On Thursday, caused by Asda’s decision to lower petrol by two pence per litre (ppl) and diesel by 3ppl, competing supermarkets were quick to announce they would match the reductions.
Call me cynical, but I don’t believe these rival grocery store giants when they declared that their reason for reducing the cost of fuel came from them trying to make driving less expensive for their patrons and the AA agrees.
In the AA report
In a recent report, the motoring organisation says supermarkets design these often termed fuel price ‘wars’ to increase sales and called them ‘shams’ for bolstering sales.
The AA adds that not only do these often insignificant markdowns seldom last long (less so when the retailers feel the reduced prices affecting their returns), they don’t always offer much of a saving to motorists.
Using new figures from the government’s Department for Business, Energy & Industrial Strategy (BEIS), the AA states that while retail volumes for petrol dropped by 1.1% between April and June 2019, sales at supermarket forecourts increased by 4.4%. The average sale of diesel decreased by 1.9% but fell just 0.5% at supermarket pumps. The AA’s report suggests that’s because motorists are ‘clinging to the hope that the superstores will be their saviours’ from steep fuel costs.
In the earlier fuel price war of Friday the 13th of last month, supermarkets announced they would reduce petrol by up to 3ppl. This followed the $8 fall in the cost of a barrel of oil, which lowered retailers’ wholesale costs. The following day saw drone strikes on the Kingdom of Saudi Arabia, ending in burning oil fields.
By the Sunday, the proposed 3ppl cut only averaged 0.5ppl off petrol and the inevitable hike in the cost of oil pushed up filling-station prices by the Thursday, resulting in not even a whole week of lower petrol prices for motorists.
In the first week of October last year, profit margins for retailers averaged 7.2ppl, with a 7.8ppl profit 12 months earlier. The AA calculated an average 9.5ppl retailers’ profit margins for last week and their Fuel Price Report recorded average forecourt prices stayed between 127.8-129.2ppl for 17 weeks. This implies that while the attractive price war stories grab our attention, what many of us don’t notice are the days after where pump costs begin a steady increase.
|Petrol comparison by brand (14/10/19)||This month (pence per litre)||Last month (ppl)||Price change (ppl)|
|Diesel comparison by brand (14/10/19)||This month (pence per litre)||Last month (ppl)||Price change (ppl)|
The variation in the average cost of petrol and diesel between supermarket retailers looks closer than it is on the ground in many communities across the UK, according to the AA. In fact, their data shows that just on Tuesday—along the M4 Berkshire/Hampshire corridor—prices differed by as much as 5ppl.
Likewise, in Scotland; a Tesco forecourt in Stirling was charging 3ppl more for petrol than the Tesco forecourt in a town less than a 20-minute drive away.
The AA report said that ‘when uncompetitive superstores allow neighbouring oil company-branded sites to charge more (and often the same price as towns with no supermarket presence at all), customers and communities lose out significantly.’
Luke Bosdet, the AA’s fuel price spokesman, said:
‘When you drive out into the country, through small market towns without supermarket fuel, and see pump prices little different from those in towns with a supermarket forecourt, you know something is broken with road fuel pricing in the UK.
‘A neighbouring supermarket will then charge the same or a penny less a litre and claim to be value for money—even though it’s getting £2 or so more per tank of fuel than at other locations.
‘The sad thing is that customers seem to be buying it, as official statistics confirm.’
Asda has a nationwide price cap and, in locations with Asda forecourts, the AA found petrol and diesel was cheaper. For example, in Basingstoke and Newbury, who don’t have an Asda, other supermarkets charged a lot more for fuel than in Reading, which has an Asda. Morrisons prices were 3.2ppl more, while Sainsbury’s and Tesco charged over 4ppl more than the price at Asda.
Speaking to This is Money, an Asda spokesperson said:
‘When we cut fuel prices, we always announce what our national price cap is, meaning drivers know exactly the maximum amount they are paying regardless of where they live.
‘No other retailer does this, meaning they are free to charge as much as they like when they have no competition close by such as an Asda. This is what the AA are referring to . . . .’
The spokesperson added:
‘On the rare occasion when a lower price is available within a local area, our aim is to match that price locally so customers can rest assured they’re always getting the best value when filling up their tanks with Asda.’:
Driving down prices
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Do you benefit during fuel ‘price wars’? Have you noticed pump prices soon creeping back up to normal? Do these supermarket fuel discounts encourage you to shop in-store? Or do you avoid supermarket branded fuel altogether? Tell us in the comments.