lpg not dropping price like petrol

[timmyspeed80]

why is lpg still not dropping like petrol lpg seems to go up and up and has nearly doubled in the past 6 years but why has lpg come down when petrol does

[Active_Lad]

It's all about Price Elasticity of Demand. Commodities like Petrol are very demand inelastic i.e. the price and levels of demand are not particularly well corelated so that the price can go up by 20%, but the demand will not fall by a corresponding amount. Perfectly demand inelastic commodities mean you can charge what you like and the demand level never changes. LPG just happens to be more highly demand inelastic than Petrol, primarily down to competitive pressures and the relative levels of demand for LPG vs Petrol.

For Petrol, if you keep the price high, there will be available competition at a lower price and consumers will switch. But if you're the only supplier (of LPG) in town, you can (almost) charge what you like. And that's what happens with LPG. My local supplier (who I never use) has been 59.9ppl for over 6 months but his Petrol prices have fluctuated wildly.

There is also the fact that because demand levels are lower for LPG, it takes a long time to sell a delivery that you paid a given price for. If you paid 55ppl to fill up the supply tank but new deliveries are coming in at 51ppl, you're still going to want to sell your current supply before dropping the price, otherwise you might make a loss (or reduced profit). There's the counter argument when prices go up, but hey, that's life.

You can also factor in the "cost to change" i.e. if there's a 4ppl difference between two LPG suppliers 10 miles apart and you do 5 miles per litre, it's going to cost you 2 litres to save that 4ppl. Depending on the size of your purchase, you might only make a small saving (or none at all) which, for some, isn't worth it.

Suppliers know all these things! Very simply, the "value" of anything is only what someone's willing to pay for it. Which is why the Housing Market is in the toilet (but that's for another topic!)

[uncouth]

Sounds to me like Gordon Brown could do with having a chat with you.

[sorcerer]

Active_Lad, I sort of agree with you in some respects but not all. I can see that if a station has bought in gas at a high price then they aren't going to want to sell it at a lower price - fair enough - but I wonder just how much of it is in their hands.

I used to think that filling stations were privately owned and as such they could charge whatever they liked, and that may be the case to a certain degree (remember that guy down in Devon who was charging damn near £2/litre for unleaded not so long ago?). However, my wife is a VAT Inspector in HMRC and when going through the records of a couple of stations that she's dealt with, the books and accounts have shown price changes (and she was even present at one station when the call came in) up to three times in one day when the refinery (Shell/BP/Esso/whatever) have rung and said, "With immediate effect, we want you to change your prices to......"

So it's the petrol companies, not the petrol stations, who seem to control what price is charged at the pumps and we should be writing to them, demanding a pro-rata drop in the price of LPG compared to petrol.

[MarkJones]

"""""So it's the petrol companies, not the petrol stations, who seem to control what price is charged at the pumps and we should be writing to them, demanding a pro-rata drop in the price of LPG compared to petrol.""""

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the LPG in the petrol stations is often a different company than the petrol company the supplies the station.

think there is even more of a monopoly in LPG than with petrol

as there are only 4 major players up here in the north west
shell
camgas
calor
flogas

we are being grossly over charged for it

tax on petrol and diesel...64p per litre,
tax on lpg...16.5p/ per litre

bet they could sell the stuff at twenty pence a litre and still make a profit.

all the best.markj

[Active_Lad]

So it's the petrol companies, not the petrol stations, who seem to control what price is charged at the pumps and we should be writing to them, demanding a pro-rata drop in the price of LPG compared to petrol.

It's not quite true to say that. It will depend who operates the station. If it is owned and operated by an Oil Company then of course they will dictate the price because there's no actual "purchase" of fuel by the station from the Oil Company. It just gets shipped in and sold at the current market price. If it's an independant then the supplier will have very little sway over what is charged. If it's a franchise it's probably somewhere in between.

All that said, it does not change the Economics of the price of petrol vs. LPG.

