Back at the end of October last year, supermarkets announced the first of many price drops. Since then, the unleaded price has dropped from an average of 131.1ppl in October to 120.1ppl now, and a 136.2ppl average in October for diesel and dropping to 129.3ppl so far in January.
Now the RAC has come forward with concerns that the supermarket price wars are no longer a thing, as they released statistics showing that ¾ of the main supermarket groups are no longer dropping their prices quick enough, and with the same ferocity as Asda.
Crunching the numbers
Ashley Beach, Data Analyst at PetrolPrices.com said “Before the price war, supermarket average unleaded prices were spread over a range of less than 1.5ppl, meaning they were all less than a 1.5ppl difference from Asda prices. On top of that, Morrisons and Sainsbury’s differed by less than 0.01ppl while Tesco was approximately 0.22ppl higher, meaning these three chains were in proximity of 0.22ppl between each other.
ASDA began the price war on the 26th with an average drop of 2.14ppl in their unleaded price. Four days later, Morrisons and Sainsbury’s followed suit but only to an extent with average price drops of 1.03ppl and 1.09ppl respectively. Tesco kept their average unleaded price above 128ppl and only followed suit when ASDA announced their second price drop. By the time all supermarkets had followed this drop Tesco, Morrisons, Sainsbury’s and ASDA had made drops of 2.21ppl, 2.46ppl, 2.82ppl and 4.15ppl respectively. This meant that the average unleaded price at each supermarket started to spread over a larger range and the difference between each supermarket became much more prominent than before the price war.
As of the 15th of January, the most recent price drop was last week, and the range of unleaded supermarket price averages is much greater than before the price war at 3.8ppl. Morrisons are 0.73ppl greater than Sainsbury’s, and Tesco 0.53ppl greater than Morrisons. Hence the price war started by ASDA made massive changes; not only have they gained, at the least, a 1.4ppl increase in the difference between their price and other supermarkets since the start of the price war, but they have also induced greater differences between the other supermarkets. However, it’s good to mention these numbers for these metrics aren’t the highest we’ve seen during the price war, and it’s fair to say the supermarkets could slowly begin to converge to closer prices again.
Since the start of the price war to present day the average unleaded price decreases for ASDA, Sainsbury’s, Morrisons and Tesco have been 13.4ppl, 12.0ppl, 11.3ppl and 10.9ppl respectively.”
What about diesel?
He continued “As for diesel, the price war had a slightly different effect. The average diesel prices for Morrisons, Sainsbury’s and Tesco converged closer than before the price war in the most recent price drops. The range of these brands on the 25th of October 2018 was 0.98ppl whereas on the 14th of January 2019 this is now 0.17ppl and has been below 0.2ppl for five days now. However similarly to unleaded, ASDA has gained an increase in the difference between their prices and the other supermarkets, as they have lowered their prices by the most since they started the price war, back in October. The average diesel price decreases for ASDA, Sainsbury’s, Morrisons and Tesco are 9.2ppl, 8.7ppl, 8.2ppl and 7.8ppl respectively.
Tesco had the highest prices throughout the price war until the most recent price drop where they have now returned to their original position having the second cheapest diesel prices after ASDA.”
So, did the prices drop enough?
At the beginning of October, the price of a barrel of oil equivalent was $86, the highest it had been since November 2014, yet prices in November 2014 averaged at 123ppl for unleaded and 127.5ppl for unleaded. In December of 2014, unleaded averaged at 117.1ppl and diesel at 122.7ppl, which is a different picture to what we have now. While the economic situation was different then, VAT has remained the same, along with fuel duty.
As shown above, the prices now are much higher and spread over a greater difference. The RAC think that over the next two weeks petrol should come down by 8p a litre to an average of 113ppl, and diesel should come down by 10ppl, bringing the average to 120ppl. However, this is dependent on the retailers passing on savings, which the RAC does not believe they are doing.
They fear that the petrol retail market may have changed forever as Asda have consistently lowered their prices by much larger margins than other retailers. The supermarkets not competing as much means that the ripple effect that is caused by competition from smaller garages aiming to compete with supermarkets simply hasn’t happened.
Do you think supermarkets have dropped their prices enough? Would a further drop help you out? Let us know below