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An irreverant view from the network

27 February, 2009
In 10 years the industry has changed to 'price rises bad', 'price falls good'
Page 58 
It's a funny old world, Saint Greavesie used to say, and if he was talking about petrol retailing he was dead right. How things have changed round in the past 10 years, especially with regard to the almost total switch over to Platt's deals.
In the old days of margin deals it was relatively simple. If you were one of those who kept your eye on Platt's you knew which way the market was moving. See it rising and you kept those tanks as full as possible. As the margin the majors were making was being whittled down it didn't matter to us; we still had our 4p or whatever. At some stage the majors would decide enough was enough and one of them would notify a price increase. Surprise, surprise, within a couple of days all the rest of the oilers had followed and everybody was at the new, higher price. Even if the hypers dragged it out a little longer it didn't matter. We were broadly all being priced the same, we all went up at roughly the same time and the net result was a tidy little boost to the bottom line from the stock profit. The public used to accuse us of profiteering whenever our prices went up and, while 'profiteering' (I really do like the American equivalent - price gouging - so much more vicious, so much more evocative) was perhaps too strong a term, we certainly weren't crying either! Of course the flip side was if prices came down. However hard you tried to keep your stocks at a minimum, there was always some product that you had to take a hit on.What a difference now. For a start we're nearly all on different versions of Platt's deals. Some of us are on a two-day rolling average, some on a weekly average. Some on Mid Cif, some on High Cif. And then there's the different Premia. Whichever deal you are on, when Platt's is rising it's us who see our margin being whittled away. And with no major making a public announcement of a price rise, everybody sits it out waiting for someone else to be the first site in the area to blink. Chuck in the hypers taking a very long-term view and it ends up that most of us have seen all our margin eroded before anybody does the sensible thing. When prices are falling however, the inertia works in our favour. We've all taken such a hit before that we're reluctant to disturb the trend of an increasing margin helping to bail us out.So, in George Orwell terminology, in the old days price rises good, price falls bad. In current times price rises bad, price falls good. How things change.== Diesel dilemma ==This brings me on to the subject of diesel pricing. In the old days diesel was always cheaper than petrol, partly because of lower duty rates and partly because of the demand in the market roughly equalling the refining ratios being produced. The level of retail diesel sales for us was interesting but not exceptional. Fast forward and for many of us diesel sales are 50% of our total volume and yet, what do we have - diesel prices higher than motor spirit. Even allowing for duty equalisation, the situation is a nonsense.== Price subsidies ==Virtually every site in the country is keeping the price high so it can subsidise the unleaded price. Has anyone actually measured the price elasticity of diesel drivers and compared it with that of those who buy unleaded? Is this pricing policy a result of a scientific calculation that this is the way to maximise revenue or are we all stuck in a time warp? So what do I do? Ah, well, there's the difficulty. My big fear is that if I cut the price of diesel and raise the price of unleaded all that will happen is that the hypers will cut their price of diesel but not increase their unleaded. Net result - I'd be screwed. Now if only we still had the majors dictating prices we wouldn't be in this Alice in Wonderland situation. Mo'gas bemoaning the demise of the majors - surely not?