Is Petrol Station Business Profitable In Kenya?

Is it profitable to run a fuel station in Kenya? Yes. In Kenya, a petrol station is an extremely profitable company, with an average annual profit of Ksh.9,000,000 for a well-located and supplied station.

By now, I’m confident you’ve figured out what you were looking for. Nothing should stop you from opening a petrol station or a micro petrol station; the time is now.

How much does a petrol station make per month in South Africa?

The convenience store raises the station’s cost, but according to Engen, it earns R309,000 in average monthly turnover in this example. An Engen at the high end of the scale will set you back around R7 million.

In Kenya, how much profit do petrol stations make each litre?

Importers of this gasoline aim for a profit margin of KSh 7 per litre, which converts to KSh 68.9, plus KSh 3.89 in dealer taxes, for a total of KSh 72.83.

After significant government taxes and levies of KSh 39.37 paid from every litre of Super Petrol purchased, the price rises to KSh 112.2 per litre.

KSh 19.90 is taxed as excise duty, KSh 18 as road maintenance levy, 65 cents and KSh 82 cents are levied for petroleum development and regulation and development of the railway network, respectively, out of the KSh 39.37.

Is running a gas station a profitable business?

In India, opening a petrol station is a high-risk venture. It is, however, a lucrative one, with petrol pump owners earning roughly 3.5 lakhs per month if they sell 400000 gallons of gasoline at a commission rate of 3.0/litre.

Is it profitable to operate a gas station?

  • Franchisees who pay royalties to name-brand gas refineries (ranging from 3% to 14%) in order to use their branding
  • Independent operators that own and operate generic “no-name” gas stations and purchase gas on the open market.

Because selling gas isn’t very profitable, most large oil firms have backed out of the retail market.

Gas stations make an average net margin of just 1.4 percent on their fuel, according to IBISWorld.

This is significantly lower than the 7.7% average across all industries, and it places it below other typically low-margin firms such as grocery stores (2.5%) and car dealerships (2.5%). (3.2 percent ).

Let’s take a step back and look at a typical gasoline supply chain to see why.

The profit pipeline

Gasoline starts off as crude oil, which is mostly sourced in the United States, in places like Texas and North Dakota.

  • Freight vehicles transport it to gas stations, where it is stored in underground barrels with a capacity of 20,000 gallons.

Let’s say you pay $4.09 for a gallon of gas at your neighborhood station (the national average, as of April 13, 2022).

Typically, gas stations only get a fraction of the price shown on the sign. After subtracting overhead costs such as labor, utilities, insurance, and credit card processing fees, the average profit per gallon is $0.03 to $0.07.

However, assuming daily sales of 4000 gallons at $0.05 a gallon, your typical station’s gas revenue might only be $200-300 per day.

Those coin-operated air machines you see at most stations, on the other hand, can make $300 to $500 per month in profit even after paying the corporations that lease them out.

For starters, petrol stations are well aware that the bulk of customers make their purchasing decisions entirely on the basis of pricing.

They have an incentive to keep those statistics as consistent as possible on the board.

Even if they didn’t, they’d be kept in check by local competition: The finest locations, such as high-traffic freeway exits and on-ramps, are frequently crowded with competing stations.

In actuality, they despise it just as much as you do, owing to the fact that competition forces them to compete on price. Catch-22:

  • When wholesale gas prices rise, many station owners would rather maintain their pricing and lose money than lose customers to competition.
  • Many petrol stations are wary about cutting their prices as wholesale costs fall, fearing a price war.

The real money is made inside the store

According to the National Association of Convenience Stores, 44 percent of gas station consumers enter the store. And one out of every three of them indulges in some sort of indulgence.

The merchandise sold inside these businesses Doritos, sunglasses, lottery tickets, and energy drinks contribute for only 30% of the average gas station’s revenue but generate 70% of the profit.

Card readers are now standard on most contemporary pumps, eliminating the need to walk inside to pay. The average time spent at a gas station by a consumer is now only 2-3 minutes.

Convenience stores also have some of the highest crime rates of any industry in the United States, with average yearly robbery losses of $761 per location.

The gas station of tomorrow

Gas stations in the United States sold 135 billion gallons of gasoline last year, enough to fill 204 thousand Olympic-size swimming pools.

In 1995, there were 195k of them in the United States; currently, there are only 115k.

  • Long-term, electric vehicles (EVs) and self-driving automobiles represent a danger to petroleum sales.
  • Urban real estate (NYC, DC, San Francisco, Boston) can be put to more profitable uses, such as condos or office projects.

Many stations have taken the pricey decision to install electric vehicle charging stations, which may cost up to $100,000 each.

