|
Hello again from the team at MotorMouth.
Well this month has been absolutely fascinating, with the weekly petrol price cycle crashing simultaneously across Brisbane, Sydney, Melbourne and Adelaide for the last couple of weeks.
Before we delve into this it’s worth revisiting why the price cycle exists in the first place. Essentially, what happens is that first you need a homogeneous product. A homogeneous product is one that regardless of the label or brand, consumers think that it’s all the same. Petrol is one product like this.
Because consumers think that all petrol is the same, the only way that retailers can get more sales is to reduce the price. Which everyone does, and the price comes down over the course of a week. When it gets to the bottom of the cycle, some retailers are selling their petrol at near or below cost. What will happen is that one or more retailers will say to themselves “That’s it, I’m out of here. I can’t afford to sell my fuel below cost so I am going to have to put my price up”. The theory is that once someone blinks, the rest of the retailers in the market say “Thank goodness for that – I’m about to start losing money too. I’m going to put my price up as well". Everyone follows and the price goes to the top, where the discounting starts all over again.
What we’ve seen happen over the last few weeks is very interesting because what’s happened is that one or more of the major retailers have said “Nah, I’m not going to put my price up this week, I need a few more sales and a bit more market share. I’m going to hold my price low”. This causes a bit of a panic because everyone who put their price up now has to adjust it downwards very quickly to be competitive. And everyone follows suit, and the price cycle crashes.
This means that while retailers are jockeying to see who is going to raise prices or hold steady there are a huge range of prices available in the market at any one time and more than ever, motorists can shop around and save real money by using MotorMouth.
And this ties in nicely with a survey that we completed recently about fuel purchases and the weekly price cycle. We found three very interesting and pertinent things.
- 60% of service station fuel sales (or thereabouts) occur on the three cheapest days of the week and the remaining 40% occur on the remaining four days.
- Across all age ranges and consumer profiles, motorists are aware of the cheap days and are lining the forecourts.
- On Wednesdays, more than 75% of purchases are to fill-up rather than top-up; on Fridays the ratio is almost equally split between fill-up and top-up.
What this means is that:
- Cost conscious (and in our opinion, clever) motorists take advantage of the low points of the price cycle.
- People fill up when it’s cheap and top up when it’s not.
- If the price cycle ceased to exist there would be a tangible benefit withdrawn from the public.
The upshot of all this is that while the price cycle might seem a tad strange, the Australian public seem to be smart enough to take advantage of it without too much trouble.
Take care and safe motoring,
Cheers
Sean Rennick
MotorMouth
If you have any suggestions then please send your feedback to
feedback motormouth.com.au
|
