Investigation into Petrol and Diesel Price Movements

December 2008

Executive Summary
The National Consumer Agency is pleased to submit the following report in response to the Tanaiste’s request that “the Agency undertake a survey into why pump prices for petrol and diesel have not fallen in line with the drop in the wholesale price of oil”. This report has been prepared over a short timeframe, between September and December 2008 by the in-house research function of the National Consumer Agency. In light of the time and resource restrictions, a decision was taken to limit the dataset for analysis to crude oil and downstream product prices between January and December 2008. Whilst analysis over a longer timeframe and using larger datasets may permit greater detail and facilitate identification of even small variances from trend, the NCA is confident that the general trends observable over the period under examination presents a fair reflection of the current state of the Irish consumer petrol and diesel market. Based on the key findings of the research, the NCA has concluded that: • There is little evidence to suggest unwarranted delays in the passing on of wholesale price changes to the consumer at the pump. • Direct comparison between fluctuations in crude oil prices and petrol and diesel pump prices is inappropriate and does not reflect the reality of the petrol and diesel supply chain. To more accurately assess flow through of price changes in refined oil products (such as petrol and diesel) to the consumer, it is necessary to compare fluctuations in Platts prices, these being the prices for Refined oil products such as petrol and diesel paid by wholesalers, and prices at the forecourt pump. • Platts prices and wholesale prices should differ by a margin comprising the impact of exchange rates, taxes, transportation and associated costs. The subsequent difference between wholesale and pump prices is typically dictated by the purchasing power of the end retailer (discounts accrue based on volumes purchased, membership of a “branded” chain etc.) and an allowance for the retailer’s margin. • Analyses of these fluctuations over the time period of this study suggest a strong correlation between Platts prices and wholesale price fluctuations and the price of diesel and petrol at the pump (allowing for changes in the euro/ dollar exchange rates). • A large proportion of the pump price of fuel in this country comprises taxes and duties. The manner of their calculation can depress overall pump cost savings to consumers, notwithstanding drops in the underlying cost of the refined fuel product. • Overall, Ireland’s service station/retail petrol and diesel supply market would appear to be competitive by international standards. The density of outlets per capita (1 outlet per 2,020 people) in Ireland compares favourably against corresponding statistics for Northern Ireland (1 outlet per 3,113 inhabitants) and for Great Britain (1 outlet per 9,539 inhabitants). Data is required at the local level to make a definitive statement in this regard.

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Examination of the accounts of the larger oil companies in Ireland suggest there is relatively modest profit to be made in the downstream supply of refined oil products. Further along the supply chain, statistics measuring the numbers of service stations and fuel outlets in the country point to sustained shrinkage year on year, which would further suggest this is not a highly profitable area in which to operate, at least at the level of fuel supply only. Increasingly, fuel retailers are adding retail outlets to their offerings, thereby enhancing revenue and margin opportunities. A review of international studies on the same issue in the USA, Austria and Portugal reached broadly similar conclusions, identifying closely aligned movements in Platts prices and petrol and diesel pump prices. Absolute fuel price competitiveness in Ireland would appear to be most significantly influenced by the effects of local competition. Areas with larger numbers of fuel retail outlets typically enjoy strong price competition, with the converse applying in sparsely serviced areas.

Notwithstanding these conclusions, the National Consumer Agency has identified a range of gaps in the manner in which information on petrol and diesel prices in Ireland is collected, analysed and made available. There is clearly scope for enhancement in analysis and reporting, and improvements in this area could serve to better inform consumers of general trends in petrol and diesel prices and to place a sustained spotlight on the competitive environment in this important sector.

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Table of Contents
1 Introduction.............................................................................................................................. 5 2 The Oil Market in Ireland........................................................................................................... 7 2.1 Refineries......................................................................................................................... 7 2.2 Wholesalers...................................................................................................................... 8 2.3 Distributors....................................................................................................................... 9 2.4 Retailers........................................................................................................................... 9 3 Pricing.................................................................................................................................... 12 3.1 Whitegate Refinery ........................................................................................................ 12 3.1.1 Refined Product Pricing - Month Average Customers............................................13 3.1.2 Refined Product Pricing - Twice Weekly Price Changes.........................................14 3.2 Wholesalers.................................................................................................................... 16 3.3 Oil Distributors /Retailers................................................................................................ 27 3.4 Competitiveness of the Market....................................................................................... 29 3.4.1 Oil Company Performance.................................................................................... 29 3.4.2 Numbers in the Market......................................................................................... 30 4 Collection of Retail Price Data ................................................................................................ 31 4.1 Retail Price Data............................................................................................................. 31 4.1.1 AA Ireland Data Collection.................................................................................... 31 4.1.2 Website Data ...................................................................................................... 32 4.1.3 Central Statistics Office Data Collection............................................................... 33 4.1.4 EU Data Collection............................................................................................... 33 4.2 National Consumer Agency Surveys............................................................................... 35 5 Conclusions............................................................................................................................ 39 Annex 1 Investigations............................................................................................................. 41 Investigations........................................................................................................................... 41 USA 41 Austria................................................................................................................................. 41 Portugal............................................................................................................................... 41 Other Studies ...................................................................................................................... 42

