Tag Archives | research on petrol prices

Price of oil vs Price of Petrol in Ireland – a comparison

Here’s an updated version of a graph that I originally put together last year. It shows the movement in the price of Irish unleaded petrol (as per the AA Petrol Price page) vs the price of a barrel of oil (the price of light sweet crude as is always quoted on the news reports when referring to the price of oil).

I’ve been trying to decipher what this chart is actually telling us.

I was originally inspired to rerun this analysis because its obvious that despite the massive fall in the price of a barrel of oil in the past 6 months, we haven’t been seeing similar drops at the petrol pumps. And this graph is showing us that thats the case – the green line for the oil price is below the red line for the petrol price.

Yes, all bad and not very nice for us consumers.

But, as you can see if you look further back in time, when the price of oil was skyrocketing in mid-2008, we were somewhat shielded from the full impact of that – illustrated by the massive gap between the red and green lines during that time.

So, a sort of petrol pricing swings and roundabouts. It looks as if petrol retailers didn’t make as much money as they could have done last year, but are making up for it now.

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Petrol Price in new Tesco in Cashel, Tipperary

We received this e-mail from a ValueIreland.com reader yesterday:

I live in Cashel Co.Tipperary. Tesco opened a new filling station in Cashel and charge 96.9c per litre for petrol. 14 miles away in Clonmel, Tesco charge 91.9c per litre. To me this is very unfair to Tesco customers in Cashel.

This was my original response:

Unfortunately there’s not a whole lot that can be done in situations like this. We’ve received numerous e-mails about petrol prices in the past – many asking about a “petrol regulator”. There isn’t any such thing, so petrol stations can charge what they want.

I suppose what Tesco are hoping to cash in on is that people will assume (given much press coverage where Tesco is referenced as having cheap petrol) that whatever they’re charging in Cashel will be cheap. As you’ve found, this is obviously not the case.

Do you know what the petrol prices are in surrounding areas in Cashel – is Tesco about the same, or as is normally their ploy to be 1c cheaper than the average? I’m guessing the average price of petrol in Clonmel is about 92.9c on that basis as well.

As it turns out, after doing some quick checking on Pumps.ie, this was exactly the case with regards to the price of petrol in both Cashel and Clonmel.

Tesco are obviously depending on the fact that most people in Cashel probably wouldn’t even know the price of petrol in Clonmel for a start.

The question is though – if you were to shop around for petrol, would you drive the 14 miles from Cashel to Clonmel to save 5c per litre on a price of petrol?

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Shopping Around for Petrol

I was always intrigued by the comments of certain commentators to “shop around” when it came to buying petrol. Not that it matters much these days (sort of) given the large price decreases we’ve seen in the past 5-6 weeks, but I thought I’d consider it a little here.

I suppose my skepticism about shopping around for petrol is that it’s kind of hard to do when the red light flashing at you on the dashboard. But there are a few things that you can do to ensure that you take advantage of the cheapest petrol and diesel available.

1. Stay informed – Check out the AA Petrol Prices web page to see what the current average price of petrol and diesel in the country. That sets the benchmark price in your mind. Now you can gauge what’s cheap and what’s dear.

2. Use Petrol Price Comparison Websites – Check out Pumps.ie or BestGarages.ie (no longer active) to find out the reported petrol and diesel prices in your local area. If you use these sites to find out information, make sure you pay it back by providing updates of prices that you’re aware of – sharing the information around makes these sites as useful as possible to everyone.

3. Don’t drive to empty – If you’re driving past a petrol station that has cheap petrol or diesel, but you’re only half empty – go in and fill up. If you know it’s cheap, fill up and take advantage of the price. You might not be back that way again, or if you’re waiting for the red light, you might be too far away to make it back to fill up.
4. Don’t fill up just because you’re empty – If you’re a red light gauge bandit but you get caught short and you end up having to buy petrol at a price you know is too dear, you don’t need to fill your car there. Get a tenners worth and get yourself to somewhere you know is cheaper.

5. Don’t get caught out in the shops – Most garages selling petrol now have swanky new shops and snack food providers associated with them. And given that’s how petrol retailers make most of their money, the prices here can sometimes be over the odds. If you can, avoid buying things in these shops, and you’ll cut the overall cost of your visit to the petrol station.

