Choosing the right fuel distributor is one of the most consequential decisions a gas station operator makes. It affects your cost structure, supply reliability, payment terms, and ultimately your margin on every litre sold. The Petrol Group team has worked with operators across 16 countries and shares the key criteria for making this decision correctly.
Understand the distribution chain first
Fuel travels from refinery to terminal to distributor to retailer. As a gas station operator, you typically buy from a distributor — not directly from the refinery. Some large networks negotiate supply contracts at the terminal level, but most independent operators work with regional distributors. Understanding where your distributor sits in this chain tells you how much negotiating power they have on price and how reliable their supply will be.
Key criteria for evaluating distributors
Supply reliability: Ask for their delivery track record. How many missed or delayed deliveries in the last 12 months? A distributor that fails to deliver on time during peak periods can cost you customers permanently. Pricing structure: Understand whether pricing is fixed, indexed to a reference price (e.g. Platts, OPIS), or negotiated per delivery. Index-linked pricing gives you more transparency but less predictability. Contract terms: Minimum volumes, exclusivity clauses, and price review windows are the most important contract elements to scrutinise. A multi-year exclusivity contract with a poor distributor is a significant risk. Credit terms: Payment terms vary from prepayment to 30-day credit. Your working capital needs should match the terms offered. Additive programme: If you plan to sell premium/additivated fuel, confirm whether the distributor adds the additive package at the terminal or whether you need to inject it at the pump.
Red flags to watch for
Be cautious of distributors who cannot provide references from current customers, who offer unusually low prices (often a sign of product quality issues or compliance problems), or whose contracts include automatic renewal clauses with limited exit rights. Always verify that your distributor holds the required operating licences and that their fuel meets the quality specifications required in your jurisdiction.
Negotiating your first contract
For a new station, your volume is your negotiating asset. Even if you are starting small, project your 12-month volume credibly and use it as the basis for pricing discussions. Ask for a trial period before signing a long-term contract. Larger operators often split their volume between two distributors to maintain negotiating leverage and supply security — consider this structure once your volumes justify it.
FAQ
Can I switch distributors mid-contract?
This depends entirely on your contract terms. Most contracts include exit clauses tied to notice periods (typically 30–90 days) or volume commitments. Read the exit provisions carefully before signing.
Does it matter if my distributor is also a branded network?
If you operate under a branded flag (Shell, BP, etc.), your supply agreement is typically tied to the brand’s distribution arm. Independent operators have more flexibility but must do more due diligence.
See also: franchise vs independent ownership guide and gas station profit margins.