Petrol (Hansard, 18 February 1976)

Mr. Alan Williams

I am very disturbed at the way in which information about petrol prices is being displayed at many garages. At the worst much of it is confusing, and many signs are ambiguous I should like the petrol retail outlets to adopt a practice of displaying in a way clearly visible to the approaching motorist the price which he will pay when the petrol is in his tank.

I have raised this question with the Director General of Fair Trading. He has now arranged for his office to have a meeting tomorrow with retailers' organisations and the major oil companies to examine the problem. This will give the industry a chance to put its own house in order. I hope that the deficiencies to which I have referred will be remedied as a result. If not I shall have to consider other possibilities including the use of legislation.

I have also been considering with colleagues in the Departments of Energy and Industry other matters relating to petrol prices about which concern has been expressed. The first is the contention that there is discrimination against certain dealers who do not receive from their suppliers the price reductions available to others. In the discussions with officials of my Department, and the Departments of Energy and Industry, the oil companies said that they stepped in with price reductions where, as a result of reduced demand and intensive competition among local retailers, one of their outlets was in difficulties. They did not reduce the wholesale price where demand and throughput were holding up reasonably well. There is clearly a question of public interest here and spokesmen for retailers asked for an investigation by the Monopolies and Mergers Commission. They have now welcomed the reference which the Director General of Fair Trading announced on 2nd February.

It has also been alleged that price competition is driving some petrol retailers out of business. Inquiries made by officials 693W suggest the rate of closures in 1975 was broadly in line with the rate of previous years.

Throughout the industry there is no dispute with the conclusion reached by the Price Commission in its report last year on motor fuel retailers' margins, which was that today's circumstances demand a smaller distributive network, concentrated into larger units. Subject to what I have said about the reference to the Monopolies and Mergers Commission, my colleagues and I see in the present situation no justification for us to take steps to preserve petrol outlets which motorists show by their buying habits they do not want to use.

Concern has been expressed about petrol stations in rural or outlying areas. The signs are, however, that petrol stations in outlying areas are not made vulnerable by being away from a main population centre. The Price Commission found that rural retailers achieved a higher net margin than suburban and city centre retailers, and that rural retailers had significantly lower operating costs.

Another complaint is that substantial price reductions are localised and are not available to all motorists equally—for example, to some motorists in the South-East. Part of the reason for this is that certain types of petrol outlets, such as hypermarkets and chains of independent dealers with an established "cut-price" policy, are rarer in the South than elsewhere.

If the oil companies had applied a general reduction in the wholesale price, the effect, given local differences in the effective pressure of demand and in the pressure of competition, would have been to establish a marginally lower price level from which price-cutting would have begun again. I note also that while price cutting typically and historically begins in the Midlands and the North, it then tends to ripple out. At least two of the major oil companies, as well as others, are now reducing wholesale prices at outlets in many parts of the country. There are, of course, unlikely to be the same reductions where either demand remains relatively strong, or local competition is less marked, and dealers prefer to sell at full price and margin.

It has been suggested that the Government should establish a minimum price in order to protect retailers, or a maximum 694W price to provide more uniformity among outlets, or both. In so far as any of these would dampen down price competition my colleagues and I consider that no further price regulation is required beyond the provisions of the Price Code. When I met the Motor Agents' Association and the Petrol Retailers' Association on 4th February it was clear that there was no agreement between their views about the need for further Government action. However, the body representing the larger number of retailers said that they would not welcome Government intervention to determine maximum or minimum prices.

I have put in the Library copies of a summary of the report prepared by officials of the three Departments concerned following their discussions with oil companies and retailers.