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."