Predatory pricing of petrol Essay

Supermarket price wars are putting Britain’s small petrol stations out of business at the rate of one a day. Sainsbury’s, Tesco, Asda and Morrisons have this year embarked on a war to attract hard-hit consumers and the price of fuel has been central to their campaign. Morrisons is offering loyalty points on its new fuel card while Asda has launched a price comparison app for mobile phones to convince shoppers it has the cheapest fuel. Both Sainsbury’s and Tesco have offered money-off vouchers for petrol customers.

The Retail Motor Industry Federation (RMI), a trade association representing the interests of 6 000 small petrol stations, is hoping the OFT inquiry will support its members, who believe that unfair and predatory pricing by the supermarkets and some major oil companies is making it impossible for them to compete. There are now about 8 000 small petrol retailers compared with 21 000 two decades ago and 40 000 in 1966. It predicts that in five years there will be very few independent petrol retailers left.

The OFT inquiry comes at a time when the supermarkets have proved particularly effective at building up a huge stake in the petrol market. With the recession dragging on, households are keen to save even one or two pence a litre, particularly those families whose livelihoods depend on the use of a car. Between June 2007 and June 2012 – a period that saw considerable crude oil price volatility – the price of petrol rose by 38% while diesel rose by 45%.

In 2011, supermarkets accounted for 45% of total fuel sales from just 1 316 sites compared with 37.4 % in 2010. The OFT said the fuel market for Britain’s 33 million motorists is worth around £32 billion a year, and accounts for 5p in every £1 of household expenditure. But many have also blamed the Government and increases in fuel tax for soaring petrol prices. It takes 60% of the price of every litre of petrol in tax – the highest rate in Europe.

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