Given that EVs presently make up of automobiles on the road, it’s a difficult cost to justify. However, the sector is rapidly growing: 4 out of 10 consumers say they’d consider buying an electric vehicle as their next vehicle, and stand-alone EV charging stations are springing up all over the country to serve them.

In the long run, EV-agnostic stations particularly smaller enterprises that can’t afford the upfront cost risk being left behind.

But, if everything else fails, gas stations have a hidden financial weapon in the form of those hypnotic rotating hot dog machines.

  • What’s the deal with the 9/10ths of a penny? When gas was only $0.15 per gallon almost a century ago, the government imposed a fraction of a penny gas tax. It’s no longer relevant, but station owners keep it since it makes prices appear slightly lower.
  • Explosions aren’t limited to the restroom. Each year, 4.2k flames erupt at gas stations around the country, resulting in $30 million in property damage. Cars are to blame for the majority of them. Hot dog machines are to blame for a handful of them.
  • When it comes to restrooms, a beautiful toilet can boost a gas station’s sales. According to one survey, 22.6 percent of customers who use the restroom “regularly” make an impulse purchase on their way out.
  • KFC got its origins in a gas station. Colonel (Harland) Sanders created his first fried chicken plate while operating a gas station in North Corbin, Kentucky, in the 1930s.

What does it cost to open a gas station in Kenya?

In Kenya, the cost of opening a petrol station ranges from Ksh. 6,000,000 to Ksh. 15,000,000. Land, construction, equipment, stocking, licensing, and insurance are all included in the initial capital.

Make sure you have enough money to run your business once it’s up and running. You’ll need a steady supply of fuel, as well as the cost of transportation and paying your employees.

In Kenya, a small petrol station business can be created in a small space and with little capital. If you buy at least one gasoline pump and upgrade later, you’ll be fine. Consider serving motorists on a small scale.

So you’ll need to set up your little gas station in areas where there are a lot of motorcyclists.

The company, on the other hand, will expand from a small start to a stable one, resulting in bigger earnings in the future.

What is the cost of opening a gas station?

Fuel provision is a necessary service (at least for the time being) that accounts for more than 6% of South Africa’s gross domestic product (GDP). It is also one of the most robust industries in South Africa, and with the right approach, it can enjoy solid earnings even during economic downturns.

How much does it cost to open a petrol station business?

The cost of establishing a local petrol station varies between R15 million and R100 million, depending on the size and location. Furthermore, depending on the cost of development, predicted volumes, and profitability, the operation payment to the oil business ranges between R2.5 million and R15 million. Then there’s the typical working capital requirements for stock and operating expenses, which might range from R1.2 million to R1.5 million. Contrary to popular assumption, when the price of gasoline rises, the petrol station does not benefit. In reality, every R1 increase in fuel price necessitates an additional R100,000 in operating capital for the average service station. The RAS (short for Regulatory Accounting System) retailer margin, as estimated by the Department of Energy, is insufficient, and there is an under recovery of roughly seven cents per litre. What this all boils down to is that while a petrol station’s massive start-up expenditures are one thing, a successful petrol store also requires constant access to fuel.

In Kenya, who is in charge of fuel prices?

According to the Energy (Petroleum Pricing) Regulations, 2010, the Authority is responsible for retail pricing of petroleum products (Diesel, Super Petrol, and Kerosene).

EPRA utilizes a method to determine the maximum retail pump prices of Super Petrol, Regular Petrol, Diesel, and Kerosene under the Pricing Regulations (the Regulated Products).

  • Pw = the highest wholesale price for super gasoline, kerosene, or automotive diesel;
  • Cu = the weighted average cost per litre ex-Kenya Petroleum Refineries Limited (KPRL) and ex-Kipevu Oil Storage Facility (KOSF).
  • K = the transportation cost from Mombasa to the nearest wholesale depot, which is calculated using the First Schedule’s x percent pipeline tariff (Kpt) and (100 x) percent road bridging cost (Krd).
  • mw = the allowed gross wholesale margin of an oil marketing business, as defined in the Third Schedule.
  • Pr = maximum retail pump price in shillings per litre for super fuel, normal petrol, kerosene, or Automotive diesel;
  • mr = maximum retail gross margin allowable, as defined in the Third Schedule;
  • z = the delivery rate in Shillings per litre from the nearest wholesale depot to a retail dispensing station, as specified in the First Schedule.

Economic Regulations considers the expenses listed in the first and second schedules of the Energy (Petroleum Pricing) Regulations, 2010 for calculating wholesale and retail prices for petroleum products.

Every month on the 15th, the retail and wholesale prices for Super Petrol, Automotive Diesel, and Kerosene are released.

What is a petrol station owner’s profit?

In India, a fuel station owner can make up to Rs 3,58,000 per month. Your monthly gross earnings will be 5,70,000 Rupees if your commission is 3 Rupees per litre.