Thursday, June 26, 2008

How FuelWatch will help

Graeme Samuel outlined it beautifully in an (unreported) answer to a quesion at the Press Club yesterday. I typed it up with a view to using it in the Canberra Times, but didn't. So I am posting it here.

The head of the ACCC is in no doubt that FuelWatch will help. I think he makes an open and shut case.

"At 9.00am this morning in Sydney the difference between the highest and lowest price in petrol being charged in the city metropolitan area was 19.5 cents.

That much I know.

And what I can also tell you is that 68 per cent of service stations in Sydney at 9.00am this morning were selling petrol below 158.9 cents.

The problem is – I can’t tell you which service stations.

I can’t tell you where they are, and I can’t give you any more information.

When I say “you” I mean all consumers. They can’t get that information.

But believe it or not the retailers of petrol in Sydney know all that information...

They have it on their computer screens in their head offices. They can tell you which service stations are selling at 169 .9 (the highest level), which are selling at 150.4 (the lowest level), and they know how to adjust their prices through the day, minute by minute, to reflect what their competitors are doing.

It certainly a very cozy arrangement. It is as close to an illegal collusion as you can get, but it is not illegal, and I emphasise it is not illegal on our analysis.

What FuelWatch will do is tell you, the consumer, where you can buy the petrol at 150.4.

It will also tell you where you can buy at 169.9, and I guess I can make a pretty good guess which service station you avoid.

And which one you will intend to buy your petrol.

More importantly at 2.00pm each day every retailer of petrol will have to make a very tough decision.

What price am I going to charge for petrol tomorrow? I’ve got to post that price by way of secret tender onto a website in the ACCC, and I’ll be stuck with that price.

If I get it wrong, if I have actually set my price at 169.9, not 150.4, the biggest variable in Sydney today, I can’t adjust it.

I won’t have the benefit of that computer screen to enable me to adjust it. I’ll be stuck with that for 24 hours.

I guess the service station that’s selling at 169.9 might find very little trade through the day as the consumer is knowing exactly which service station it is, and what the real prices are that are available in alternative service stations.

That’s what Fuel Watch is about."

7 comments:

Anonymous said...

It looks as though Fuel Watch will be rather more useful (depending on how you define that) than I thought. However, I don't care much for two reasons. First, and most important, we should be paying even more for fuel given that it's running out and also adding CO2 to the atmosphere. Second (more self-interested but less important), I drive a diesel-powered vehicle and its price doesn't vary by more than about 4 c/l across Adelaide over a given week.

Neerav Bhatt said...

hi peter

Surely you and Mr Samuel are aware of the free service provided by motormouth.com.au ?

I've been using it for ages to save money by planning which local petrol station to fill up at

Peter said...

Motormouth doesn't work like this:

Under Fuelwatch "at 2.00pm each day every retailer of petrol will have to make a very tough decision.

What price am I going to charge for petrol tomorrow? I’ve got to post that price by way of secret tender onto a website in the ACCC, and I’ll be stuck with that price.

If I get it wrong, if I have actually set my price at 169.9, not 150.4, the biggest variable in Sydney today, I can’t adjust it.

I won’t have the benefit of that computer screen to enable me to adjust it. I’ll be stuck with that for 24 hours."

Neerav Bhatt said...

True motormouth can't be 100% accurate for a 24hr period like fuelwatch but when Mr Samuel says

"When I say you I mean all consumers. They can't get that information"

Than i disagree, customers have been able to get 80% as good info for over 2 years

PS anyway bring on fuelwatch, I am a supporter of the idea and readers of my blog from WA have indicated they find Fuelwatch and related mashup services like http://wafuelfinder.com/ulp/perth/today very useful

Graeme Harrison said...

Yes, it was a complete media hype to describe anti-FuelWatch diatribe as "It will be illegal to allow a service station to lower its price." The media outlet carrying such comments should have pointed out that it was necessary to have service stations commit to a price, for market information purposes... and that they can drop their price the next day.

I agree that balancing the price knowledge (between suppliers and consumers) can ONLY be a benefit.

Anonymous said...

Of course his comment that it is as close to an illegal price fixing arrangement as you can get without crossing the line is plainly wrong. He has no evidence of any arrangement as to pricing. You can get a lot closer. Forewarning your competitors about your price rises, for example (also not illegal).

Anonymous said...

Actually, I've another example. If one petrol station calls another one up and says: "In five minutes I'm going to raise my price by 5c per litre, how about you?" and the other says "Yep, sounds like a good idea.", that is still not illegal, so long as they don't feel bound to then do so and don't signify to each other that they consider themselves so bound. Samuel is really talking rubbish with all this "as close as you can get to illegal" stuff.

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