How Petrol Pricing Works In Australia
Price, is amount of money asked for by a supplier from a customer, or the amount of money paid by a customer to a supplier for a product or service.
Pricing, is the process a supplier uses to set the price of a product or service for sale to a consumer.
When a supplier is deciding to set the price of a product or service they consider the “price point” — that is, the possible/hypothetical “points” of price on a graph they could sell a product or service for.
Prices could be:
· Fixed; or
· Changing (Also called Dynamic Price).
Those fixed or changing prices could be based on:
1. The raw cost of materials for the supplier;
2. The desired margin or profit for the supplier;
3. The market conditions/demand for the product or service by consumers; or
4. Through many other pricing strategies…
Petrol stations in Australia sell petrol on a dynamic pricing basis, and according to the Australian Competition and Consumer Commission petrol prices are based on “deliberate policies of petrol retailers, and are not directly related to changes in wholesale costs.”
I will not speculate as to what those policies of petrol retailers are, but the fact remains, that in Australia petrol prices occur in cycles — that is prices go from a high price point to a low price point and repeat.
This is referred to as the “Australian petrol price cycle”.
And the price at any given day in Australian petrol price cycle (the peak price to low price) is measured as an average for an entire state/region.
There are more than 8,000 petrol stations in Australia.
So, for example, in a hypothetical 14-day petrol price cycle in a single state/region the daily average of all those petrol stations could be as follows:
· Day 1: $1.47 per litre;
· Day 2: $1.45 per litre;
· Day 3: $1.44 per litre;
· Day 4: $1.41 per litre;
· Day 5: $1.39 per litre;
· Day 6: $1.38 per litre;
· Day 7: $1.35 per litre;
· Day 8: $1.29 per litre;
· Day 9: $1.23 per litre;
· Day 10: $1.21 per litre;
· Day 11: $1.22 per litre;
· Day 12: $1.25 per litre;
· Day 13: $1.45 per litre; and
· Day 14: $1.45 per litre.
This example is similar to what is reflected in several free “comparison” petrol price apps provided by government and commercial providers such Petrol Spy and so on.
This hypothetical 14-day petrol price cycle has a peak average state/region price and low state/region average price.
The peak is Day 1 at an average of $1.47 per litre and the low is Day 10 at an average of $1.21 per litre.
Although possible, petrol prices in Australia are never 2 days — that is a peak day, followed by a low day, followed by a peak day and so on — petrol prices in Australia incrementally decrease and increase in price over several days.
There are 3 ways to save money at the petrol bowser as a consumer:
1. Purchasing the cheapest petrol on any given day;
2. Purchasing the at the low of the petrol cycle; and
3. A combination of both
Way #1 To Save At The Bowser — Purchasing The Cheapest Petrol On Any Given Day
Now, even though each of the 14 days described above have an average price which is made up of all of those petrol stations in that state/region, there is still fluctuation and discrepancy in prices between individual petrol stations each day, that being a daily peak maximum price and a daily minimum price.
For example, on Day 1 the average petrol price is $1.47 per litre, however:
· Retailer A could be selling it for $1.47 per litre;
· Retailer B could be selling it for $1.45 per litre; and
· Retailer C could be selling it for $1.50 per litre.
The average of $1.47, $1.45, $1.50 is $1.47 per litre.
If consumer purchased petrol from the cheapest retailer on any given day, then they could potentially save the difference between the maximum price for the day and the minimum price for the day.
In the previous example of Retailer A, Retailer B and Retailer C, the maximum saving that is possible if the consumer shopped around for petrol, $0.05 cents per litre ($1.50 — $1.45 = $0.05 cents per litre).
Way #2 To Save At The Bowser — Purchasing The At The Low Of The Petrol Cycle
If the consumer purchased on the day of the low of the petrol price cycle, then they could potentially save the difference between the average price of the peak day of the cycle ($1.47), Day 1 and the average price of the low day of the cycle, Day 10 ($1.21).
In the case, buying petrol on the low day of the cycle is saving is $0.26 cents per litre ($1.47 — $1.21 = $0.26 cents per litre).
Obviously buying at the low ($0.26 cents per litre) is a greater savings than buying at the minimum price on the day ($0.05 cents per litre).
Way #3 To Save At The Bowser — Purchasing The Cheapest Petrol On A Day & Purchasing The At The Low Of The Petrol Cycle
Now, as I explained previously the price at peak and low is measured as an average in a state/region.
This means that at the low in the cycle there could be petrol stations selling lower than the daily average and at the peak of the cycle there could be petrol stations selling higher than the daily average.
In the attachment, this is the case.
On the peak, Day 1, Retailer C is selling petrol at $1.50 per litre — $0.03 cents per litre above the daily average ($1.47 per litre).
And on the low, Day 10, Retailer A is selling petrol at $1.20 per litre — $0.01 cents per litre below the daily average ($1.21 per litre).
Mathematically speaking, the most a consumer can save on petrol purchases is 1) at the petrol station with the cheapest price for a that day and 2) at the low of the petrol price cycle of the state/region.
And in our examples, that would be from Retailer A on Day 10 ($1.20), because the average price jumps back up to $1.47 per litre on Day 14.
In the case buying at the low AND from the cheapest retailer the consumer has potentially saved a minimum of $0.30 per litre ($1.50 — $1.20 = $0.30).
Obviously saving $0.30 per litre is better than $0.26 cents per litre and is much better than $0.05.
Way #3 is the way a consumer can maximum savings at the bower.
Currently there is real time petrol pricing for consumers via apps like Petrol Spy.
This is an absolute boon for consumers as outlined in Way #1.
But knowing when the next potential petrol price cycle low (Way #2 and Way #3) is in an Australian capital city region/state is the ultimate pot-of-gold for consumers.
Petrol Price Predictor™ is the FIRST and ONLY product on the market to forecast the dates of the next predicted petrol price lows in major Australian capital city regions.
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