How Petrol Stations Are Making It Harder To Find 'Cheap Days'

Petrol isn't cheap: the average cost in Australia over the last year was 143 cents a litre. When weighed up against other locations, Australia still comes out as one of the less expensive OECD countries, but shifty behaviour by retailers means it's getting harder and harder to buy petrol at the lowest price point.

Image courtesy of Shutterstock

Those are the most notable conclusions from the Australian Competition and Consumer Commission (ACCC) annual report into unleaded petrol pricing in Australia, which was released today. The report is based on the ACCC's regular monitoring of petrol prices in the five major capital cities. Undoubtedly remote rural consumers will pay more, a factor the commission acknowledges, while pointing out that lower volumes and longer transport distances mean that isn't actually a totally unreasonable outcome.

Capital city petrol prices have gone up substantially over the last ten years, but that increase is in line with the overall international Singapore Mogas benchmark price. As the announcement of the report points out: "Over the last decade the average retail price (excluding taxes and subsidies) has risen around 120 per cent, while the price of Singapore Mogas 95 has risen around 122 per cent." Supply shortages and unrest in the Middle East were major factors in dictating crude oil prices, the ACCC noted. "Even with the recent increases, petrol prices in Australia remain among the lowest in the OECD," the report noted.

That remains true even when local taxes, a major component in petrol prices, are included. This chart shows the amount (in Australian cents per litre) charged for petrol and tax in OECD countries:

The exclusion of taxes and subsidies does mean it's hard to make direct comparisons for individual consumers. By the ACCC's reckoning, the international price of petrol plus taxes accounts for 88 per cent of the cost, while local wholesale and retail charges account for just 12 per cent. (Just try asking Apple shareholders if they'd be happy with sub-12 per cent margins.)

Not much of that actually stays at the pump. A typical retailer makes 1.5 cents for every litre of petrol sold. When convenience stores (which typically don't employ supermarket-based discount coupons) are included, that figure rises to 2.4 cents. That's still hardly enormous, and convenience stores represent a small proportion of the local market. But consumers won't feel sorry for petrol stations. We're too busy trying to work out how to not get totally rorted.

How Cheap Tuesday Died

The ACCC's announcement points out, yet again, that drivers find the highly variable pricing for petrol on any given day confusing and annoying. As we've noted before, the cheapest day shifts on a regular basis, so you need to regularly assess your buying habits. This sucks, unquestionably, but it seems unlikely to change. Indeed, the report points out that in the eastern states, the situation is worsening, and it's almost impossible to predict a "cheap day":

The duration of price cycles in the eastern capital cities has been increasing over the last few years. In 2009 the average duration of price cycles in these cities was around seven days, whereas it had increased to over 12 days by the end of the September 2012 quarter. This has made the price cycle less predictable and means that it is not as easy for consumers to take advantage of the low points in the cycle. ACCC analysis has shown that the upward phase has generally been led by BP or Caltex.

The big exception to this rule is Perth. WA regulations require fuel prices to stay stable for 24 hours and to be published on the FuelWatch web site. That would be a welcome development in other states.

The ACCC began an investigation into whether petrol suppliers are illegally colluding to share price plans in May this year, but that investigation is expected to take some time. The ACCC is also investigating the potential effect of the widely-used supermarket discount docket schemes on pricing. (47 per cent of Australian petrol sales are through Woolworths or Coles-branded stores.)

We know that many countries in the world pay much higher prices for petrol (and that comparing prices on their own is meaningless if you don't also consider income levels). Picking the right points in the petrol sales cycle to buy cheaply will save you money, but the most reliable way to reduce petrol costs is to drive less. I can't see that happening — every time we mention this on Lifehacker, the comments flood with people pointing out their utter car dependency — but it is by far the most reliable method.

ACCC Petrol Report


Comments

    I use both racv fuel watch and motormouth to figure out the cheapest day. Motormouth lets you select the stations you want and get emails of their prices daily, and racv fuel watch provides a graph of the last couple of weeks on prices. I just spend 2 min each day and can usually pick the cheapest day to fill up if i need fuel

    I think all states and territories in Australia need to advertise their prices on FuelWatch. Not only would it make finding cheap fuel easier, but would allow the data to be scraped or integrated with another site. A Google Now card would be nice!

    These price cycles are really pointless - I don't get why they can't just average it out like every other country does.

    I'm finding in Perth, the cheap Tuesday notion is slowly moving to Wednesdays. Fuelwatch helps a lot, especially their nightly email subscription.

    Just thought I'd weigh in here to give a quick explanation of why the price cycles occur. Full disclosure - Up until 12 months ago, I worked in the head office of one of the major fuel companies.

    As you're aware, fuel prices must be displayed outside the petrol station. This allows competing petrol stations to see what prices other nearby petrol stations are offering. Let's say, for example, that Petrol Station A and Petrol Station B are near each other, and both have an advertised price of $1.50/L, with associated costs of ~$1.35/L. With this pricing, they'll both get a good margin (15c/L) and will receive about 50% of the customers. A might look at this situation and see that they can get 100% of the customers if they drop their price by 2c, and take the hit on margin. Now their making 13c/L on twice as much fuel. B now realises that they're getting no customers, so they'll need to drop their price to $1.46/L to get all the customers (at 11c/L margin). This will continue until the margin drops close to zero (price gets closer to $1.35/L). At this stage, A will think that there's no point in getting all the customers if they're not making any margin on the fuel, and they'll decide to put their price back to the original ($1.50/L), high margin level, and just make more margin on the very few people who buy from there. At this point, there's no incentive for B to leave their price at $1.35c/L, as any amount less than A's price will get therm all the customers, so they raise their price back up (perhaps to $1.48/L to ensure that they're still beating A), and the cycle starts again.

