Why we have petrol price cycles and how to avoid getting stung

Huge fluctuations in petrol prices – up to 50c a litre in some cities – has motorists fuming. This is what causes these weekly or fortnightly games of finding cheaper fuel.

Few things frustrate motorists more than being caught on the wrong side of a petrol price cycle.

Filling up your tank is expensive enough these days, so when you find you could have bought your fuel 50c cheaper just a day earlier, swear words will be uttered.

Price cycles are common in most capitals and in Adelaide they’ve recently swung between $1.25 and $1.75 a litre.

For an average family car, that’s about $30 extra a tank – ouch!

And there’s one big question that nobody has a clear answer for: Why do we have fuel cycles at all?

They’ve been around for years and consumer watchdog the ACCC says they are “the result of deliberate pricing policies of petrol retailers, and are not directly related to changes in wholesale costs”.

Petrol retailers say cycles don’t maximise profits because at the low point of the cycle petrol is sold at a loss. So, they argue, why would anyone deliberately make a loss if they’re trying to boost profits?

Retailers say the cycle reflects intense competition between petrol stations, which keep undercutting each other until their price becomes unstainable.

This helps explain why the big petrol chains are often the first to lift prices during the cycle – because they’re making bigger losses by selling bigger amounts of cheap petrol.

Their argument hasn’t impressed the ACCC, which says cycles infuriate drivers who see no reason for them to exist.

Motoring groups say petrol cycles are a “market disruption tool that the oil industry is wedded to”, with fuel discounts used to draw in customers to spend money on other stuff.

Whatever you think about these cycles, there are ways to make sure you don’t get stung badly by the big spikes that suddenly pump prices into the stratosphere.

It starts with keeping a close eye on petrol prices in your area. There are several apps and websites that can help with this including the accc.gov.au that shows graphs of the current cycle – although it may be a day or two out of date.

When you start to see one or two petrol stations push prices up to peak pain levels, quickly check online for retailers yet to rise, because they don’t all climb simultaneously.

But don’t wait a day or two to act because you might miss the boat.

If you do get stuck at the high point, don’t fill your tank up through gritted teeth. Instead pump in $10 or so because prices will start heading back down within days. Then try to time it better next time.

A decade ago petrol price cycles were much more predictable, with cheap days each week. Now that the cycles can stretch for three or four weeks between peaks, you have to keep a closer eye on them.

And unless you use very little petrol each week, this longer cycle means you’re unlikely to always be able to buy it at the bottom. Just make sure you don’t always buy it at the top.


Extracted from News.com.au

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