most successful stations in the midlands (there is a general acceptance that this station has a huge trade) is the KilMartin N6 Service Station. It is surrounded by 1) a hotel, 2) a McDonalds, 3) a retail park comprising 3/4 units major units and of course 4) the convience store. It relies on these businesses to provide the traffic to keep the business profitable. This is also quite a common system in other towns and cities - I suppose you could call it clustering; several complementary businesses are clustering around one another to drive traffic, e.g. McDonalds gets people to stop, they decide to fill the tank whilst stopped, and conversly Statoil customers decide whilst filling up to get a drive-thru meal. Do you think you could secure a petrol station in such a good location surrounded by such businesses? - more importantly can you afford to?, these stations obviously are much more expensive but small stations with noting but petrol and briquettes will struggle to compete with these super stations.
c) Risk - oil prices. In the end of the day, the oil business is exceedingly risky. Oil prices spike suddenly, your supplier passes the cost on to you, tesco down the road keep prices down as a promotion to attract customers - what do you do? sell at a loss or raise prices and loss custom? This scenario will become more common in the future - oil prices will continue to fluctuate violently until theres no more oil left. What do you do when oil reachs $100 a barrel? Customers may bear very high prices for a year - but any longer and they will look eventually for an alternative - they may even consider Irelands wonderfull public transport network as an alternative!
Anyones these are just a few points to consider - don't let me put you off.