Shell’s cut-price fuel strategy in certain parts of the country has prompted the Petrol Retailer’s Association to write a letter of complaint to the Office of Fair Trading, pushing for a meeting to discuss the matter in depth.
PRA director Ray Holloway believes that Shell is selling below-cost on some of its company-owned forecourts, which is squeezing the businesses of any dealers caught in the midst of a group of such sites.
He is using elements of the OFT’s recent paper on its enquiry into the supermarket sector as the basis for addressing the issue. "There is a paragraph in the OFT paper that talks about local trading area domination," he said. "If I can persuade the OFT that a similar situation applies in the fuel industry, then we may well attract some attention to this.
"It is possible to track where prices have been below cost, and you can also look at the market share within trading areas."
The PRA’s action follows complaints from certain retailers who are struggling to compete with prices that are 3-4ppl adrift of their own. There is also concern that other fuel companies are beginning to follow suit.
"These retailers have invested heavily in their futures, in a market that is not rewarding them with a fuel margin. Then you have a company which has not invested in its assets, which is using those assets to sell a product from which it is making no profit.
"The result is that Shell is undermining their businesses. But you’ve got to question the tactic, at a time when the closure of filling stations has taken us back to a point where forecourts can hold volume without cutting price. Shell is not optimising volume performance with price.
"Shell has embarked on this policy because it is making shed-loads of money from its refinery business. For the past two and a bit years it’s been in their favour, but for the previous 23 years they lost money. The only thing I can say in consolation to dealers is that these refinery margins won’t last."
See News Extra.