What we're actually discussing is the issue of competition. The Oil market is essentially oligopolistic i.e. there are a small number of market operators who can exploit the inelastic nature of supply. They can also stifle competition because of the high cost of entry into the market. The only reason the Supermarkets broke the stranglehold of the Oil Majors in petrol retailing was because Tesco had the financial muscle to move in and start retailing petrol at a loss to buy market share. The other supermarkets simply followed. Now the Oil majors and Supermarkets are in bed with each other, so you have, for instance, a Tesco Express in an Esso Petrol station.

If the market for LPG was big enough, you can bet the Supermarkets would move in big time. As it is, there's little or no money to be made, to the Oil Majors continue to dominate and, as epsilon pointed out, actually sub-contract the supply of LPG to others.

[SimonHobson]

why is lpg still not dropping like petrol lpg seems to go up and up and has nearly doubled in the past 6 years but why has lpg come down when petrol does

As others have already said - there isn't the same competition. I effectively have a choice of 2 filling stations, one in town where I live, one in town where I work. Both have gone up as petrol has gone up, neither have come down - simply because the two towns are 10 miles apart and so for users who don't have the luxury(?) of commuting anyway, simply can't justify the journey to use the non-local one. The one near home is a Texaco franchise and charges 2ppl more than the other one which is Morrisons - so for me, that would be a saving of at most £1.80 if I were dry (I can get almost 90l in my tanks). For a more modest tank capacity, the potential savings are less - so few people would save money, and then there's the time factor.
A friend uses a similar amount of gas to me, but works in the opposite direction - so he simply pays the higher price.

There is another outlet further out of town that consistently charges another 4ppl more - but he gets away with it by being the last LPG station before the Lake District, or the first one coming out. Thus getting the tourist trade that doesn't have much option other than to pay that price or run on even more expensive petrol.

A while back, the Texaco place ended up a penny or two cheaper than Morrisons - I happened to talk to the owner at thetime and his sales had increased by 50% My guess is that he knows he can't win a price war with Morrisons, and so although there is no collusion at all, in effect there is a pricing cartel where my local simply stays at a price that won't cause mass defections to Morrisons OR cause them to lower their prices. I imagine the economics for my local are simply - do I sell a reasonable amount of LPG at (say) 10ppl gross profit margin, or sell twice as much at only 2ppl gpm ? That's the key - if you are still getting the sales, then the last thing you want is the price (and hence profit margin) going down.

My mates ex was in the trade, and (I assume it hasn't changed in the few years since I was told this) she told me that for an independent the profit margin was less than 1% on a good day. Wholesale price is what the supplier tells you, retail is what the local market will stand. On some days the gross profit margin was negative. That's why there are very few 'petrol stations' now - they are all really convenience stores (to pay the bills) with a few fuel pumps (to draw the customers in).

As it is, I'm always on the lookout for a tank etc - between the two of us, my mate and I use over 500l/month. The problem is the large capital outlay (especially if we need a meter so as to fairly account for usage), which makes the payback time rather long.

[clanless]

Just been to a BP station to fill up. LPG 53.9 Unleaded 104.9, diesel 115.9.

The rapidly diminishing price gap between lpg and diesel and the higher mpg from diesel are making me think twice about this wonder fuel known as LPG.

I'll wait a bit to see is the prices normalise. Otherwise its bye bye lpg. At this rate the old cost per mile will shorlty make diesel a cheaper fuel.

Still, I got a couple of years of lpg motoring in at a time when the price differential made it worthwhile.

[clanless]

In fact if I bought one of these now :

1.6-litre HDi 110hp SE guise, the French manufacturer’s newest model returned an impressive 71.92mpg

It would be cheaper to run than my converted 1.6 Astra.

[the_mothman]

I've written to my local MP about this today to take it up with the necessary energy watchdogs.
The issue we have is that the PM Gordon Brown promised during his last budget as chancellor that the cost of LPG would remain at the very least half the price of petrol until 2010.

So if your local garage has unleaded at 97.9p lt then LPG should be no more than 48.9p lt. While that might not be a significant drop, it will still be a fair price given the PM's promises.

