It didn’t take very long into the new year for politicians to make themselves look either desperate for popularity or just plain silly, with their proposal to force fuel retailers to share price changes within 30 minutes.
In this instance, they hid behind the Competition & Markets Authority (CMA), when the Department for Energy Security and Net Zero launched its open consultation on the idea of making forecourts legally responsible for publishing their pump-prices in real time. Even the full title of the document - Empowering drivers and boosting competition in the road fuel retail market: open data scheme and ongoing monitoring function for road fuel prices – reeks of modern politico-speak. But then we are in an election year.
Their bright idea is to make it a legal requirement for every forecourt to notify some unspecified organisation of price changes within 30 minutes of them happening, so that the data can be fed into some unspecified app which will allow drivers to hunt for the cheapest fuel at any given time. The expectation being that this will somehow force down fuel prices in any given area. I don’t know about you, but it just made me wonder whether any government minister or high ranking civil servant, used to being chauffeured around in their official limousines, have the faintest idea of how drivers in the real world actually buy fuel, let alone of how petrol forecourts actually set their fuel price.
As most forecourt retailers, and those of us otherwise involved in the industry, will have learned over the years, customers can be broadly categorised into three classes: There are the regulars who are generally local, and who use a particular site because they find it convenient, or because it offers some service or facility that they want, such as a jet wash, or simply because they know and get on with the staff. For these customers price comparison isn’t much of a consideration, if at all. Price only becomes an issue if they feel that they’re getting ripped off. They may complain about fuel prices in general, but aren’t going to go anywhere else just because a competitor site has suddenly dropped a penny or two per litre.
Secondly, there are the locals who aren’t really regulars for fuel. These are the people who you see once or twice every couple of weeks, usually only buying odd items in your forecourt convenience store. You know the sort, they’re the ones who will moan about your prices for everything – fuel, tobacco, jars of coffee and toilet rolls – but still find the site essential. You also know, probably because they tell you on every other visit, that they do their regular fuel and grocery shopping at a big supermarket maybe four or five miles away, “Because it’s so much cheaper”. It’s easy to imagine these sorts of customers trying to find cheapest fuel prices online – but if their fuel buying is linked to grocery shopping, then fuel pricing alone may not make them switch which grocery store they go to; part of that decision will surely depend to some extent on their perception of food and drink prices and loyalty programmes between different brands.
And then there is the third type. Those who really only use any forecourt because they need fuel – now, or at least, quite soon. They may hunt around for lowest prices within a very small area and quite possibly if say their sat nav is displaying up-to-the-minute pump prices they’ll be tempted to reach the cheapest site within range. But even here, the usefulness of the price comparison data may be rather limited; historically, within any particular limited geographic area there are rarely drastic differences in pump prices. Most sites have always set prices with one eye on local competitors: they may have different policies in place – for example, staying a certain number of ppl relative to the cheapest or most expensive competitor in their pricing zone - but very few ever go completely out on a limb price-wise, whether high or low. Certainly, there are often major regional differences, but anyone needing to fill up their tank quite soon isn’t going to drive 40 or 50-plus miles to find the cheapest forecourt. However, an instant price app might just let them come off the motorway to find a local site that will inevitably be rather cheaper than a motorway service area.
As others have already pointed out, there’s no lack of information about actual pump pricing already. At the broader level, prices are supplied daily by many of the major forecourt operators to the CMA, at the local level I cannot recall seeing any forecourt without a large, illuminated sign outside showing instantaneous fuel prices.
The whole proposal seems flawed. It is based on the simplistic assumption that when it comes to customers choosing where to buy fuel the only determinant is a price difference, generally of only a few pence per litre at any given time and within any small geographic area. And a further, equally simplistic assumption, that somehow informing consumers of that price difference will automatically force down fuel prices. Never mind that each site has its own cost structure – from tanker pricing through to overheads – and some requirement of a return on capital employed, i.e. profit, which determines actual selling prices. To many of us it would seem that the sort of consumer who is indeed completely price motivated can already find the information that they want, if they have the time and inclination to look for it. True, it may be only daily, but forcing the whole industry to follow this proposal really does seem completely over the top.
There’s one section of the document which rather seems to suggest the real motivation behind this proposal: It reads: “It will grow our digital economy creating opportunities for third party app and website developers to use the data in innovative ways, like price comparisons tools and costed journey planning tools.” This is a vague job creation hope which really has nothing to do with fuel.
I can’t help thinking that if the government was really serious in its stated aim of wanting transparency in overall fuel pricing, it would require each fuel supplier, not the retailer, to publish changes in their delivered prices for every tanker of fuel leaving the distribution depots. After all, everyone can already see what the retail price is just by looking at a pole sign. Publishing actual delivery prices would leave the refiners and distributors to explain their pricing mechanisms, as well as indicating which retail group owners are slow in passing on any drops in wholesale prices to customers. And no, I don’t imagine that would be very popular in the industry, either.
The consultation period is open until 12 March and you can make your views known to the people at the ministry via the online form at: https://energygovuk.citizenspace.com/energy-bills/competition-in-road-fuel-retail-market/
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