Recently a BP pricing manager wrote an email recommending that BP raise its prices across the Kapiti-Horowhenua region in order to combat flagging sales and convince their competitors to follow suit. This is just across the road from my motel, so how can I desist from writing about it.
In Otaki we live on the edge of a very strange competitive construct, in fuel terms, because of the low cost, unmanned petrol stations that we see just up the road in Levin.
Once you look into the nuance of the situation behind the leaked email, you can understand how it came about, and also begin to understand that despite the strong reaction from individuals and from government, regulation of the whole sector on the back of this email would cause a lot of problems down the line.
I’ve written about the Levin petrol price conundrum before. The gist of it is that the fuel cost of travelling the extra kilometres to Levin to fuel up is actually greater than the savings you achieve at the pump (not to mention time cost, carbon emissions, etc), so now I no longer bother. But nevertheless, this doesn’t stop a whole road full of traffic travelling all the way up and back again in order to score cheaper fuel. It also leads to, potentially, a lot of Otaki petrol business being siphoned off (dreadful yet irresistible pun) by the cheaper stations up in Levin.
The problem is being stoked by the fact that in Levin there exist two (generally) unmanned, low cost petrol stations.
The problem is not a problem of fuel price manipulation. It is a problem of automation. The Allied Petroleum station in Levin is cheaper because it is automated. This means no gas station attendants. The incidence of automated fuel dispensaries is the reason for higher price competition and lower costs in Levin.
If I can paint the picture better for you: a brand that is allied to employing staff at its station is at war with two cut price brands without such overheads. The problem that drives the price manipulation is the higher costs that BP faces by employing people. This is, I am sorry to say, the sort of conflict that will come up more regularly in the next 20-30 years.
Enacting legislation on the back of a leaked business email, as the Government seems poised to do, would not only be a bad idea because it manipulates and restricts a free-flowing, albeit oligopolistic market: but because it will force petrol stations across the country into further automation at the cost of jobs.
That’s my two cents anyway. I know that this is a deeply divisive and political issue, and one I wade into at the risk of making a few enemies. I just couldn’t help, since it was across the road.
