The ups and (not so) downs of petrol prices

27 May, 2009 11:32 AM
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A war of words has broken out between WA's consumer watchdog and the state's biggest oil company over exactly who is benefitting from the unleaded petrol price cycle.

About ten weeks after the cycle - where prices rise on Wednesdays before falling later in the week - it made a return to WA, following a 10-month absence.

FuelWatch says the state's motorists are being short-changed as they continue, by force of habit, to buy petrol on the days when it is most expensive.

Deputy prices commissioner Aaron Rayner, who runs the FuelWatch scheme, said the cycle continued to be bad news for motorists.

Retail margins in the 10 months there was no price cycle were "thinner than you would expect", indicating a better deal for motorists. Before the cycle, unleaded prices in Perth were about five or six cents a litre cheaper than other state capitals, but this had been almost completely wiped out.

Despite oil companies claiming price cycles encouraged motorists to buy fuel on cheaper days, this was not the case.

"The historic data we've got shows people tend to buy their petrol on the most expensive days," he said.

"They are creatures of habit and tend to fill up when their tanks are empty."

While recent sales data had yet to be compiled, he did not expect much change.

But BP, the state's biggest oil company and pricesetter due to its ownership of the Kwinana refinery, said its figures showed "significant" numbers of motorists are buying petrol on Tuesdays, now the cheapest day of the week.

Spokesman Chandran Vigneswaran said there had been an equally large drop in sales later in the week, when petrol was more expensive.

"Price conscious motorists are aware BP is offering discounts early in the week. What we've done is put in place a sustainable way of pricing," he said.

"By offering discounts in one point of time and having a cycle, on average we're able to generate a market which allows us to operate a reasonable business in Perth. We can't offer a discount every day of the week - how are you supposed to make any money?"

Fuel price watcher and competition expert Frank Zumbo, an associate professor of business law at the University of NSW, said the cycle was proof oil companies were playing "games" with motorists.

The long-time FuelWatch critic said a mockery was being made of the scheme, with prices at the bottom of the weekly cycle consistently higher than those in Sydney. The scheme was supposed to flatten the price cycle but "that hope is now in tatters".

"In fact, Perth motorists are now worse off... clearly FuelWatch is a waste of taxpayers money given that all the scheme now does is provide pricing information that the Motormouth website provides to motorists for free.

"The real problem is the lack of competition at the wholesale level. Until there is more... motorists will continue to be ripped off," Mr Zumbo said.

But Mr Rayner said FuelWatch addressed an "asymmetry" in the market by giving motorists access to the same information oil companies had.

"It's designed to give consumers information - nothing more, nothing less," he said.

By operating a "closed tender" each day, it did not allow oil companies to signal each other, unlike in the Eastern States where through Informed Sources - a company which also operates Motormouth - they were able to change prices "every 15 minutes".

"That's where the real signalling is going on. It costs huge sums of money to join that club and FuelWatch doesn't permit signalling to that degree."

What happened in Perth is that a pricesetter - typically BP or Caltex - led the way - followed two or three days later by others, though to a lower degree, Mr Rayner said.

While the tops and bottoms of the cycle were more marked early on, in recent weeks they had "softened", while the underlying average price of petrol was creeping up due to international factors, he said.

"The cycle masks that influence, it's what it's intended to do, it's a contrivance and you never really know whether you're getting value or not. The best indicator is to take the average price on any given day and try to purchase below that."

Caltex has hiked its unleaded petrol prices by 18 cents today, to 132.9 cents a litre, closely followed by BP, which has raised prices by 14.4 cents to 129.9 cents a litre.

However, 192 service stations will be selling unleaded fuel below the average price of 118.3 cents a litre.

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