FuelWatch - News Story

As far as I am aware it is all encompassing, and this is the issue for the Independents. They are committed to the posted price for 24 hours. No-one should be excluded if you are going to bring a scheme like this in.

However the Independents should be concerned as geographical representation by the major outlets will enable them to out-flank the ndependents across cities, under pricing in some areas, over-pricing in others and eventually this will lead to the demise of the Independents. No doubting the majors will look to remove the Independents through this type of pricing strategy.

I said previously I am not a fan of this as it will not deliver cheaper fuel, it will provide some transparency, but wil also remove the discounting cycle.

I'm not sure who will be better off other than the major retailers; Woolworth's is on record as saying that west Australia is its most profitable State for fuel sales because of FuelWatch.

That's a very good analogy which makes a lot of sense.

Paul


So often the fuel discussions and debates take on the ‘Earth is flat argument’. Enough people believe the story, sounds logical, so must be right! No, I don’t work for an oil company, but I have taken the time to understand the issues and endeavoured to sort fact from fiction….

You raise a valid point; however the answer to the reason why it happens is that fuel is a highly commoditised product, it is stored in many places, including service station retailers tanks and is sold subject to changes in wholesale pricing

The problem with the concept of service station retailers selling it for what they purchased it for until they refill their tanks is that when the price falls they would never sell fuel. Other retailers will have had the opportunity to refill their tanks at a lower cost and therefore their retail price would be lower. How would this system work? Let’s say you are now selling fuel instead of widgets and you just took a delivery of fuel at a high price. Overnight the wholesale price falls and your competitor 300 metres down the road has just filled his tanks at a cheaper wholesale price. If it follows that many fuel purchasers are like you and just want the cheapest price, how much fuel do you think you will sell versus your competitor who now has a cheaper price?

If widgets had the same level of demand as fuel and the manufacturing costs changed daily (like refining oil into fuel does) and there was no difference in competitor’s products, rest assured widgets would have the same price fluctuations as fuel.

However, FuelWatch will deliver what you are asking for, the knowledge of where the best price is on any given day. That doesn’t mean it will be better than the price you can buy it for under current arrangements. Current ‘savvy’ fuel buyers will be worse off in the long-run under FuelWatch.

I’m not sure anyone can do anything about the rising price of fuel in the short-term; the longer term will need to yield some answers as the price oil is unlikely to fall back to levels we have been accustomed to.

The point of the inquiry and submissions by the Independents is important if you don’t want total control of fuel retailing to fall to the multi-national interests. Look what has happened to grocery prices in this country, take the Independents out and you will loose price tension.

The CEO of Woolworh's is on record as saying that its fuel sales in West Australia are more profitable than in the other States because of FuelWatch. I believe the two central reasons for this is that they are less inclined to discount the price of fuel under FuelWatch because of the requirement to hold that price for 24 hours, and secondly, the Independent retailers cannot adjust their price on an intraday basis to bring about price tension when the major retailers set the price higher.

Thanks for your response Landy.

I'm not overly sure that the major retailers haven't already taken the fuel industry by the throat and play a major role in manipulating the retail prices on a day to day basis.

I agree that we will never see fuel prices back to where we would like them as I have said in previous posts its all about 'conditioning' the public to pay higher prices.

Coles and Woolworths are highly profitable businesses who don't often take huge risks therefore, they wouldn't have entered the fuel industry lightly, what now seems to be an eternity ago. I do remember all those years ago commentary about giving them too much power to drive prices higher but people were clambering at the time for the discount vouchers instead of taking notice of what was to become.

If fuel prices come back below $1.50 per litre I'll eat my hat.

I purchase my fuel from independents whenever I can.

Using your widget description.
If I bought a widget for $1 and sold it for $2 the $1 margin is what I use to feed myself and pay my other running costs.

If the widget wholesale price goes to $2 and I don't reprice accordingly then I have lost my $1 margin to restocking cost and I have no money to eat with.

