People assume that because petrol is so expensive, there's plenty of room for manoeuvre in the price. Not so. The vast majority of the cost (around 80%) is tax which goes straight to Gordon Brown. In fact, there is very little profit in petrol. Ask any petrol station manager, and they'll tell you that they make more profit from selling a Mars Bar than they do on a full tank of petrol.cwathen wrote:Now this is what I don't understand with fuel prices. With every other consumer product, there is a lot of competition amongst the biggest providers to offer their product cheaper than anywhere else, so that more people buy it, so that the store can then buy in greater bulk for cheaper prices, thus benefitting the consumer and the company. Large supermarkets even take this concept to the extreme of selling things at a loss in order to get the punters in - because they will easily be able to recoup that cost with the higher volumes of product they will buy in next time.
Surely, with the price of petrol being a constant complaint, it would seem obvious for Tesco/Sainsburys/Safeways/whatever to start undercutting everyone else for fuel, not as part of a loyalty scheme, not by some paltry 1 or 2 pence figure, but by a meaningful amount, like 10p per litre, or more. If everyone else is flogging fuel for 80p but Tescos are pricing theirs at 65, then everyone will go to Tescos, who would then be able to negotiate a better deal on their fuel and end up making a bigger profit on it than anyone else.
But for some reason, no one seems to want to compete when it comes to petrol prices.
Ironically, it's the phenomenal level of fuel tax in Britain that has caused there to be such little variation in price. As the consumer becomes more and more price conscious, the retailer has to strip away their profit right down to the bone in order to compete effectively. So every fuel retailer is selling their petrol almost at cost price, with 95% of their profits coming from other purchases made inside the shop. That's why garages in Britain refuse to install "Pay at the pump" technology where you swipe your credit card (America's had it for years) - it's because they're completely dependent on people coming in the shop and buying crisps and chocolates on impulse.
By today's prices, a garage selling unleaded for 75.9/76.9 is almost selling at cost price. And the ones we consider to be a "rip off" at around 78.9 are in fact making a very small profit of a couple of pence per litre for themselves. You could argue that they're entitled to make this small profit just like someone selling milk or bread.
No petrol retailer (even the big supermarkets) could possibly afford to knock 10p a litre off, as they'd be making a big loss. And there'd be queues for about 2 miles down the road.
Just remember - the actual cost of petrol is about 15p per litre. The rest is all tax. Blame the government. And every time you see the price go up (or down) by a penny per litre, it's worth bearing in mind that the retailer is putting the actual price up or down by only 0.2 pence per litre, because it's taxed as a percentage of the original price (approx. 400% - yes four hundred percent - when you include the VAT on top of the fuel duty).
