er than large since actually Charlotte is the only large city between Richmond and Jacksonville. So for the data in this report we have combined the large and medium cities into a unit.

TABLE 25 shows the cost and margin relationship for these cities. It's a prosperous operation as a whole but there are some less privileged areas. The Virginia cities, for example, show an average margin of only 4.92¢ per gallon. This has always been a low margin state. Again, in the South Atlantic markets there seems to be quite a variation based on company size. In the large and medium cities companies with above 2,000 No. 2 oil customers average 6.36¢ margin while under 2,000 customers it's 4.934.

TABLE 26 shows that oil got 35% of the new installations during the season, the country's second best ratio, after New England. There were some very bright spots, Jacksonville for example where the average company estimates showed 70% oil, 15% each for gas and electric. The serious competition in the small cities is not so much gas as it is electric heat, which just edged past us by a point.

TABLE 27 brings some delivery characteristics which should be clear. We did not use here the truck capacity to customer index as was done in the New England and Mid-Atlantic reports, since here it's too hard to separate the products. There's a lot of No. 1 oil business in the South and a lot of the small market trucks carry two or more products, so you can't isolate the No. 2 equipment as such on any wide scale. If you're curious about this new index read the New England report.

Bulkplant capacities are low, since the winters are mild. Just half of the reporting companies

own one or more transports and
bring their own products from
water
or pipeline terminals.
They don't need big storage.

Why driver wage rates are higher in the small cities could be a guessing game. It can't be anything but supply and demand. Notice too that practically all of the small city drivers work all year, so they're rooted in the companies.

Bits and pieces . . . South Atlantic oil men replaced with oilburners a total of 1,328 gas units and 1,264 electric heat installations. A lot of the latter were heat pumps where oil displaced the heating portion and left the cooling as it was. Gene Brown of Charlotte developed an equipment package for performing this operation.

In the larger cities fueloil distributors invested 43¢ per customer in co-op advertising, in small cities 234. Customers on budget payment plans were 11% of the total in larger cities, 7% in the small, so the idea has not been pushed very hard, although one Virginia company has 50% which shows that it's possible. In the main cities they say it costs $30 to add a new furnace oil account, in the small cities $17.

Middle West

THE EARLIEST HOME of oilheating was the Midwest, not the East. In 1925 there were more oilburners in Nebraska than in New York. But in the 1930's a

tidal wave of dirt-cheap natural gas swept across those beautiful states and 'took' the automatic heating market that oil had introduced. There was never any attempt to reduce fueloil prices to match this cheap fuel. Today the heating costs of the two fuels are not far apart since gas has risen sharply, but gas has the heavier acceptance due to its popularity in its cheaper days.

But in the face of these conditions, Midwest oilheating is still very big business ... it's 25% of the whole industry's market.

TABLE 28 shows oil second best by a considerable margin in the new heating installations of the past season. As observed, in all areas oil heat does better as the city size decreases and the reverse is true of gas. Electric heat makes slow progress through that region except in large apartment buildings. It is still basically a Southern and West Coast facility where public power is cheap and winters are mild.

TABLE 29 shows operating costs related to margins in that region. There was a time, about 15 years ago, when Midwest fueloil margins were below the rest of the country. This has been pretty well adjusted by now. They're still on the low side in the large cities. The result of this appears in the small profit levels of the big markets. On the other hand the large city retail distribution of No. 2 oil is handled 58% by refiners or their subsidiaries and only 42% by independent distributors.

Measurement of certain delivery operations is seen in TABLE 30. The only thing here that needs explanation is the third item. We have divided the combined capacity of all delivery trucks by the total number of No. 2 oil customers served

by those trucks. This gives an index-for the whole area 5.7which means that for 1,000 customers the distributor's fleet would be made up of trucks totalling 5,700 gallons capacity. It doesn't say that this is what they should be, but this is what they are among all the cooper

ating companies in this survey from the Midwest. Thus an oil man can soon tell if he's "overtrucked" or under, compared to the industry averages... and it might help him to decide if he needs another one.

