Exploring the Structure and Performance of Petroleum Retail Outlets in Pakistan

Abstract

The petroleum retail industry is one of the least researched industries in Pakistan due to, perhaps, unavailability of the relevant data. This paper aims to fill this gap. Specifically, the present paper examines the structure and performance of petrol pumps in Pakistan, using primary survey data. Analysis of the data reveals that operating a petrol pump is a profitable venture and both location and non-locational variables are important in contributing to the profitability of a petrol pump. The exploratory analysis shows that the petrol pumps in urban areas and those on highways have higher sales, indicating that the geographical location of a petrol pump is important in explaining a petrol pump’s performance. According to the regression results, as the size of a petrol pump increases, its profitability increases and there is a non-linear relation between the distance variable and profitability of a petrol pump. The non-linearity implies that there exists optimal distance between two petrol pumps that maximises profits. This optimal distance is shorter for urban and non-highway petrol pumps, compared with rural and highway petrol pumps. JEL Classification: D24, L81, R3 Keywords: Cost, Retail Business, Firm Location, Petrol Pumps