Fuel Oil Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Fuel Oil Category Overview

The fuel oil category is anticipated to grow at a CAGR of 4.8% from 2023 to 2030. The category is mainly driven by the demand, supply, and prices of crude oil. Oil prices are mainly affected by Russia’s ability to produce and export oil, and the ability to increase production by various non-OPEC countries. According to the U.S. Energy Information Administration, Crude oil prices have exhibited a general downward trend since March 2022 at the time when Russia's full-scale invasion of Ukraine has caused Brent crude oil prices to go above USD 130 per barrel. This invasion took place during a period of low oil inventories, and the potential for sanctions or operational disturbances in Russia's oil production further contributed to the upward price pressure. Subsequently, the descent in crude oil prices can be attributed primarily to the deceleration in global economic expansion and a reduction in oil consumption.

Fuel oil is the residual product remaining after the distillation process of crude oil. A greater production of crude oil directly leads to a higher generation of fuel oil. The escalating need for crude oil, particularly in North America, due to the ample availability of shale oil reserves and advanced technologies, is propelling the expansion of fuel oil production even more. The demand is also on the rise in emerging countries such as China and India. The economic expansion in these nations is driving more industries’ establishment, resulting in a higher need for fuel oil.

China is the major importer and is anticipated to keep importing fuel oil as a feedstock to compensate for tight crude quota availability. According to an S&P Global report, Chinese refineries raised up the imports in June 2023 to around 1.32 million mt from 80,000 mt in June 2022. The volume pushed up to 6.96 million mt in the first half of 2023 from a low of 449,000 mt in January-June 2022.

The potential of technology to enhance performance throughout the upstream oil and gas value chain is realized through the facilitation of optimization and automation. Automation encompasses the utilization of fully or partially autonomous machinery in lieu of human operators to conduct drilling, inspection, and upkeep of equipment within high-risk offshore or drilling and production locations. These mechanized systems possess self-monitoring capabilities and can transmit information to a control center located onshore, where most of their operations are supervised from a remote vantage point. However, the effective transmission of pertinent data to the central hub necessitates adequate bandwidth and potentially relies on edge computing methods.

Fuel processing equipment and machineries connected through internet of things can help in getting the current information of the machinery. This capability can assist fuel oil enterprises in forecasting equipment malfunctions and reduce overall periods of inactivity. The financial impact of a single pump malfunction can be substantial, potentially leading to the loss of hundreds of thousands of dollars in productivity. Thus, with the ability to monitor pump conditions in real-time, preparations can be made for the timely replacement of pumps identified as prone to failure. This immediate stream of data stands to enhance the management team's capacity to arrive at improved and well-informed choices.

The fuel oil suppliers include oil producers, refineries, and distributors. The bargaining power of suppliers can be influenced by the concentration of suppliers, the availability of alternative sources, and the cost of switching between suppliers. In the global oil industry, a few major oil-producing countries and companies dominate the supply, giving them significant leverage over prices. However, the growth of shale oil and renewable energy sources has slightly weakened this power.

Producing fuel oil has various cost components such as raw materials cost, labor, refining, distribution and marketing cost, taxes, and others. Raw material (crude oil) cost is the major component accounting for more than 40% of the total cost. The costs associated with refining undergo seasonal and regional fluctuations. This variability is attributed, in part, to the necessity for distinct fuel oil formulations aimed at mitigating air pollution across various geographical areas within the country. The specific attributes of the fuel oil produced are contingent on both the category of crude oil utilized and the refining technology accessible at the production facility.

In terms of fuel oil sourcing, the hybrid model is a popular engagement model in the category, combining in-house and full-service outsourcing. Some companies opt for a partial outsourcing model. Companies outsource operations such as refining, and distribution. Whereas, employing an in-house team in various task from extracting crude oil up to refining and distribution can be beneficial for the company. Developing a strong relationship with suppliers and ensuring the consistency and traceability of the supply chain is key of sourcing the category.

Fuel Oil Procurement Intelligence Report Scope