Incidental observations While oil men lost a lot of accounts to gas not everyone likes it, for there were 2,052 replacements of gas by oil... This market like the South Atlantic has a good many combination companies selling both fueloil and gasoline, TBA. Just half of them sell both products and 34% of the companies sell more gasoline than fuel-would be listed as "jobbers", selling their principal product for resale and they are concentrated in the medium and small cities with very few exceptions. Those selling oilheating equipment were 55% of the Midwest total and they averaged 17 installations, mostly sold in conjunction with

-CITY SIZES-com

Large

Medium

Small

424

319

212

1,847

2,015

1,694

4.4

6.3

8.0

$3.21

$3.34

$2.39

$2.62

$2.82

$2.27

59

42

82

306

180

62

29

E DIDN'T CALL it "Pacific
Northwest" this time because
there was some participation
from both Idaho and Nevada
although most was still Wash-
ington and Oregon. It has been
a most interesting marketing
region through the years, very
imaginative, with higher than
typical fueloil pricing, stronger
margins until recently and the
highest driver wage rates.

It's probably the hottest com-
petitive area in the industry
with all three fuels extremely
promotional and spending larger
funds in proportion to market
size than anywhere else.

There's a gas line, a big inch one, running up from the Four Corners area, some 1800 miles. with very little business along the way. So the gas utilities of

the Northwest have to get a lot of business to pay interest on the line. The oil folks have four refineries on Puget Sound and if they don't sell the heating oil nearby they can't afford the shipping costs to any other market. The electric people have cheap public power so they're out to prove its popularity for heating homes. So it's a real Donnybrook if we've ever had one, but with wealthy companies in the tussle it's exciting. The operating ratios of the area are in TABLE 31. We didn't divide it by city sizes since there are only two large cities in the four states but a lot of good medium ones... like Boise, Reno, Everett, Spokane, Tacoma, Olympia, Eugene and the like. So few reports were from small cities, and they represented only two percent of the total customers, that we saw best to combine the whole.

Companies without bulkplants are mostly big city operators, as their costs and margin would indicate. Companies with bulkplants, mostly medium city types, did better.

TABLE 32 with delivery yardsticks is quite understandable. If you have read previous sections you will understand the third item. If not, this is briefly the idea. By adding the capacity of all No. 2 oil trucks in the survey of the Northwest, then dividing this by the total of all customers of the participating distributors, we get this index figure of 5.1. It means that for each customer the group had 5.1 gallons of capacity in its fleets. To illustrate, an oil company with 1,000 customers typically has 5,100 gallons of capacity in its total trucks for No. 2 oil. Knowing this may help a

company to decide if it needs more or fewer truck units, or whether perhaps its distribution is spread more sparsely than average.

con

Incidental items... Fueloil men in the past season verted approximately 960 gas users to oil, 794 electric heat users to oil... The support rate by distributors for the co-op advertising campaign averaged 47¢ per customer... Gasoline is not a factor in this market, for while 13% sell it, no company found it his major product... Four-fifths of the participating companies sold some oilheating equipment during the season and the average was 41 installations with the best company record 221 units. In large cities it costs $52 to add a new oil account, in medium $18 .. Customers on budget plans average 20%, with one company reaching 50%.

gained 1.8% in No. 2 oil accounts. It's true that gas and electric heating grow faster in many states, but as long as oil heat can grow moderately while holding good price, margin and profit levels it's a deep rooted and pretty solid industry for the future.

TABLE 32

Much like the rest of the industry, the Northwest group is holding its own in total customers and increasing the number annually. In 1966 the total customers of the Northwest grew by 3% while the industry nationally

ALL CITIES

404

1,716

5.1

$3.56

3.36

46

345

184

35

85

62

Bulkplant cost

25

Delivery cost 1.77

2.05

Selling cost

Gen. overhead

Total cost

4.16

5.75

Margin

5.49

6.86