A trial by Highways England to display fuel prices from upcoming motorway services along a stretch of the M5 has come to an end, and the findings have now been published. Highways England hoped that the trial would increase fuel price competition and price transparency, but unfortunately its failed to achieve either of these aims.
Several thousand drivers were surveyed, and they did not think the signs helped at all. Most drivers know the price of fuel at motorway services is a lot higher than on normal roads, and all it did was highlight how expensive motorways service stations were rather than help reduce prices on motorways.
Setting up the trial
Highways England tested four things; Safety, customer, economic and performance. Was there an impact on safety? Did the customer find it useful? By providing fuel price transparency, did it lower prices? And did it work all the time, effectively?
Five Motorway Service Areas (MSAs) were chosen to take part between Junctions 18 and 30 of the M5 southbound; Gordano, Sedgemoor, Bridgwater, Taunton Deane and Exeter. Four signs were installed each with the petrol and diesel prices for the next three MSAs in distance order.
The trial lasted from April 2016 to Sept 2017, and the signs were in constant operation during that period. The signs had a live feed of the price at the stations as well as the distance to the MSA. With a delay of under two minutes, the prices were consistently up to date, meaning that no more than four cars would see a difference in price when they entered the station.
There were no safety issues reported during the trial, and while some people found them to be distracting there was nothing above the expected level.
When surveyed, participants from Highways England found the signs to be useful, but motorists responding to an online survey disagreed greatly. They felt that the signs were not helpful, should not be introduced on other motorways and 75% said they were not helpful.
A common criticism across all the respondents was that they felt the signs did not provide good value for money, with many adding that they did not fill up at MSAs anyway as they knew, due to inelastic demand, that the price at a motorway station was considerably greater than one just off the motorway.
Regarding economic value, the trial did not prove effective as the fuel prices did not go down and stayed in line with national average trends. While some would have thought that the price signs would have created competition and driven prices down, this did not happen. The price transparency provided by the Government had no effect at all, as everything stayed in line with the national average of MSA’s on other motorways without price signs.
Why didn’t it work?
Highways England were naive if they thought that this would work successfully. As they were merely comparing MSA with MSA, there is no competition created as the inelastic demand around MSAs will always be high enough to require people to stop. Due to this MSA’s know that they can keep prices high, no matter what the competition is doing.
However, if they had compared the fuel price of an MSA to one that was a bit off the motorway, showing the distance and the comparative fuel price, that would have made a huge difference. People would have realised that by travelling slightly off route, they would have found a much cheaper fill-up. By not implementing this key strategy, Highways England has conducted a somewhat useless trial, as there was no competition properly created for the fuel price retailers to then properly respond to and drop prices.
One example is Junction 8A of the M40. The service station there is currently 141.9p per litre for diesel, but just over 1 mile away another station is selling diesel at 118.7p per litre. If the fuel price sign trial had shown the respective prices of these two with the comparative distance, it would have reduced the MSA considerably.
Jason Lloyd, Managing Director of PetrolPrices.com, says “A similar test worked really well in Italy which brought down fuel prices on major roads, so I can totally understand the rationale behind the Highways England trial. However, the UK is a different market and motorway service station operators do take advantage of a captive audience far more than those in Italy do because many operators are the only petrol station option at that specific junction.
The only way to shock motorway service operators into action would have been to highlight the price difference between non-motorway stations at that junction or the next junction. It’s only when a dramatic price difference is shown to be available 1-3 miles down the road will it change behaviour and move pricing the way Highways England wanted it to.
You can now get full colour LED screens as road signs that can display all the information needed for drivers to make an informed choice about the cheapest and nearest places to fill up with basic directions how to get there.”
So what happens next?
The trial will not be rolled out nationally as Highways England predicts it would cost around £50 million pounds, a steep cost for something that has no proven economic value, both to the motorist and to the Government. Negative feedback from survey participants showed that they thought the idea was a ‘waste of money.’ It seems, for now, PetrolPrices is the best way to find out the cheapest fuel near you.
If Highways England would like to take up our suggestion and run the test again by comparing MSAs with stations less than 3 miles from the same or nearest junctions, PetrolPrices would be happy to get involved and assist to make it possible.
What do you think of this test from Highways England? Would you have expected it to work? Do you think comparing motorway services with stations nearby is better and would force them to change? Let us know below.