Fuel Prices Falling- But Slowly
The price of petrol and diesel is at long last starting to fall, but motorists are concerned that they are not falling fast enough. We all read about falling oil prices, so why aren’t retail fuel prices falling at the same rate?
The AA monitors fuel prices every month and has been looking at this issue for a long time. Are we being ripped off? Probably sometimes, by some garages and in some locations. It’s time for motoring consumers to demand better prices...
The AA’s monthly survey of fuel prices is carried out in the second week of each month. The September figure showed that petrol cost an average of 127.5 cent per litre, down 1.3 cent since August. Diesel fell more sharply, dropping 4.5 cent to 133.5 cent per litre.
|
 |
That was a snapshot of a market in motion. Prices have been falling and we expect that they will continue to fall in the coming weeks. This is some relief after what has been the year from hell as far as fuel prices are concerned.
“Averages can be misleading.” Says Conor Faughnan. “As my old professor used to say, if your head is in the oven and your backside is in the freezer then on the average you’re comfortable. Irish prices vary locally, and all are supposed to relate to the world oil price and its movements. A major question is whether the oil companies collectively are passing price reductions on.”
As a general rule it takes about four weeks for oil prices changes internationally to be reflected at Irish pumps. The price that we are paying now is based on the cost of oil last month. There are other complications – exchange rates etc – but that should be the pattern. On the whole it is, but not without exceptions.
We get a lot of correspondence from members on this, and here are a number of typical questions that we receive:
Q: Yes or no... are we being ripped off by the oil companies?
A: Sometimes, yes. It’s a deregulated market which means that every garage is free to set their own price. Only about a third of the garages that you see are directly owned by the oil companies. The other two-thirds are independent small business and they are by law free to set their own price. The old Statoil garage on Dublin’s south quays was the most famous example – his prices were absolutely ridiculous.
High prices aren’t illegal. Price fixing is, but that is a different matter.
Q: Is there a cartel in operation and does price fixing occur?
A: A cartel is a criminal exercise and we do not have evidence to support such an accusation. There are sometimes price movements in certain locations that make us suspicious. If you take a typical country town and can observe neighbouring garages moving their prices in concert like line dancers then you are bound to be sceptical.
We have in the past been suspicious enough to involve the Competition Authority when we shared our data and intelligence with them concerning border countries especially Donegal. That did not result in convictions but it did help – border service stations are far less out-of-line pricewise now.
The Competition Authority did successfully prosecute a retailer in Galway some years ago for what was a rather flagrant violation.
Q: Is my local garage ripping me off as he’s more expensive than the same brand of fuel elsewhere?
A: No, probably not. As noted above, the local garage is likely to be an independent small business. He is very much at the end of the food chain and has almost no power when it comes to buying his fuel. It is true that garages make very little margin on fuel – it can be worth more to him to sell you a coffee than to fill your tank.
The greater concern would be whether he is getting a fair deal from his wholesaler. There are examples where an independent garage cannot buy fuel wholesale for the price that the company-owned site down the road is retailing it.
Q: Do prices go up faster than they come down in response to world oil?
A: This is said to us all the time. We have looked at it carefully, and on the whole the answer seems to be no. That comes with strings attached, however.
Tracking the national average price and mapping it against world oil prices (converted from dollars to the appropriate Euro value), an overall pattern emerges which appears to show that oil prices are faithfully reflected.
But – there are examples of individual garages applying opportunistic price rises so it does happen. There was one case in Co. Wicklow where we caught a garage owner red handed – he literally heard a headline about oil price rises and went straight out to his forecourt to up his retail price!
The consumer’s best defence against this is shopping around. All of us have options. No matter where you are in the country there are nearly always at least two or three garages that you pass close to and that you could choose to use for your weekly fill. Let’s all go for the cheapest ones. There are 2 million motorists in Ireland and if we all became price-conscious consumers overnight it would make a big difference.
Q: Whatever about the local market in Ireland, is there a bigger rip-off happening at European or world level?
A:It is hard for us to know the answer but it’s hard not for us to be suspicious. In Europe, a lot of refined product (petrol, diesel etc) is sourced from Rotterdam. Hence the ‘Rotterdam spot price’ is generally reckoned to be the best price indicator. The question is whether those Rotterdam prices are passed on in a faithful and timely way to the European consumer.
AA Ireland has taken a particular interest in this, as has our colleague organisation in Austria (The OAMTC) and others. Together we are calling on the European Commission to investigate the fuel sales sector to see if price changes are being passed on fairly. We may learn more about this is the months ahead.