Vote with your feet with fuel buying

There is nothing like rising prices to convince people that they are being ripped off. I found this out again this week on the thorny subject of rising fuel prices.

Fuel is on the up again. As I have noted before, this is mostly down to a weakening Euro and the rising price of oil on world markets. The bad situation is made much worse by the extraordinarily high fuel taxes that we pay. These are pushing the average price for petrol up above €1.70 per litre.

I spoke to Charlie Bird on RTE Radio about this last weekend. I was very much the bearer of bad news as I told him that further price rises were expected within the week.

All true, but in response I got a very concerned email from a motorist in Cork. He was furious with me because, as he put it, within an hour of me being on the radio his two local garages had put up their price.

It is a genuine debate as to whether we would be better off with the government controlling the maximum price of fuel and imposing it on garages. It used to be that way. Up until 1991 it was the state that effectively controlled the retail price through a maximum price order.

That meant that the garages essentially did not compete. There was huge attention on things like Tiger tokens and the early versions of loyalty cards but the price didn’t really change from garage to garage.

The price was then de-regulated by the Charlie Haughey-lead government in October of 1991. Since then it is for the garages to charge whatever they want to and it is down to competition in the market to keep prices low.

On the whole this has been good for the consumer in my view. Prices vary considerably and while if you are careless you can pay too much, there is also relatively good value to be found if you seek it out.

These things need to be policed though. The AA regularly monitors fuel retailers and if we are suspicious about their behaviour we follow it up with the authorities. It can happen that a garage will put up its price in response to a newspaper headline. I am not sure if that is what happened in Cork last weekend but it is possible I suppose.

While opportunistic there is nothing illegal about it. We consumers just have to vote with our feet and buy elsewhere.

Garages are not allowed to co-operate with each other to fix prices in a local area. That practice is explicitly illegal under competition law. The Competition Authority are the ones who watch this and they have taken prosecutions although it can be very difficult to prove.

But in all honesty the local garage is not the villain of the piece. They are not making huge money from us. Although many motorists have great difficulty believing it, the garage is at the end of the food chain and makes very small margins.

Typically a garage is lucky if they are making four cents per litre sold. If you buy 20 litres of diesel and a cup of coffee they are literally making more money on the coffee.

The wholesaler does a little better – normally about eight cent per litre. But the biggest snout in the trough is the government.

If you are doing 12,000 miles per year and getting 30 miles per gallon from your car you will therefore use 150 litres of fuel per month. At current prices that will cost you €255. Of that, the garage will make somewhere in the region of €6 in profit. The wholesaler about €12. The Irish government will take a whopping €139.

We are being ripped off, no doubt that the conspiracy theorists are right about that. But it is our government, not our local retailers, that is doing the ripping.


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