The fight against fuel fraud calls for industry leadership
What does the future hold for the oil industry when facing up to fuel fraud?
The recent Oil and Fuel Supply Chain Security Summit – where John Hogg was a conference sponsor – offered an annual opportunity for the industry, government representatives and other experts to share problems that fuel fraud presents as well as potential solutions.
And it’s fair to acknowledge that companies and governments worldwide are doing great work to frustrate the activities of fraudsters – and we’re proud to be working with them.
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But the scale of the problem means there is still much work to do. As noted in a previous article, fuel fraud equates to about 10% of global fuel sales; to be clearer still, that is equivalent to the entire GDP of Kuwait.
Beyond the business of balance sheets there is the environmental argument – brought firmly into global consciousness with the latest climate protests.
Adulterated fuel increases harmful emissions of materials such as carbon monoxide, Nitrogen oxides and particulates. Allowing this to happen is at odds with the worldwide cities initiative to reduce greenhouse gas emissions by 2050. Indeed, London has just introduced a very low emission zone (VLEZ), requiring diesel cars to run on euro 6 standards – impossible to achieve if adulterated fuels enter the supply chain.
Such ambitious eco-initiatives mean it is imperative the oil industry ensures its fuel is of the highest quality.
So, how does the oil industry protect its supply chain and, therefore, its fuel quality and integrity?
Traditionally, marking programmes consisted of physical product marking such as fuel markers and on product security features such as holograms and serialisation.
These methods provide a level of protection but, with enhanced counterfeiting techniques and methods of fraud, the industry needs a more sophisticated way of identifying, tracking and solving the problem.
Some current programmes are hampered by inefficient data gathering and a disconnected approach to enforcement, as well as questionable test results.
Equally, our industry partners have told us about adulterant markers found in high value, branded fuels here in the UK and Europe; clearly this system needs improvement.
Using the most up-to-date technology provides the capability to mark high value fuels rather than adulterants. This is an advantage as marking high value fuel eliminates the profit incentive available from removing markers.
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Protecting fuel with this method protects it from all adulterants, not just those with markers, so ensuring the whole fuel supply is fully protected.
Many countries such as Korea, Spain and Colombia have shown great success in tackling fuel fraud when industry and technology providers collaborate in marking high value fuel.
A case in point
Our recent work with a major oil company in the People’s Republic of Korea identified that 12-15% by volume of the company’s branded products were counterfeit. Consequently, the company invested in a new marking programme to protect the integrity of its fuels.
As part of this initiative, we’ve been able to introduce the latest innovations in detectors, software and data capture. This means the company can receive and respond to data insights generated from its supply chain in real time. Ultimately, the oil company believes this new approach will enhance the effectiveness of using fuel marking programmes.
Ironically, we’d partnered with the same company in 2010 when it faced a similar problem, though cost reductions eventually stopped the programme. The resulting effect on revenues and reputation was reason enough to resume anti-fuel fraud activity.
This approach is built not on one single tactic, but on an ecosystem approach that connects technology and intelligence to secure the supply chain end-to-end.
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As a result, oil companies can offer a greater level of assurance that customers are buying a product they can trust, while deterring fraudsters who soon recognise what they’re up against.
The need for leadership
And so, what progress would we like to see by the time of next year’s Oil and Fuel Supply Chain Security Summit?
Only by close collaboration between oil companies, governments, law enforcement and fuel protection experts can we develop a deeper understanding of the ever-changing threat from fuel fraud. From that knowledge comes innovation: in products, in technology, in data gathering and analysis.
This challenge requires determination but – above all – it demands leadership. The next 12 months offers an opportunity for our industry to adopt leadership in tackling this problem.
And, that’s why we at John Hogg are respectfully – but without reservation – asking our colleagues across the industry to face up to fuel fraud.
That is about protecting the consumer, preserving the environment, defending corporate reputation and, admittedly, the bottom line of profit and loss.
But it’s also about the “bottom line” of how oil companies are judged in the accounts of public opinion and corporate responsibility.
If you enjoyed this article, why not let us know how well your company is dealing with the threats to fuel integrity?