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Why is the price of petrol falling?

During the late spring and summer of 2008 as petrol prices were rising drastically, we were told various different reasons behind those rises. It was because of the weakness of the dollar, the increase in demand and the approach of peak oil and the impact on supply. Or all of the above, or some of the above.

However, there were strong suspicions that a significant proportion of the rise was due to the market speculation on the part of investment banks, commodity traders and hedge funds. This article (albeit coming from a particular “angle”) cites that 60% of the rises we saw earlier in the year were due to speculation alone.

Not being a financier or an economist, I don’t know myself, and I haven’t seen any specific evidence for any of the arguments.

However, what is very noticeable is that since many of the worlds larger financial institutions have become strapped for cash because of the fallout from the “credit crunch” caused by their exposure to sub-prime mortgages, we’ve seen a significant decline in the price of oil.

In fact, we’ve actually seen a decline of about 60%. Spooky!

Do the oil speculators from late spring and summer now have no more spare cash to play with on the oil commodity markets, and thereby causing the price to drop?

Did they in fact try to manipulate/speculate on the oil commodity markets earlier in the year in an effort to actually bring in some extra cash quickly to cover the hole in their finances that they saw coming because of the sub-prime problems?

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National Consumer Agency starts their petrol price investigation

In case you don’t know, you can be safe in the knowledge that the National Consumer Agency have started their investigation into petrol prices.

The very morning after that investigation was announced, someone from a NCA computer IP address was onto Google searching for “retail petrol prices Ireland”. They’ve been back a few times since.

Let’s hope their researcher took heed of the advice provided in my earlier post on the reasons for the price of petrol at the moment. I wonder did they also hit the sites of Pumps.ie or IrishFuelPrices.com (RIP as they’ll have found out).

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National Consumer Agency to investigate the price of petrol

According to this article in todays Irish Independent, the National Consumer Agency are to investigate why the price of petrol hasn’t decreased in line with the price of a barrel of oil.

Yet again, it’s the NCA and Minister Coughlan jumping on the media generated bandwagon – this time about the price of petrol. We’ve all forgotten about the euro/sterling exchange rate difference, so now it’s on to petrol.

For free and for nothing, I can save them a massive amount of time, and a massive amount of money – let the fuckers* read this blog and my comments on the price of petrol and be done with it.

Just to show you how little these people know what’s going on around them, and seemingly don’t even communicate with each other, according to the article:

Minister Coughlan feels grocery prices have dropped since the NCA’s series of surveys of supermarket prices over the summer.

Yet the most recent NCA survey states:

In general, for Dunnes, Tesco and Superquinn the basket of branded goods has increased from December 2007 to August 2008. However, from June to August the level of the increase has slowed or in some cases decreased.

Hardly a ringing endorsement of their bosses feelings by the NCA.

Maybe we should have the Comptroller and Auditor General, who today released their annual report, carry out a “Value for Money” analysis on the activities of the National Consumer Agency?

Doing surveys and buying baskets of goods doesn’t do anything to bring down prices. All it does is make it look to consumers that the government is doing something about perceived high prices, while in reality they’re doing absolutely nothing. And now they’re going to apply the same logic to doing nothing about the price of petrol.

Pointless.

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Why does petrol and diesel cost so much? (2)

This e-mail came through this evening from a Value Ireland reader:

Just noticed on my way into work this morning that various petrol stations along the Cabinteely-Donnybrook route have increased the price of unleaded by 2c a litre. Considering the cost in $ terms has fallen by 22% since its highs, this should translate into about 1.05 a litre and not 1.28. Any idea why?

While I had posted about this earlier last week, it seems that this topic has come up again in the newspapers this morning following a call from the Consumer Association of Ireland Chief Executive, Dermott Jewell, that the Competition Authority get involved.

From todays Irish Independent, according to Mr. Jewell:

“The extraordinary situation continues,” he said. “The increases were put down to the price of a barrel, and then it was put forward that it was a currency issue. The reasons given are poor. We should be seeing reduced charges at the pumps. “We’ve put this off long enough. We need to have some form of investigation. The Competition Authority needs to urgently demand answers as to why this is the case. We need some intervention. This affects every part of our economy, not just the consumer. This is no more than continuing price taking.”

