Why should the oil industry in 2019 face up to fuel fraud?

By Philip Double, Technical and Commercial Director, John Hogg

The problem – in pure financial terms – equates to about 10% of total, global fuel sales. For example, an oil producer selling 65bn bbl a year generating $10bn in revenue could be losing up to $1bn annually in fraud.

This amount makes a significant dent in the capital invested by companies to provide legitimate fuel products that consumers around the world recognise and trust.

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The worldwide growth in vehicle ownership, with annual sales predicted to reach 80 million by the end of this year, combines a greater demand for petrol and diesel with an equally large number of people expecting to get exactly what they pay for: they want guaranteed performance, the branded fuel they buy to deliver and assurance that what goes into their tank will not cause any damage to their motorised “pride and joy” or essential work tool.

Modern, technologically-sophisticated vehicles require the right quality of fuel to function effectively; conversely, using the wrong quality of fuel – if it’s illicitly diluted with other fluids such as solvents or used fuel – is now a much more expensive problem to resolve.

If fuel fraud is allowed to operate somewhere in the petroleum supply chain, it raises the risk that a motorist will unknowingly buy adulterated fuel which causes their car, van or truck to fail. This can leave the customer out of pocket, facing a protracted claims process and create a long-lasting negative opinion of an oil company’s supposedly premium product. Apart from the cost of paying genuine claims, the oil company is paying an even greater cost in lost reputation.

The priceless value of reputation

A good reputation built up over years can be lost in an instant.

Sub-standard fuel caused by adulteration, the resulting damage to car engines and a poorly-handled approach to claims are all likely reputation “killers”.

And where such problems would previously receive limited public exposure, our hyper-connected world now ensures that bad news travels faster than ever and leaves a permanent, digital record through social media. It can also leave a big hole in company accounts as they scramble resources trying to extinguish online “fires”.

Countering a major image problem – reversing suspicion about a particular brand of fuel and the oil producer’s supply chain security – takes considerable time and effort. The challenge is exacerbated if the fraudulent activity involved is part of organised crime such as the drug trade, human trafficking and even terrorism; illegal activities that no brand wants to be associated with.      

Similarly, the treatment a consumer receives when they are innocent purchasers of adulterated fuel products can help make or break an oil company’s reputation. Customers increasingly demand higher levels of customer service and are empowered to pursue claims against companies that have let them down.

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If oil companies are wholeheartedly facing up to fuel fraud, and protecting their brand reputation, it’s about both tackling the broken links in the supply chain and rapidly rectifying the experience of dissatisfied customers.

Facing up to fuel fraud – an investment in fraud prevention

It would be surprising if oil companies didn’t already recognise the importance of corporate reputation and customer satisfaction. We work with many that do.

However, addressing the ongoing problem of fuel fraud needs a collaborative approach among technical, commercial and marketing teams, blending knowledge and expertise about product development, specification, performance and brand-building among retailers and customers.

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Numerous oil companies are now taking fuel fraud seriously by adopting brand and fuel marking programmes as part of their strategy: fuel marking is a tried and tested method to ensure that the fuel a motorist buys from the retailer is legitimate and unadulterated during its journey from pipeline to pump.

This chemical equivalent of a unique “fingerprint” is both about fraud deterrence and instilling a petroleum or diesel product with an integrity that can be monitored, tracked and tested throughout the supply chain, as fraud can occur at numerous points despite the best efforts of the industry.

Having the right technology to confirm the source and validity of branded fuel gives oil companies the ability to seek out and eliminate supply chain security weaknesses; it also equips a faster response to honest claims from motorists and decline those aiming to profit from fraud.

We think the time has come for our industry, collectively, to face up to fuel fraud: this is a joint challenge for oil companies and fuel security experts to protect petroleum product quality and ensure motorists worldwide can trust what they purchase at the fuel pump.

To learn more about facing up to fuel fraud – including the problems in oil and fuel supply chain security and some of the solutions oil companies are now using – visit our interactive white paper.