Coming back to Britain from Spain after Easter and finding the pump price of unleaded had crept up to more than 95p a litre (with diesel already being advertised at 99.9p on some main road sites) was something of a shock - especially since the Spanish pump price for unleaded worked out at no more than 74p a litre at current exchange rates. With the experts telling us that we "ain’t seen nothing yet" as far as this year’s oil price is concerned, it’s looking pretty likely that the £1 litre of unleaded may be here in a matter of weeks. Even if the US decides not to nuke Iran in the near future, the oil price seems set to stay high during the summer - and that’s before we start getting into hurricane season in Texas and the Mexican Gulf, when another repeat of last year’s events could send the price soaring to levels that don’t bear thinking about. Quite apart from the larger ’economic’ effect of fuel prices draining spending power from other sales, which our Database figures suggest is already happening, the cost of fuel may have more ’local’ implications for petrol retailers this summer.
First of all, we have the usual problem: credit card charges. Our current dealer data suggests that dealers were typically making a gross profit of some 4ppl during January and February. If those dealers retain that level of gross margin during the next couple of months and have to pay credit card commission at 2% of the pump price, that leaves them with about 2ppl. If the pump price rises above £1 per litre their real profit level will fall even further. Somewhere in the dim and distant past the petrol retail industry got mugged by the credit and chargecard companies into agreeing that the commission rates for fuel sales should be based on a percentage of retail prices, rather than on a fixed transaction-cost basis (as is the case with debit cards, where each transaction is usually at a fixed price, regardless of the value of that particular transaction). At the sort of pump prices we’re now expecting to see as ’normal’ this is a ridiculous situation for an industry which, at least at the retail end, gains little or nothing out of price rises.
Allied to this, of course, there’s the effect on bank charges. Some operators are subject to a ’heads you lose/tails I win’ situation with their bank. Believe it or not there are retailers out there who still pay an itemised transaction charge to their bank (covering cash counting and automated receipts, such as from card companies.) and then get clobbered by ’turnover’ charges on top. A pump price rise of 10p a litre on a five million litre site results in additional ’turnover’ of £500,000 a year. Guess who’ll be smiling most as the pump prices rise? Unlike the credit card problem, however, this is one that you might just be able to mitigate: shop around - not all banks are the same, and it pays to look for the best deal.
Then we have the problems associated with any high-value product - ’security’ for want of a better description. Just watch those drive-off figures rocket. Yes, there’ll undoubtedly be more ’customers’ who will decide that the benefit of stealing a tank full of fuel now outweighs the potential ’risk’. Just as there’ll be dishonest staff who’ll be more tempted to mask their own cash takings as drive-offs now and hope that the boss doesn’t notice. It is sometimes quite amazing how site owners will accept large cash losses, drive-offs or fuel shortages without bothering to check the figures. All of that technology seems to induce a certain apathy when unpleasant results arise - it’s almost as if ’it has to be true because that’s what the equipment says’.
On the subject of ’automation’, it was interesting to note that none of the sites in Spain seemed to have a problem with showing pump prices of over Eu1 (unleaded was Eu1.07 per litre), so why are we led to expect a problem with £1-plus on the pumps over here? Are we really that far behind the rest of Europe in terms of investment in site infrastructure?
The bottom line is simple. You’ll be faced with more money going through your systems and a higher value of stock on the premises than you’re ever likely to have had before. Unfortunately, none of that extra lolly is ’profit’ so you have to review your security and cost control in order not to lose any of it. Of course there may be some people out there who see the fuel price rises as an opportunity to make more for themselves; unfortunately they’re not likely to be petrol retailers.