    So as you can see, the frequency of the cycle depends on a few factors - the amount of margin at the highest price, the rate at which petrol stations change their prices, the amount of each change, and the lowest margin that they're willing to tolerate before they give up on that discounting cycle.

    So I'm not going to give you any spiel about fuel companies being good/evil, just thought people should keep these factors in mind when they're reading things about fuel pricing and price cycles.

      And all of Sydney does that in one go? I don't buy it.

        Sorry, should have specified this in my first comment.

        No, this doesn't happen on an individual level. Each of the major fuel companies subscribes to a publication called "Informed Sources" which is a company that collates all petrol stations' fuel prices and provides the information out to all subscribers. Consider it the equivalent to someone driving around the city and radioing the prices back to head office.

        This allows each company's pricing team (and yes, each company definitely has a "team"), to structure their Australia-wide prices in response to their competitors' Australia-wide pricing structure.

        So no, it's not individual stores making price responses to the store over the road. It's national companies making price responses to other national companies pricing changes.

    If prices were "regulated", the stable price would be at the high end of current cycles, not the low end. So if you could choose, would you prefer predictable, stable higher prices, or volatile potentially lower prices? No prizes for the correct answer.

    And let's not hold our breath waiting for the latest ACCC report into petrol prices. These have averaged out at one inquiry every two or 3 years for many, many years. They're worth reading as they are usually successful at filtering out media-driven hysteria and old wives tales (eg. "prices always go up at Christmas and Easter") in favour of commentary based on sober, reliable data analysis.

      I'd rather stable higher prices knowing that everyone was paying them!

        Similarly, would you prefer that Myer never had 30% off shirts for three days, or Coles never had chocolate bars half price for the weekend, or Kogan didn't take $20 off an iPad for a couple of days, on the basis that everyone should always pay the same price?

          GOD YES. Seriously. I loathe sales. Brings out the worst in people.

    Every wednesday here in Perth seems to be cheapest on Average. Most people already ave realised this and you have massive queues all day on wednesdays here. It is an absolute PITA to keep an eye out for the cheaper fuel and I have resorted to just going to the fuel station up the road from where I live and topping the tank right up each week. I have probably saved a fair bit of money by sticking to wednesday but not as much if I tried shopping around. My problem is I don't have time to travel anywhere else to buy fuel at a cheaper price. I really hate the price hikes before any holidays though and tend to stock up long before any holiday!

    I tend to ride my bike to work, so I can absorb any times I'm forced to fill up on an expensive day. Having said that, I try and top up on Tuesdays or Wednesdays. CBF trying to keep a hawk-eye on the Fuelwatch website.

    I just have FuelWatch bookmarked in my phone browser. Theres almost always 1 in the top 10 cheapest with 3km of my house. Even on weekends.

    I don't get what is the trigger that causes the price to go from low to high in 3 days. And everyone does it on the same days, no matter the neighbourhood in Sydney.
    And if it wasn't for motormouth being so tight &^%$'ed, I'd develop a mobile app trying to incorporate the anticipated sudden rise in price.
    Brilliant people (aka me) never get rewarded for being bright. Fuel stations like them customers uninformed.

    Would you all still be so keen on FuelWatch as you are in WA if you knew that it was costing you about 2 cents per litre?

    I manage a servo and I get to hear people complain about the prices all day. I don't mind too much, I completely understand people's frustration at paying more for something than they think they should. What I don't understand is people's driving. When the lights turn green everybody wants to zoom off quickly, only to be lined up at the next set of lights. The extra economy that you can gain from going easy on the accelerator is extraordinary. But I suspect most people are more interested in being in a hurry to get nowhere than saving money at the pump. I think most people's propensity to complain is more overwhelming than their desire to conserve.

    If people were actually serious about saving money on petrol they wouldn't be driving like they do.

      A very big +1 here. I'm also not sure why people need web sites and the like to buy fuel. You drive past a servo, see the price, determine how much fuel you need and decide if it's cheap or not. If you're not sure you wait til you drive past another one to compare.

    I'm a big fan of MotorMouth... they save me money every time i fill up! Get involved!

    Most people who live in the city have 3 majors things: A discount cycle on fuel, actual competition, and public transport. Once you are 50km out of Adelaide, you will find that the fuel is one price, or a slight variation, but usually at the higher end of your discount cycle. Currently, fuel is $1.44/L for 91 Unleaded. I go 100kms up the road, and it is precisely the same price. It doesn't depending on the day. It also takes a while for changes which result in the price coming down, but is very quick when prices go up, sort of like bank interest rates. Now, on the third point, if it become such a sticking point for you about fuel, you can catch public transport for a day or two to get by. Most of us in the country do not have that luxury, with the only public transport typically being the Coacth to Adelaide. Not exactly convienient as alternative transport, especially when it runs 1 return trip per day, or worse. We have to grin and bear it. On the occasion we get take advantage of the fuel discount cycle in our major city, we have a narrow windows to do this on our normal trip, or we need to ensure that we have sufficient fuel to avoid buying at your peak price, which is often higher than our local price. An advantage of feing dual fuel, often if I hit the city at your cycle peak, I'll just refuel on LPG which is still 12-15c less than our local price, and ignore the petrol, and refuel that locally.

    Am I the only one who just buys petrol when they need it?

      As in, without prior planning? Yes, I think you're in the minority.

Join the discussion!

Trending Stories Right Now