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.......38 4 ............................................................26 12 Setting of Price .....................................22 6Platts Variation Versus Morris Wholesale Prices................................................................25 Petrol and Diesel Prices ........................................................................18 Platts Quotes/ Campus Wholesale Prices.........................................................................................................................................19 Platts Quotes/ Emo Wholesale Prices.................................................................................................20 Platts Quotes/ Esso Wholesale Prices.................................................................................................................................................................................................................................................................32 Table of Tables Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table 1Platts Variation Versus ConocoPhillips Wholesale Prices.......................24 8Platts Variation Versus Texaco Wholesale Prices.................................................................26 11 Petrol and Diesel Prices –Cost of Product and Taxes...................................................21 5Platts Variation Versus Maxol Wholesale Prices........................................................................................................37 16 National Results Petrol .................................................22 Platts Quotes/ Morris Wholesale Prices.............................................................20 4Platts Variation Versus Esso Wholesale Prices...................................12 Refinery Versus Crude Oil Prices.....................23 7Platts Variation Versus Topaz Wholesale Prices.......................................................................................................31 AA Ireland versus Platts..................................................................18 2Platts Variation Versus Campus Wholesale Prices........................................................................................................................................................................................................................................................................29 14 Petrol Prices 7 November 2008.Summary...................38 17 National Results Diesel ......................................................24 9Platts Variation Versus TOP Wholesale Prices...........21 Platts Quotes/ Maxol Wholesale Prices..........................................19 3Platts Variation Versus Emo Wholesale Prices........................................................13 Whitegate Customer Area..........................................25 10 Petrol and Diesel Price Build-up early December 2008...........................................................................16 Platts Quotes/ ConocoPhillips Wholesale Prices..............................................................................................................................................Table of Figures Europe Brent Spot Price January to December 2008...............................................................23 Platts Quotes/ Topaz Wholesale Prices........................................................................................15 Whitegate Refinery Margin..............................................................................................28 13 Oil Company Accounts ............................................................................................................24 Platts Quotes/ TOP Wholesale Prices.....................................36 15 Diesel Prices 7 November 2008.....................................................................................................................................23 Platts Quotes/Texaco Wholesale Prices..........

the Agency has: ♦ Held discussions with oil companies (Texaco.” The Tánaiste went on the say that “I consider it important that there should be greater transparency between the manner in which the retail price for fuel paid by consumers follows changes in the wholesale price”. 3 The Agency would have liked to consult with a number of other oil companies in Ireland but there was insufficient time. Topaz. 1 2 5 . While wholesale prices are readily available. accurate retail prices would be difficult to obtain as the nature of the market lends itself to difference prices for different customers. credit history etc. a significant proportion of this report is concerned with describing the market for petrol and diesel in Ireland. Competition Authority and Department for Communications. longer term inflation etc. Top. This will improve transparency and it also provides useful context for the sections of the report that analyse price fluctuations. In compiling this investigation. “requested the National Consumer Agency1 to undertake a survey into why pump prices for petrol and diesel have not fallen in line with the drop in the wholesale price of oil. petrol and diesel prices at the pump rise quickly. ♦ Analysed wholesale and retail prices in Ireland and compared these with prices for refined product at international level. Maxol. as a longer-term study would require correcting for changing distribution costs. • Within this market. In September 2008. individual retailers) and other relevant parties (National Oil Reserves Agency. retailers (Tesco. ♦ Conducted extensive surveys of petrol and diesel prices at the pump (over 2.400 prices gathered over 4 Fridays in November). only sales to private consumers were examined5 Hereafter referred to as the Agency. Trade and Employment Mary Coughlan. Applegreen3. the Tánaiste and Minister for Enterprise. ConocoPhillips).1 Introduction There is a widely held view that when the price of crude oil increases. 4 The Agency is happy to examine the market for home heating oil at the request of the Tánaiste. This document presents the findings of the Agency’s investigation into the movement of petrol and diesel prices in Ireland. Energy and Natural Resources). The analysis in this study is based on information commencing January 2nd 2008 and includes data collected up until the first week of December 20082. oil distributors (East Cork Oil). As a result. TD. In order to understand how and why prices change it is necessary to understand how the oil industry operates. distance to travel. prices at the pump are slower to fall. depending on volume. 5 The market for haulage and fuel cards is excluded as these markets have their own distinct characteristics. Irish Petroleum Retailers Association. Esso. but that when the price of crude oil decreases. This study was conducted within the following parameters: • Only the market for petrol and diesel4 was examined. This tightly restricted time frame simplified the required analysis.

