Wednesday, August 26, 2015

At the meeting with Howard Cox on 18th August, PRA was represented by their Chairman and a retailer from Hampshire who owns and operates 4 local filling stations. The retailer emphasised that the pricing agreement with their supplier was "Weekly Lagged” and then explained how it works – this week’s prices (which take effect on Tuesday) are based on the average of the previous week’s prices. Then a price is calculated based on the average of their agreed marker sites. This produces a "Supported Price” and the margin that results is shared with the supplier on the basis of a matrix which forms part of the supply contract. However, the retailer often has to sell below the agreed price to remain competitive in the local area and, as a result, takes the full hit on margin. A 1ppl cut in pole sign price costs 0.83ppl - often a very substantial part of the margin.


It is disappointing that Howard insists on referring to crude oil prices despite telling him repeatedly that retailers only buy refined product which is separately quoted by Platts ( a division of McGraw-Hill). Recently there have been considerable differences in the grade prices.


Howard also conveniently ignores the fact that the retailer has stock in their tanks, sometimes considerable volume which has to be sold before dropping the price. More likely, the retailer drops the price immediately taking the hit on margin


This is illustrated in the table below.


 


Oil company fuel cards were mentioned due to the very low card commissions at around 1.40ppl and just 0.77ppl for Bunker diesel. This clearly reduces the overall margin achieved as the independent segment has 70% of the specialist hi-speed refuelling facilities for HGV’s so supply a large part of the on-road fuel to this sector. Without this network the fuel costs of many haulage companies would increase as they would have to divert off route increasing delivery/product prices for everyone.


The retailer advised that an average annual gross margin of 5ppl is needed just to sustain the business but that isn’t a maximum it is just a target that the retailer has yet to achieve over a financial year. This market cannot be judged in a single day, or even a week – it really should be considered over a much longer period, a year minimum.

 

Brian Madderson
Chairman Petrol Retailers Association

 

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[ posted by Mark , 26.08.15 10:08 ]

Doesn't explain why prices rise quicker than they fall - the "tank contents" argument works both ways. Also FFUK uses petrol and diesel wholesale prices as well as crude, and the PRA themselves admitted that diesel pump prices were until recently artificially inflated "so they could then discount prices for fuel card users".

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[ posted by admin, 26.08.15 10:11 ]

Great points Mark

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[ posted by Peter Frost, 26.08.15 12:49 ]


Peter Frost
I mentioned an idea a long time ago, about how to get the attention of the major suppliers, without hurting ourselves......
The idea could be co-ordinated by Fair Fuel UK here. We simply agree which supplier we should use for September. For example -we solely use Shell that month. BP, Texaco, Esso etc see a massive drop off at their outlets (including massively reduced sales on their other products). They panic, because they need the monthly sales, reduce their pump prices to entice us back in, and we then decide who we'll choose to use and avoid the next month.
If BP (for example) have been avoided for 2 months, they are seriously struggling & their financial quarter returns & budgeting will be shot to hell. Most of the outlets are privately owned & run, so they will be screaming at their suppliers to reduce the prices. They in turn, will start to scream & shout at the cartels & government.
I appreciate that not everyone has the luxury (especially if you live out in the country) of doing this, but 90% of us WOULD have that choice & the sooner they realive that we can also play the 'manipulation' game, the power turns to the consumer, in the same way it has with other types of business.

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[ posted by eric harding, 27.08.15 17:34 ]

Well put Peter ,,but lets face it ,people will only use the points where fuel is cheapest ,,usually s/mkts when they have price wars ? but you do have a good point .

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[ posted by Leslie Cruickshank, 26.08.15 13:11 ]

It's all well and good shouting at the retailers, but they are in business to make a living, and it benefits no one if they go out of business. Considering that the retailers margin makes up only a very small proportion of the overall price, I think we are shouting at the wrong people, and in the meantime the government are laughing because the pressure has been diverted away from them.

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[ posted by Leslie Cruickshank, 26.08.15 13:12 ]

It's all well and good shouting at the retailers, but they are in business to make a living, and it benefits no one if they go out of business. Considering that the retailers margin makes up only a very small proportion of the overall price, I think we are shouting at the wrong people, and in the meantime the government are laughing because the pressure has been diverted away from them.

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[ posted by Tony Shaw, 26.08.15 16:28 ]

Sounds a load of hogwash to me. Customer satisfaction just doesn't come in to theequation.

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[ posted by Robbie Roberts , 26.08.15 21:31 ]

diesel prices at the three Supermarkets in Penzance are 107.9! 14 miles Nearer the Depot in Helston two of those Supermarkets are charging 110.9 The other Supermarket does not trade in Helston! So with less delivery distance why is the fuel nearly3% dearer?

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[ posted by Darren Lines, 27.08.15 08:45 ]

In all fairness, that letter really didn't explain much, all it was basically saying was "we need to make 5p margin each week". That's fair enough, all businesses need to make a margin to survive. The supermarkets can be cheaper because they shift the margin to other areas of the business.

With regards to the storage of fuels on site, what a load of rubbish. If the price goes down because of a surplus in the tanks, it should also be slow to rise because of the same surplus, yet it rockets up with the baseline of crude! If the fuel retailers are working on averages over a long period, then the price should be allowed to rise and fall at the same rate as it will have a smaller effect on a long term average. All they are doing is putting the price in favour of the higher, ripping us off!

One interesting point is that he mentioned that refining hasn't been taken into consideration. Maybe it's something that needs to be looked at? Maybe refiners are making massive profits. I can't see how the refining costs would have shot up by that much per litre compared to the last time crude was at its current low price. I think they oil companies are just piling on the profits, so as not to let their multi-billion pound yearly profits take much of a dip.

Also, let us not forget that the government are still taxing us an exhorbatant amount for fuel duty, and then shoving another tax (VAT) on top of that. The government still need to reduce duty significantly. We're supposed to get cheaper crude than anywhere else in Europe due to the north sea rigs, yet we pay more than most of Europe for the end product, and the taxation is way above the circa 50% average in Europe!

They must think we are all idiots!

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[ posted by Tony Hey, 27.08.15 08:49 ]

it all sounds like it could have been spoken by an MP, lots of fancy words that the layman doesn't really understand and in the end hasn't actually answered the question. The PRA are ripping us all off, FULL STOP.

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[ posted by Cliff Sellers, 28.08.15 08:50 ]

Doesn't the whole argument boil down to the fact that its the government with VAT & Duty who WANT to keep fuel prices high to support their agenda's.

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