Why do BP always increase petrol prices first?

By Steve Biddle, in , posted: 18-Jul-2006 08:46

Hardly a geek topic today but I'm sure I'm not the only person out there who has observed the small fact that virtually every petrol price increase in the past 12 months has been lead by BP? How can a company have such a brain dead marketing policy that has now created this perception in the market place? Shell have very carefully positioned themselves as the exact opposite who have lead the way in reductions.

Don't get me wrong - I know petrol (probably) has to increase in price. This doesn't hide the fact however that out of out four main fuel companies BP is continually the first to increase prices. I'd suggest everybody boycott BP or at least make sure you make their staff very aware that you strongly dislike their current pricing strategy.

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Comment by freitasm, on 18-Jul-2006 10:25

It also strikes me that they all raise at very close time, to the same price. It's strange, because they have different company organisation, number of employees, distribution, sourcing, therefore different cost structure - but the prices are always the same.

Author's note by sbiddle, on 18-Jul-2006 12:41

They have the biggest price fixing cartel in NZ and nobody does anything about it! :-) But seriously a lot of the blame has to be placed in the hands on NZ customers. Unlike Australia where people will move between stations to save a few cents people in NZ seem very oblivious to the differences between the chains or minor pricing variations. I became quite interested in this a few months ago helping a mate with his marketing papers and it's interesting to observe places like VIC Cnr in Lower Hutt where there is now a BP, Caltex, Shell and Pak 'N Save all next to each other. Despite Shell & Caltex running a 6c off promo on a Saturday afternoon and BP not following suit the BP was still very busy and had no shortage of people filling up. This same scenario in Australia would result in absolutely nobody going to the most expensive station because people are used to shopping around. The same thing happens here with staff - why do people go to self serve stations like Mobil when you can pay the same price at somewhere like Caltex and they will fill your car for you? There are obviously very significant differences in the cost structures on these companies yet they maintain the same price because there is simple no incentive for them to drop prices by say 1c for a self service station because despite what market research says the simple reality is that people will not change stations. The pricing issue in NZ is also related to the fact the main 4 companies own shares in the only refinery. This results in them being essentially being allocated a % of petrol based upon their market share, any significant increases over this results in them having to purchase fuel from overseas which generally costs more than from NZ. This is the main reason why supermarket fuel schemes in NZ have not occured on a large scale like Australia, because none of the four companies want to risk being exposed to significant increases in fuel costs that would occur for probably 1-2 years even though it would result in an increase in market share. The whole pricing issue

Comment by NokiaRocks, on 18-Jul-2006 16:39

Petrol Companies should have 2 week price locks, that way if a petrol company rises their price and the other companies dont follow suit then they're screwed for 2 weeks.

Author's note by sbiddle, on 18-Jul-2006 17:03

BP actually increased their prices more than 6c yesterday and dropped theirs back after competitors only had a 6c increase.

Comment by Krisby, on 26-Oct-2006 15:12

Where I work in Tauranga I can see BP and Mobil out of my office, and my obvservations are that Mobil are always first to increase their prices. Even recently they tried putting it up and I expected BP to follow as they often do a few hours later, but they did not and subsequently Mobil dropped their price that evening. It is true though that so many people don't look for the cheapest, when Mobil put their prices up last month it was still just as busy as BP. However on the few times when Shell were offering their "5c until 7pm" specials during the winter the queues were out on the road. I am more a loyalty customer anyway, Shell have Flybuys but my 850 Turbo likes the fuel too. Caltex fuel seems to disagree with my car, and because of BP and Mobil's greediness I prefer not to buy from them, except for gas bottles as they are closest to home. I like the idea of the price lock

Comment by Nzder2007, on 12-May-2008 15:52

There is no price fixing cartel... it is simply barometric price leadership... http://www.competition-commission.org.uk/rep_pub/reports/2000/fulltext/446a7.9.pdf

Comment by justinprouse, on 13-May-2008 08:49

Nzder2007 is correct, there is no collusion in the New Zealand petrol market. As has already been said BP is always first to rise prices, if there was a price fixing cartel all the prices would rise simultaneously. Petrol is an inelastic product, this means when the price of it increases the petrol stations revenue increases (The can maintain the some customer base with price hikes)as it is a necessity, simply BP is the leader in price rises why should we boycott them? If BP don't increase their prices just another petrol station would. I really don't like the idea of a price lock simply because it involves even MORE government intervention in the petrol industry and as we all know government intervention is terribly inefficient, and also what if the costs of petrol rise significantly within the two weeks? that would single handedly destroy New Zealand's economy with all the major petrol stations going bankrupt.

Comment by julio, on 27-May-2008 17:24

I think some people here need to go back to high school and study economics. Then you would learn all about oligopolies and kinked demand curves. Do a search on it but it basically means that all members in the market will have the same price.

Comment by Gav, on 9-Mar-2010 21:53

It's easy to think that BP lead the price hikes with stuff like this: 9th March 2010: BP led today's price hike, by raising the prices of all fuels including diesel by 5 cents per litre this morning, making it currently 182.9 NZ cents/litre for Regular 91, and 115.9 cents/litre for Diesel. The rest is here: http://www.gavinshoebridge.com/electric-cars/new-zealand-fuel-price-increases-5c-per-litre-again/

Comment by Phil Blackwood, on 21-Mar-2011 20:32

What people fail to realize is that BP don't need to compete on petrol price point as they offer much better in store goods and services than other outlets.

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Steve Biddle
New Zealand

I'm an engineer who loves building solutions to solve problems.

I also love sharing my views and analysis of the tech world on this blog, along with the odd story about aviation and the travel industry.

My interests and skillset include:

*VoIP (Voice over IP). I work with various brands of hardware and PBX's on a daily basis
  -Asterisk (incl PiaF, FreePBX, Elastix)

  -xDSL deployments

*Structured cabling
  -Home/office cabling
  -Phone & Data

*Computer networking
  -Mikrotik hardware
  -WAN/LAN solutions

*Wireless solutions
  -Motel/Hotel hotspot deployments
  -Outdoor wireless deployments, both small and large scale
  -Temporary wireless deployments
*CCTV solutions
  -Analogue and IP

I'm an #avgeek who loves to travel the world (preferably in seat 1A) and stay in nice hotels.

+My views do no represent my employer. I'm sure they'll be happy to give their own if you ask them.

You can contact me here or by email at stevenbiddle@gmail.com