April 29, 2008...6:53 am
BP (no longer) looking lonely with petrol at 188.9c
Updated 6.25pm
On my way home tonight, I saw that my local Mobil station had matched the BP one opposite and put its price up by the same 3c a litre that BP did a week ago. I presume Shell has also now matched BP.
As of 6.30am today, Shell and Mobil had still not followed BP and put up petrol prices. BP had increased pump prices by 3c a litre last Tuesday, taking 91 Octane to a record 188.9c a litre. Caltex quickly followed, but not Mobil and Shell. Many Caltex outlets seemed to have put their prices back down.
This was the first time I had seen the petrol companies with prices this far apart for so many days at a time. BP is usually first to raise prices, but the others usually fall in line within hours, as long as Shell also does.
Brent crude is $US 115 a barrel, $US 3 more than when BP raised its prices a week ago, so pump prices will not fall any time soon.
3 Comments
April 29, 2008 at 11:01 am
I’m not sure how real these displays of apparent competition actually are. IIRC, they seem to happen from time to time when oil prices go silly and public sensitivities are enflamed. Otherwise, they don’t happen. Usually, one puts it up or down and the others follow. Only after a series of rises and the public gets grumpy do we tend to get these wee dances…….
April 29, 2008 at 11:53 am
This is not completely unheard of - i’ve seen similar a few times in the past. I think BP is hanging out because margins are very tight and really wants the market to rise while Shell is probably selling at very low margin to make a point to consumers. If the macros margin calculations are correct they will have to move soon.
On Steve’s point re competition, what most don’t realise is that the price is usually the lowest the market can sustain rather than the highest. There is no great variation in fuel so people can replace one brand with another, so it is difficult to keep prices up if a single competitor chooses not to follow. Ask yourself what you would do if two neighbouring sites had differing prices. Nearly all of us will follow price.
As a result prices slump to the lowest common denominator. That’s why cost control is so important in this market because that gives you some control on margin.
If a price rise happens, prices then go to a new plateau and stay until the costs get too hard to bear for even the lowest cost competitor. It’s just a repeating cycle. Each company will have its ‘intolerable pain point’ and this current situation shows how BP and Shell’s are different.
April 30, 2008 at 9:38 am
I called it right for once!
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