In short, this is pointless. As consumer’s we’ve shown that we’re willing to pay upwards on 140c per litre earlier this year – why would petrol retailers who are in the petrol selling business to make a profit reduce their prices that far below a level that they realise Irish consumers are grudgingly willing to pay.

It’s tough, I know, but it’s the hard reality of the petrol retail market in Ireland as it stands at the moment. There’s a lot more to illustrate the pointlessness of this suggestion – read on if you want to see more.

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Pointless Exercise

Bringing in the Competition Authority isn’t going to reduce the price of petrol for consumers.- I don’t believe there’s anything for them to investigate. If Mr. Topaz gets up in the morning and looks across the road to see Mr. Esso charging 3c more, and he ups his price by 3c – we end up with petrol uniformly increasing by 3c – but without any price fixing taking place.

As an aside, it’s a similar situation when you look at the recent National Consumer Agency grocery price survey. From a basket of 72 individual items, Dunnes, Tesco and Superquinn have exactly the same price on 41 items – yet there were no price fixing calls following that survey – they just happen to have the same price, apparently.

So what is going to cause the price of petrol to fall?

In short, unless there’s a massive fall off in the demand for petrol when we start using the trains and buses, or the government brings in price controls, the answer is nothing will.

Given that the sale and pricing of petrol in Ireland is a non-regulated market and selling petrol is a business, the petrol retailers will sell petrol at a price that consumers are willing to pay.

Over the summer, when a barrel of oil was touching $145, and a litre of petrol was 10-15c more than it is now, the petrol retailers found that people were still buying as much petrol as always, despite the price rises. Retailers now know we’re willing to pay a whole lot more – so, why would they drop their prices if they can charge more, and get it. Anyone in business would recognise the madness of doing such a thing.

Basically, in economics terminology, the price of petrol is inelastic – when the quantity demanded does not change much with the price change. Petrol retailers have identified that for most car owners, petrol has almost become a non-discretionary purchase – because at least up to a price of 140c per litre, consumers will still keep buying the same amount each week.

So, bring in the Competition Authority?

Presumably, as requested by Mr. Jewell, the Competition Authority could investigate the retail petrol market in Ireland – and therefore determine if we have enough competition.

But they’ve done this investigation already. For an organisation that takes years to produce their research, their 2006 observations following the Topaz/Statoil merger approval fiasco could almost still be described as current. The summary of their investigations back then were that:

Consistent with other decisions, such a market concentration (of a combined Topaz/Statoil market presence) does not give rise to competition concerns at national level.

It could be worse

To further illustrate the pointlessness of any new research completed now is the fact that relatively speaking, Irish consumers are better off now than they theoretically could be.

Even allowing for exchange rate differences, the price of a barrel of oil has increased 32% in the past 2 years since the original Competition Authority statement – but the price of petrol in Ireland has increased by only 20%.

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Why does petrol and diesel cost so much?

Or not coming down! You’ve heard many of the reasons in the press recently. The price of a barrel of oil is going up, but the dollar has weakened against the euro. Or has it strengthened against the pound. The normal winter price increases because of the demand in the colder United States should have worked its way out of the system – yet we’re not seeing this, or will soon be working it’s way back in. Others say it’s all down to oil speculators. Who knows!

The people who actually set the petrol prices in Ireland is an organisation called the Irish Petroleum Industry Association (IPIA) which, according to their website “is the representative body of those companies in Ireland engaged in the importation, distribution and marketing of petroleum products”. The site says that the members of the IPIA represents 95% of the oil industry in the Republic of Ireland.

So, obviously they’re “insiders” – if there’s money to be made on the price of petrol and diesel – then these are the people who make it.

To get the other side of the story, they have published a document called “What determines pump prices”. Click here to read that document to see what they have to say.

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Cheap petrol!

In case anyone hadn’t seen this, and I’m not sure how new this news might be, but I was in Tesco in Clarehall this morning and noticed their advertising for their 5c off offer on petrol and diesel.

The deal is that if you spend more than €50 in Tesco (with some exceptions) you’ll get 5c per litre off your petrol or diesel purchases with Tesco also.

Applies to Tesco in Clarehall, Clearwater and Dundrum.

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