Fewer petrol stations to cater for Ireland's increasing car numbers

Irish drivers, already accustomed to long queues at service stations, should prepare for even longer waits as the number of filling…

Irish drivers, already accustomed to long queues at service stations, should prepare for even longer waits as the number of filling stations continues to fall.

According to the Irish Petroleum Industry Association (IPIA) there has been a substantial decline in the number of petrol stations operating here. Between 2003 and 2004, while the rest of us were enjoying the economic boom, more than 200 filling stations closed down. Not by coincidence, that was the year Tesco entered the petrol retailing market with cut-price fuel, which according to some commentators caused the closure of local filling stations that were unable to compete with the superstore's low prices.

The following year, more than 80 filling stations closed, and the year after, another 110 pulled down the shutters for the last time.

There are now just 1,147 stations attempting to serve the 2.15 million vehicles on the Republic's roads, compared to more than 2,300 just a decade ago.

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The decline in the number of forecourts has been particularly dramatic in Dublin, where property prices have rocketed. Estate agent Savills Hamilton Osbourne King recently sold a former filling station on Merrion Road in south Dublin for "well in excess" of the €8 million asking price. A clearly less attractive filling station in Ballinteer still fetched €2.5 million.

Neither site had planning permission - something that does not deter developers. "Their supreme locations and the fact that most are already zoned 'mixed use', means these sites are prime for developing," explained the agent's spokesman.

According to a spokesman for the IPIA, while fuel volumes are increasing, margins are getting tighter and this is having a dramatic impact othe number of viable outlets. He added that while volumes are increasing, margins are getting tighter and this is having a dramatic impact on the number of viable outlets. The problem is compounded not only by Tesco's pricing policy, but also from the tight margins to which all fuel retailers are subject.

Figures are hard to come by, due in no small part to the work of the Competition Authority, which has made petrol retailers reticent about discussing anything to do with pricing. Declan McAndrew, Texaco Ireland's country chairman, said margins are so tight at present that the money made from selling fuel is not enough on its own to support a forecourt business.

With such minuscule margins, many have left the industry, especially in urban centres where property prices have tempted some to sell their land to property developers.

Texaco is reviewing its Irish retail operations, and is paying particular attention to its sites in the capital and other large urban areas where it is closing smaller stations and developing those with significant passing trade and large sites that can accommodate convenience stores as well as multi-pump forecourts. As McAndrew says, selling fuel is no longer the name of the game: "We need petrol to increase footfall into the shop where the high-margin products are sold."

Despite this, the company is attracting new franchise holders - 20 in the past two years - and is still looking for additional retailers.

But these are not new entrants to the market, simply existing petrol stations switching allegiance.

This rethink by the big players has led to some significant changes to the petrol retailing landscape over the past two years. Esso reduced the number of its outlets, and now does not operate away from the heavily populated east coast.

Two other major multinationals - Shell and Statoil - opted to go one step further and abandoned the Irish market altogether. The retail operations of both were taken on by the newly formed Topaz, which still sells fuel under the Shell brand name in 145 outlets across the island.

Earlier this year, in a move that signals a more upbeat feeling, Topaz merged the Statoil and Shell operations to bring together the 335 service stations it either owns or licenses to independent franchise operators.

Both Topaz and Texaco are still looking at opportunities to open new service stations.

But despite their optimism, one only need look across the water to see the dramatic effects of superstores entering a market where tight margins and high overheads have already made profitable petrol retailing a dream for many in the business.

According to the British Institute of Petroleum, Ireland is now going through the same pattern that Britain experienced over the past 20 years, where the number of standalone service stations there also declined by almost one-half.

It points out that during the same two decades the number of filling stations attached to superstores rose from 165 to 1,041. However, in Ireland, Tesco - the only superstore that also sells fuel - currently operates fewer than 10 service stations.

But the writing is on the wall, and whether Tesco remains operating just a handful of service stations or not (it has confirmed at least one more will open in Clonmel later this year) the decline in the number of places to fill up with fuel is going to continue as the big players and tight operating margins squeeze the small stations out of business. "This is a real issue," said a spokesman for Texaco. "In the UK we experienced what is happening now in Ireland over the past few years . . . and this is affecting not just motorists but also the elderly, infirm, parents with young children and people with limited access to public transport who use the store at the forecourt.

"In many areas, the service station is the last store in the community and so by at least doing some of your shopping there rather than at the supermarket, customers will help to keep their community alive."