Retail petrol and diesel is a perfect market with vibrant competition

There are few more perfect markets than that for petrol and diesel – at least in urban areas. The pump price is market driven with retailers constantly monitoring competitive prices in a trading area and responding to changes. Petrol stations which increase prices above their area’s norms lose business and those which reduce prices gain it – its as simple as that.

Petrol stations visibly display prices on roadside signage helping the motorist to make a choice. If you don’t like one site’s price you can find another. There are no restraints on fuel prices other than those of the market. Fuel is a commodity with little or no product differentiation. Convenience plays a part in choice as does service and the presence, or not, of shops and convenience stores. But it’s primarily a price driven market.

There is often a time lag between falls or rises in wholesale prices and pump prices but it isn’t for long as market forces cut in. Where competition is weaker, in rural areas or on motorways, prices are higher. But in towns and cities the market and competition generally works well.

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