The repricing does mean that I have actually made more money but its now tied up in an increased stock value leaving me with a cash flow dilemma.

You must reprice immediately to ensure enough cash to replace the stock required and maintain the profit margin to eat with, if you don't then you will only be able to buy half the amount of stock you previously had as the cost value has now doubled and your losing money.

I won't start on the issue of the actual percentage markup and margin effect, other than to say with the fine margins in fuel its imperative that prices are moved instantly to try and preserve same.

Hope this helps.

Paul...tragically that is probably the case.

You are right about Coles & Woolworth's, look at the businesses they have targeted as a way of getting a larger share of your wallet. Groceries, liquor retailing and fuel. We are vesting far too much power in these two companies and the cost to all is increased prices.

Cheers.......

John,

I'm shocked. How on earth weren't you able to malign Swann and Rudd?

With a bit of effort you could have implicated Hawke, Keating, Whitlam, and with a bit of serious effort Chifley and Curtin as well.

Lift your game son. You'll lose your Party Membership soon unless you can do better.

Cheers,

Jim.

Jimmy old boy :-) my comments were just a short look at the issues involved in maintaining a retail margin and trying to stay profitable.

As for fuel watch well the populist man in Canberra seems to believe something contrary to the well publicized facts of the fuel watch issue.

Bottom line it will have negative effect on the discount cycle but like Kyoto etc he thinks people will think he's actually doing something positive until they realise it will come with a large negative effect and cost them where it hurts most.

In the end big deal some seem to think the few cents per litre even multiplied over the usage per year will make or break life.
I am constantly amazed by people who will que for ages to save 4 cents a litre, in my case my time is worth more than the 2 or 3 dollars per tank being saved.

Is that political enough for ya??? :-)

Yeh, a few weeks ago, I went to a Woolies servo in Perth for their cheap diesel. "Out of Order" Hmmm. Dropped back in two days later still same price, still out of order - hmmm... - but it was a weekend. But I've seen tankers deliver on weekends. When the diesel went up 3c at that servo on the Monday, they then had diesel to buy. Mind you, this is probably the first time I've encountered this in 6 yrs.
But we've seen the same news items about the same trick in the east, with the cheap fuel pumps "out of order", one servo stated that the bowser was out of sight of the operator at this desk. Why only out of sight on a cheap Tuesday? most likely coz they don't want to sell at a loss. This argument has nothing to do with Fuelwatch.
On the lighter side, I bought my full 150L diesel today with my Woolies 20c/L disc voucher - a $30 saving. I'm happy.
Gerry

Similar complaints are being made in the Sydney media, about bowsers being out of service on "cheap tuesday". Of course nobody can ever prove it's a rort.

Living outside Sydney though, means you pay the same high price everyday of the week!

Hi joc45,

"This argument has nothing to do with Fuelwatch." yeah I know but it has a lot to do with low prices. It is interesting to see that it is happening over East as well, ........me with my head in the sand LOL.

Cheers

D

I dunno theres always plenty of out odf service tags on the BP cnr of kalamunda and Hawtin road but it never has cheap fuel, matter of fact i suspect it is consistantly perths dearest servo

yep at 1.92.0cpl that easily makes it perths most expensive diesal (equal with a few others)

Hi Davoe,
"matter of fact i suspect it is consistantly perths dearest servo"

You're not wrong there, I don't think we have ever bought fuel at that servo. We use Peak, cnr Canning & Lesmurdie Rds.
Cheers

D

I buy mower fuel there
otherwise its the bioD at Gull kalamunda or midland.
If heading out of town its the gull clackline way

Hey, Davoe, are you trying to keep one step ahead of the tax man or something?!!
It used to be Davoe Widgiemooltha, Nullagine, now Yalgoo, and now I see you're near Kalamunda. Where next? LOL!
Re BP, rarely see BP on special, diesel, anyway. But usually the outer suburbs are better-priced than the inner ones for some reason. Thought you might have had a good outlet around there in Kalamunda.
Gerry (still in Doubleview)