Friday, October 07, 2011

Petrol cartel again

Despite the number of times I and others explain it the price of petrol keeps reappearing in the Letters pages of the Shuttle. So let's try one of the argument again.

Let's assume there is little to no new market in petrol sales. Sure there are those who have just learned to drive, but they're flightly; nice to have but can't be depended on quite yet. Unlike other markets there are few stating "Well I'd buy petrol if only it were a bit cheaper" or "I was planning a long car trip, but what with the price of petrol I won't". As such the core market is relatively static.

With that in mind consider a hypothetical petrol station selling at 135.9p/litre. As we know VAT is 20% and fuel duty is 57.95p/litre the station is getting 55.3p/litre. To make life simple let's consider all of that as profit.

This station sells 2,000 litres of petrol a day and thus makes a profit of £1,106. However a competitor sets up shop and starts selling at 130.9p/litre. The next day our first station realises they're losing 250litres worth of sales per day thus 'only' making £967.75.

Simplistic competition dictates that our first station should lower their prices to match. However customers can be fickle things and in this case doing so would only lure back half the litres lost.

Selling 1750 litres at 135.9p makes a profit of £967.75.
Selling 1875 litres at 130.9p makes a profit of £958.75.

Provided there are no more losses the first station makes more money by keeping the price at the same level and not matching the competition.

1 comments:

Tony Robbins said...

A pressure washer is a machine that washes water at a high pressure to rid objects like buildings, vehicles and concrete road surfaces from mold, grime, dust, dirt and mud. The pressure washer equipment can either be bought or rented from outside. This equipment produces pressures ranging from 50 bars (750psi) to 1200 bars (30,000 psi). Hyundai HYW3600GB Gear Drive Petrol Pressure Washer, having 3600psi, features the Hyundai HY390 4-stroke OHV Petrol engine, coupled to the Gear drive Triplex pump, with brass head and ceramic pistons for long life. This is a heavy duty high pressure washer designed for a serious work load.

Petrol pressure washer