If the forecourts are charging higher than this, then they are in effect breaking the PM's promise and should be held liable.
It may or may not have an effect, but if more people (i.e. you guys) write to your local MP and ask them to act on your behalf for this (as it is a government issue) then it may have an effect.

Will keep you posted.

[sorcerer]

Just two points there (a) as I understand it (may well be wrong though) Brown said that the duty charged on LPG would be around half that of petrol, and (b) OPEC have already said that they are cutting production to stop the falling price of oil - so petrol will soon be going up again.

[the_mothman]

The duty on fuel is less than half of petrol so I'm confident it was price. However should I be proved wrong, then the forecourts are still over charging in comparison and not providing a fair deal so then it is still good for an MP (or several) to get involved.

However if you're happy paying over the odds on LPG then feel free to exercise your right to abstain from contacting your MP

OPEC production cut may see an increase in fuel costs immediately, but they're doing it to stop it going down to like $30 a barrel so it wont actually go up massively with the current economic issues in place.

[SimonHobson]

The duty on fuel is less than half of petrol so I'm confident it was price. However should I be proved wrong, then the forecourts are still over charging in comparison and not providing a fair deal so then it is still good for an MP (or several) to get involved.

However if you're happy paying over the odds on LPG then feel free to exercise your right to abstain from contacting your MP

Much as I see your point, retail price control is not, and should not, be the concern of government. All the government can do is ASK retailers to drop prices, but retailers are quite within their rights to tell them were to go.

What is needed is more outlets, and hence competition. I was 'a bit disappointed' when my local ASDA completely rebuilt the petrol station and didn't put gas in - it would have made the local market quite different to have ASDA and Morrisons only a mile apart.

[clanless]

In which case Government support for LPG as a green fuel is fairly pointless and is having, or will shortly have no impact at all. Either the price differential comes down and retailers are forced to sell at a set price below petrol/diesel or LPG is a dead fuel with no future.

[tucker1]

My local independant has just reduced his price by 2p to 50p per litre.

There's a cheaper one slightly further afield. He was already 48p and is always 4p cheaper, so I expect his will now be 46p.

Needs a bit of competition with LPG. I am on holiday next week near Ross on Wye and just checked the prices down there and the cheapest is 58.9p.

Petrol reductions seem to be driven by the big supermarkets and local forecourts have to follow suite to be competitive.
It makes you wonder what would be happending if none of the major supermarkets sold fuel?

[lebesset]

might as well face the fact boys and girls ...we are being screwed

I , for one , am on my last lpg vehicle , can't beat the cartel

why are all the filling stations controlled by the big petrol companies still around 60p? coincidence ? there are small independants around selling at under 50p and making sensible profits since the wholesale price drop

the point is , once we have paid for our conversions we are locked into buying lpg so long as it is below 75% of petrol ! yes , I know it costs more than running a diesel , but what choice is there ?

[lebesset]

some time ago I emailed morrisons asking for a list of their filling stations which sell lpg
they replied that all I had to do was enter the post code of where I was and it would tell me ; other than I don't always have on line availability as I travel , and usually don't know where I am , let alone the post code ,this was fine

however , I notice that there is now a specific lpg filling station list on their site

[uncouth]

My local Morrisons is 52.9p and has been for some time, I'm still waiting for the price to drop but to be honest the current price is acceptable for me compared to some poor souls on this board.

I also collect the Morrisons Miles points which equates to about 3p per litre so that keeps her indoors happy with £5 vouchers.

[SimonHobson]

the prices local to me have dropped another penny this week. Now down to 57.9ppl

They haven't here - still 53.9 and 55.9 for my two local places.

I meant to ring a couple of the gas suppliers last week to ask what their current bulk prices are, because at this rate it might be worth another look at having my own tank (luckily we have space in the garden). If I share with a mate we could split the capital costs - but then need to add the cost of a meter so we can account for who's used how much.

[clanless]

My car is fairly frugal when running on petrol anyway - if the price gap closes much more then the old petrol/lpg switch will flick over, permanently.

I suspect that LPG cars will then go the way of the do-do.