The other day, I speculated that we could do better than the WA model in making petrol pricing information more available. But that led me to wonder: if the communications technology was ideal (as it pretty well is or at least will be within a year or two), what would be the ideal system for consumers?
Well here it is: a driver is setting out or driving around and wants to find the best petrol price. They send a request (from a computer or mobile phone) to the FuelWatch website that gives their location, their destination, the degree to which they will deviate from an optimal route and the time frame upon which they would like price offers (this last bit, I’ll explain in a moment). Then, the site would give them a series of prices and locations that will be fixed (capped) for the time frame they have nominated. The driver, then chooses a petrol station and can make a purchase at that price.
So what does this require of the petrol stations? First, they have to upload their prices. They have to be contingent prices based on the time frame a driver might want them fixed for. So a station could offer a 149 cent per litre offer if the driver wants it fixed for 30 minutes but possibly a different price if they want it fixed for some other length of time. There is no reason why the price offers should not be for arbitrary lengths of time up to 24 hours. Beyond this and we have an issue associated with consumers gaming the system (you know, asking for a week long commitment, but never exercising it).
Second, they could change these price offers at any time. However, this means that if they raise their prices they still have to honor offers made to consumers for fixed periods that cover this.
The end result of this would be to dramatically reduce the cost of searching for the best deal but if you chose not to search, it could well be that you end up paying more. So be it. Nonetheless, I suspect that this would be enough to end and not just move out to two weeks, the petrol price cycle.
And here is the really good news: absent the current FuelWatch, there is nothing stopping the petrol industry just setting up this mechanism. It is just a market for short-term futures on petrol prices. Of course, if we rush headlong into the current proposed FuelWatch design, it will rule out design innovations. Do we really want to do that?