Why not an app for real time petrol prices?

Those interested in helping motorists would surely jump at the suggestion.

What would the usual free market fundamentalists say? Predictably, the free market fundamentalists would say that price differences at different petrol stations reflect different levels of competition in the retail petrol market. Yes, that’s generally correct, but what about promoting the most effective and efficient level of competition by empowering motorists to shop around for the cheapest prices by giving them online access to all petrol prices?

For those sensible observers out there the problem in the retail petrol market is so simple that even the most zealous free market theorist has to admit it. Motorists are largely in the dark on petrol prices. Sure, motorists can see the price boards of those petrol stations that they drive by, but motorists generally don’t know the petrol prices at other petrol stations.

Our economist friends would say that there is an “information asymmetry” between the petrol retailers and motorists. In plain language the petrol retailers generally know the prices charged by other petrol retailers, but motorists don’t generally have such knowledge or to the same degree.

The smarter petrol retailers subscribe to pricing information provided by a company called `Informed Sources’ which collects petrol prices from petrol retailers and then provides that information back to other retailers. Of course, petrol retailers pay for the pricing information provided by Informed Sources and, more importantly, the petrol retailers provide the pricing information electronically to Informed Sources.

Here, it’s critical to note two very important things. First, the petrol retailers incur a significant cost to subscribe to Informed Sources so as to keep themselves up to date on the prices charged by their competitors. Second, the pricing information is already available electronically.

The significance of these two points should be obvious to anyone interested in ensuring that the retail petrol market works as efficiently as possible. Currently, the retail petrol market is not operating as efficiently as it could for the simple reason that, while petrol retailers have access to the petrol prices of their competitors in near real time, motorists don’t have access to similar real time pricing information.

So why don’t we just give motorists access to all petrol prices in real time? Will the petrol retailers voluntarily provide such online access? Of course not, as the petrol retailers are happy for motorists to be kept in the dark.

While petrol retailers are happy to pay big money to find out the prices of their competitors, they won’t voluntarily spend the same money putting their prices online for motorists. That would simply empower motorists and could lead to motorists paying lower petrol prices.

Would there be a cost to each retailer if they chose to provide their pricing information online? Yes, there would be, but remember that they already pay Informed Sources big money to subscribe to pricing information available through Informed Sources.

What if petrol retailers stopped subscribing to Informed Sources and instead used the money to provide their prices online for the motorists?

The problem would be that if only one particular retailer did that, then the other retailers could simply get the value of the pricing information published by the particular retailer without having to pay for that information from Informed Sources. That’s the problem with free riders or freeloaders. They want to get the value of something without paying for it.

Clearly, all petrol retailers need to publish their prices online in near real time in order for motorists to benefit and to ensure a level competitive playing field amongst retailers. Since that will not happen voluntarily it’s clear that the Federal Government needs to take action.

The Federal Government should stop wasting time with the ACCC Petrol Commissioner and simply require that all petrol retailers across Australia publish all their petrol prices online in near real time.

There’s little or no regulatory cost of requiring the petrol retailers to publish all petrol prices online. Instead of paying money to Informed Sources, petrol retailers can use that money to fund the cost of updating their own website.

Significantly, the petrol retailers already collect their own petrol prices electronically so the information is already available electronically. There should be no additional cost to petrol retailers to collect pricing information from their own petrol stations.

Under this scenario, the petrol retailers would still get the pricing information of competitors from the websites of other retailers, but at the same time the petrol retailers would be giving motorists access to full pricing information in near real time. Clearly, a “win-win-win” situation for the petrol retailers, motorists and the Federal Government.

Why do we need an ACCC Petrol Commissioner to tell us that price hikes are “crazy” when we can all work that out for ourselves?

Abolishing the Office of the ACCC Petrol Commissioner would free up a great deal of money that could be used to provide funding grants to all those poor little petrol retailers that would need to invest in a website to publish their petrol prices online.

That would be more meaningful support for those petrol retailers who are small businesses than the Federal Government’s creation of an Australian Small Business Commissioner who will have no legislative powers and, more dangerously, no teeth. There’s generally a lot of talk and little real action from the Federal Government on small business issues.

The big petrol retailers already have the information technology to provide all their petrol prices on their own websites. All we now need is the Federal Government to do the right thing and undertake the much needed reforms to finally deliver on all those election promises they made to put downward pressure on petrol prices.

Less talk and more substance on stopping the petrol rip off might come in handy for the Federal Government at the next election.

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