Section 3 describes the factors that affect pump prices and compares relevant trends in international prices with wholesale and retail prices in Ireland. recommendations and outlines a number of areas where further study may be warranted. The Agency would like to thank those who provided time and information in the course of this study. Key points are highlighted in bold throughout the report. Section 5 presents conclusions. Section 4 examines the current situation in Ireland with regard to the collection of price data and also presents the results of the Agency’s surveys.The report is divided into this introduction plus 4 sections and an Appendix as follows: • • • • Section 2 outlines the context for the study by providing a description of the market for oil in Ireland. 6 . Appendix 1 presents the results of similar price investigations in other countries.

8 Competition Authority Submission to OECD Working Party on Competition and Regulation. upstream and downstream. Denmark. Limerick. they are involved in more than one level of the market. total motor fuel sales in Ireland were just over 3 billion litres.2 The Oil Market in Ireland In order to provide a context for the analysis of prices. It is important to note that the vertically integrated companies in Ireland operate as separate entities to the refineries owned by their parent companies.1 Refineries There is one refinery in Ireland9. ♦ Distributors. has 2. the UK has 10 refineries. ConocoPhillips. and several operate across the entire supply chain. Co. Some companies are vertically integrated. the Netherlands and Spain. ♦ Retailers. according to Experian Catalist6. 7 Source: International Energy Agency. 9 In comparison. This is explained in more detail hereafter. Downstream oil companies refine.e. store. The oil industry comprises two distinct segments. These ports are of varying size. September 2008. For the most part. Upstream oil companies are concerned with exploring. In Ireland. from extraction to retail sales. They also publish market data for Ireland. this section gives a brief summary of the oil sector in Ireland. extracting. Drogheda. producing and transporting crude oil. The refinery was constructed in 1959 and ran until it was shut down (due to over capacity in Europe) in 1981. based in Whitegate. The Competition Authority has identified8 four categories or stages in the motor fuel industry in Ireland: ♦ Refineries. Ireland imports all of its oil requirements either in the form of crude oil or as finished products such as petrol and diesel. In 2007. distribute and sell refined products such as petrol and diesel. The displayed prices for each type of fuel are obtained from fuel card transactions made on the forecourts the day before. Galway and via Northern Ireland through Derry and Belfast. i. ♦ Wholesalers. and in turn the prices that consumers pay further down the distribution chain. The market for the EU as a whole is around 100 times larger 7. while finished products are imported into Dublin. transport. Cork. They compete for refinery output with other companies on a commercial basis. 6 7 . a country with similar demand to Ireland. Crude oil is imported into the ConocoPhillips Whitegate refinery. Marina. It was restarted soon after by the state owned Irish National Petroleum Corporation Experian Catalist provide daily site retail fuel prices for main fuels on sites across the UK. The total market for oil in Ireland is approximately 0. which affects the size of the ships that use them. New Ross. 2. Foynes. Esso and Texaco are vertically integrated. the crude oil that is refined in Ireland is sourced from the North Sea while imports of finished products come from the UK and Europe.2% of the world total.

the refinery produces ♦ 20% gasoline. Tender. There is an agreement with the Irish Government that the refinery will continue to operate until 2016. varies daily (see Section 3). This limits profitability. ♦ 20% diesel. or purchase from the refinery at Whitegate. ♦ Chevron (trading as Texaco in Ireland). ♦ 10% kerosene. 8 . from each barrel of crude oil. ♦ 35% fuel oil. Spot. Phillips subsequently acquired Tosco in 2001. ♦ Emo ♦ MorrisOil ♦ Maxol. The key players in this segment are: ♦ Campus Oil. ♦ Other e. Its gross margin. which in turn merged with Conoco in 2002. diesel. gasoline. There is a large. the difference between the aggregate product price and the crude price. ♦ 10% heating oil. kerosene. by Irish standards. 2. The refinery converts crude oil into LPG. The refinery is small by international standards however it runs permanently10 at maximum capacity (75. as fuel oil is less valuable than the other products.000 barrels a day). import facility on the site. ♦ Retailers.and was sold to Tosco in 2001. ♦ Distributors. ♦ 5% consumed as fuel. ♦ ExxonMobil (Esso). 10 The only scheduled shut down occurs once every 5 years. Marine. The proportion of fuel oil is high in comparison with other refineries. heating oil and fuel oil. In most cases.g. It supplies approximately one third of the transport market in Ireland and is responsible for the majority of product in the South of Ireland (see Section 3). It does not sell directly to private consumers. The refinery sells to over 100 customers (see Section 3) ♦ Wholesalers.2 Wholesalers Wholesalers import petroleum products into Ireland.

