Why 24 hours?

As regular readers know, I am for the information provision that FuelWatch is going to provide. But what of the requirement that petrol stations fix their prices for 24 hours? Where did that notion come from?

It appears that it was because it was done in Western Australia and we have been able to evaluate the impact that scheme. That is a reason but is it good enough? After all, the WA scheme can be improved upon. Moreover, there is a good theoretical reason why 24 hours is a long time: petrol stations like to change their prices over the course of the day. In addition, by adhering to 24 hours, we can’t do things like asking retailers to fix prices but for decreases as they would all end up nominating a high price and not, in effect, fixing anything.

What if we required prices to not increase for an hour? Whenever the station changed its price it would send it in to the authority who would post it. Other than that if the minute handed passed 12, it would be presumed that the current price could not be increased for the next hour. This would make enforcement possible but also allow for intra-day prices changes. Put simply, I think the government needs to do better than simply replicating the WA scheme.

10 thoughts on “Why 24 hours?”

  1. Why not take your suggestion the next step. Let petrol stations nominate when they will next evaluate the price they are charging and when it will next either go down or up. That gives more flexibility to the sellers who can try out different strategies while still ensuring that motorists don’t get a rude shock when they arrive to buy petrol.

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  2. Isn’t the idea that people can check the price online and use that to guide their shopping? Short of us all getting iPhones, constantly updating would make it significantly more difficult to shop on the basis of price for those who spend the day on the road.

    Of course, this might be a good argument for getting an iPhone…

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  3. “petrol stations like to change their prices over the course of the day.”

    Just because they do does not mean that they like it. Even if they did like it, for whom is the benefit? All it achieves is to irritate customers.

    No other commodity has such frequent retail price fluctuations, not even the local commodity brands of beer. Their prices change only on a weekly cycle at most and are well advertised when they do.

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  4. When I cycle to the local shopping centre I shortcut through a service station. Often I’ll go at 3pm or so, and about 60% of the pumps are occupied. When I return at 5pm, all pumps are occupied, there is a line up of cars, and this line up is snaking out onto the road and contributing to the congestion already there.

    Surely this represents an ideal situation for price discrimination. Cinemas and public transport provide intertemporal price variations to avoid this, why would petrol be different except for public complaints, especially since this kind of change would be very regular (since peak hour doesn’t move around).

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  5. Hey Joshua:

    I presume you also have a problem with them shifting the price down and limiting when they can, or does it work only one way.

    Oh I get it, we have to be careful when they shift down prices in case the operators are practicing unfair competition.

    Why don’t we nationalize petrol stations and be don’t with it instead of this useless tinkering you and others are suggesting that wastes time and simply distorts the market and will end up costing the consumer more.

    Why don’t you propose to take a look and check the profits of the operators and see if they are making more than they were when the price was a lot lower. I bet they weren’t, so this silly suggestion is nonsense.

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  6. ARC, read the post again. I proposed an hourly cap.

    I did, Joshua. That’s why I called it tinkering.

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  7. Let’s get a few things straight. First, the idea is to come up with a system that anticipates technology and is not wedded to the fact that not everyone is on-line all of the time. You can’t impose rules on petrol stations arbitrarily.

    Second, for information provision, our only real requirement should be honest reporting of real time pricing. That said, having some windows upon which you can rely on prices being available is not a bad idea. I suggest an hour rather than 24 hours is all that is needed.

    Finally, as it is for consumers, we shouldn’t care about price decreases. However, with 24 hour windows allowing downward flexibility would make all this a mute point. But with an hour it is workable so why not allow it?

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  8. You can’t impose rules on petrol stations arbitrarily.

    Not only are these rules arbitrary, but they also seem capricious

    But with an hour it is workable so why not allow it?

    But why even have such a system? Why force people to look at their watch to see when they can set prices.

    This seems like a really dumb idea.

    Should the local fish&chip shop also work prices on an hourly basis? Why not? Should the entire economy be on an hourly price surveillance system? Why not?

    Furthermore, you still haven’t answered my other point. If you (and other left leaning economists) think Petrol stations are making too much money why don’t you simply take a look at their financial results? One tell tail sign they are making oodles of cash is if stations are selling at high multiples. A quick look in the classifieds ” business for sale” would fast prove the point. I would guess his isn’t so.

    It would also prove that this is arbitrary and capricious action.

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