Wednesday, Apr 16, 2008 at 12:52
Hi Eric
The question you raise about regional Singapore prices are
well documented so I won't go into any more detail, other than to say it is in part about parity pricing. Why would companies producing oil in Australia sell it for any less than someone elsewhere in the world is willing to pay for it?
Your point about the value of the oil shipment in transit is a two-way street; the price could go down. In fact next time you fly over Kurnell in
Sydney have a look down at the large oil storage capacity the Kurnell refinery has. The value of those oil inventories will be subjected to price fluctuations, both up and down, before it is refined into petroleum products and sent to the retailer. This is the risk that the owner of that oil is faced with.
The issue you raise about why it can go down (by 15 cents - or whatever it is) is the discounting cycle at work. Buy fuel on these days and you will be far better off. As to how and why they do it. Market share is one, and that isn't to say they are making a profit out of it when it is sold at heavily discounted prices. That is why the price support is only offered for a short period of time, once it is removed the price goes up.
But consider this; if I follow your argument, how it is that airlines can sell economy class seats on their aircraft for prices that vary from $100 to $400 a
seat between
Sydney and
Melbourne, for example, when the cost of flying it between those points is fixed? Should we pay $100 for every
seat or should we pay $400 for every
seat. The airlines look at what yield they need to make the flight viable and make a profit and offer seats at varying prices to achieve this. That is to say some seats are discounted, some seats won't be. But this discounting offers the consumer the choice of a discount rather than one ‘flat’ rate for every
seat. Some will be able to take advantage of it, some won’t.
Or what about Target, you know the Ads that appear on television almost every other week.
Shop at Target tomorrow and receive a 20% discount on all (or most) goods. Again, your argument suggests that if they can do it one day, why don't they do it every day? They won’t because they wouldn't make a profit and would be out of business. But if you
shop on those days you will benefit from the discount.
The point is simple, regardless of what you choose to believe despite the evidence that Australia has a competitive retail fuel market – if you remove the discount on anything from airlines to retailers to fuel retailers how are you better off for it?
You won't have the big price fluctuations once FuelWatch is brought in – this means you as a consumer will be paying a higher price everyday. You're in the tourism business and use fuel, no discount means average higher price over time! This development is not good for your business and that is the point I am making to you.
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