Tánaiste publishes NCA Report into Petrol and Diesel Price Movements

Report finds price movements are passed through to consumers quickly

The Tánaiste and Minister for Enterprise, Trade and Employment, Ms. Mary Coughlan, T.D., today (Friday, 19 December 2008) published the National Consumer Agency’s report following its investigation into petrol and diesel price movements.

The Tánaiste had asked the NCA to undertake the investigation following her concern in the autumn that reported pump prices for petrol and diesel were not falling in line with the drop in the wholesale price of oil.

The Tánaiste welcomed the NCA’s overall finding that, at national level, price changes for refined petroleum products are being passed on to consumers in a relatively timely fashion. “The conclusions of the NCA’s work on petrol and diesel price movements may come as a surprise to many, but I welcome the fact that they demonstrate that, at a national level, we have a healthy and competitive market at the pumps. Changes in the price of wholesale oil are passed through to consumers in a relatively timely fashion and it is clear from the report that consumers themselves drive down prices by seeking out the best price per litre.”

The Tánaiste noted that the NCA had identified a range of gaps in the manner in which information on retail petrol and diesel prices are collected and publicised.

The Tánaiste, in commenting on this information gap, stated: “It is my strong view that for price competition to be effective, the consumer must be fully informed. It is clear from the report that we need to reform the way in which we collate and publish information on the retail price for fuel paid by consumers. The time lag between price collation and publication results in the publication of stale data and this is particularly evident where there are significant fluctuations in crude oil prices such as has been the case in recent months”.

The Tánaiste concluded saying that it was her intention to work in conjunction with her colleague, the Minister for Communications, Energy and Natural Resources, Mr Eamon Ryan, T.D., and the National Consumer Agency to see how best the information gap identified by the NCA could be addressed.

The report can be accessed at the following link:

NCA Petrol and Diesel Price Investigation

ENDS/ETE1992

Notes for Editors:

Based on the key findings of the research, the report concludes that:

• There is little evidence to suggest unwarranted delays in the passing on of wholesale price changes to the consumer at the pump.
• Direct comparison between fluctuations in crude oil prices and petrol and diesel pump prices is inappropriate and does not reflect the reality of the petrol and diesel supply chain. To more accurately assess flow through of price changes in refined oil products (such as petrol and diesel) to the consumer, it is necessary to compare fluctuations in Platts prices, these being the prices for refinedoil products such as petrol and diesel paid by wholesalers, and prices at the forecourt pump.
• Platts prices and wholesale prices should differ by a margin comprising the impact of exchange rates, taxes, transportation and associated costs. The subsequent difference between wholesale and pump prices is typically dictated by the purchasing power of the end retailer (discounts accrue based on volumes purchased, membership of a “branded” chain etc.) and an allowance for the retailer’s margin.
• Analyses of these fluctuations over the time period of this study suggest a strong correlation between Platts prices and wholesale price fluctuations and the price of diesel and petrol at the pump (allowing for changes in the euro/ dollar exchange rates).
• A large proportion of the pump price of fuel in this country comprises taxes and duties. The manner of their calculation can depress overall pump cost savings to consumers, notwithstanding drops in the underlying cost of the refined fuel product.
• Overall, Ireland’s service station/retail petrol and diesel supply market would appear to be competitive by international standards. The density of outlets per capita (1 outlet per 2,020 people) in Ireland compares favourably against corresponding statistics for Northern Ireland (1 outlet per 3,113 inhabitants) and for Great Britain (1 outlet per 9,539 inhabitants). Data is required at the local level to make a definitive statement in this regard.
• Examination of the accounts of the larger oil companies in Ireland suggest there is relatively modest profit to be made in the downstream supply of refined oil products. Further along the supply chain, statistics measuring the numbers of service stations and fuel outlets in the country point to sustained shrinkage year on year, which would further suggest this is not a highly profitable area in which to operate, at least at the level of fuel supply only. Increasingly, fuel retailers are adding retail outlets to their offerings, thereby enhancing revenue and margin opportunities.
• A review of international studies on the same issue in the USA, Austria and Portugal reached broadly similar conclusions, identifying closely aligned movements in Platts prices and petrol and diesel pump prices.
• Absolute fuel price competitiveness in Ireland would appear to be most significantly influenced by the effects of local competition. Areas with larger numbers of fuel retail outlets typically enjoy strong price competition, with the converse applying in sparsely serviced areas.
• A number of gaps exist in the manner in which information on petrol and diesel prices in Ireland is collected, analysed and made available. There is clearly scope for enhancement in analysis and reporting, and improvements in this area could serve to better inform consumers of general trends in petrol and diesel prices and to place a sustained spotlight on the competitive environment in this important sector.