4 above set their own prices whereas Head Office will set prices for company owned stations. and Galway. 2. reflecting savings achieved through purchasing power based economies of scale. Esso. The discussion here is limited to service stations and does not address the supply of home heating oil. or be supplied by. some of which it owns and some of which it operates under Solus agreements. industrial and commercial customers (including service stations). Independent retailers not tied to a supplier (there are very few of these). Independently owned stations may or may not operate under the brand of an oil company. Maxol etc). see section 3. Emo. Over 75% of service stations in Ireland are independently owned. Product is either moved by road or by sea because there are no oil pipelines in Ireland. Sweeney Oil etc. Topaz operate their own terminals in Dublin. TOP operate their own terminal in Dublin. Emo. This type of agreement is common in the fuel retail business. Some of the main players in this market are the firms mentioned in section 3. many of which are also wholesalers (Topaz. There are four main types of service station in Ireland: 1. In practice. 11 9 .♦ Topaz. 3. There are approximately 10 main players in the Retail segment of the market. Topaz. The largest. Campus and Morris have throughput arrangements with a number of terminal operators around the country. one supplier. as there are in the UK for example. ♦ TOP. 2. Those owned directly by oil companies but licensed to station operators (Licensees). such as the Dublin Joint Fuels Terminal. Maxol. These companies’ import directly and in some cases storage facilities are operated on a shared basis. Those owned and operated directly by oil companies.2 plus Petrogas. Limerick. it is impossible for the consumer to distinguish between oil company owned service stations and independently owned stations operating under the brand of that oil company. 3. operates a network of 350 service stations.4 Retailers These companies supply directly to consumers. This has a significant impact on costs.3 Distributors These companies obtain product from wholesalers or directly from Whitegate refinery and sell it to a range of domestic. and have throughput arrangements with others around the country. 2. Yet this distinction is important as categories 2. Those owned by independent retailers which are tied to a particular supplier (by way of a Solus agreement11) and 4. There are a large number of companies in this category. operated by Esso and Texaco. Maxol and Texaco all operate similar A Solus agreement is one by which a person aggress to buy from. East Cork Oil. Cork.

they are limited to 5 years (rather than 10 years as was the case previously). In addition. 12 10 . The size of rebate achievable by them depends on a number of factors including the size of any loan from the oil company. In recent years there has been a move to add convenience stores/delis to the fuel side of the business. sales volume/history etc. very few stations are not tied to an oil company. these agreements allow retailers to take advantage of branding and crossselling opportunities. 13 Experian Catalist (2007 figures). In return the oil company may provide money for re-branding and shop refurbishment. Industry sources suggest that in years to come a “natural level” for this country will be around 1. Solus agreements operate for a fixed period. This is not always the case and some retailers wish to remain “unbranded” or elect to pay for re-branding themselves. Maxol. Emo. Chevron. This difference reflects the proportion of fully-fledged “service stations” versus unbranded outlets that have just one or two pumps. benefit from the marketing expertise and buying power of the larger firm and. 14 Campus. It should be noted.000 square feet under the Retail Planning Guidelines.092 in 2007 (a decrease of 52%).332 12 to 2. ConocoPhillips. importantly. Competition Authority Submission to OECD Working Party on Competition and Regulation. Tesco.03413. In general.308 in 1997 to 1. In general.numbers of service stations.000 service stations. ♦ Increased safety standards – requirements for significant investment in sites to comply with the Dangerous Substances Act and ♦ Reduced profitability due to increased competition. Figures from the Irish Petroleum Industry Association (IPIA) show that for its members 14 the total number of sites fell from 2. September 2008. although they can be for a shorter period. TOP and Topaz. The total number of retail sites in Ireland is disputed. with figures ranging from 1. to achieve cost efficiencies in their purchasing. that the size of service station shops is restricted to 2. Emo Oil. The reason given is that the higher margins achievable through these activities compensate for the relatively modest return on selling fuel (margins are discussed in detail in section 3). A number of reasons are cited for this decline in the number of stations in Ireland over time (in random order): ♦ Property development (particularly in Dublin). For this reason. Other well-known brands are Campus. Esso. however. the agreement entails an exclusive purchasing obligation whereby the retailer purchases product at a wholesale price less a fixed rebate which can by mutual agreement be reviewed to take account of competition and changing circumstances (see section 3). unless local authorities grant otherwise under special planning conditions. Applegreen. Since 2002. location. and GreatGas. the total number of stations has been in decline for the last 20 years or so.

5m litres to 2. These figures are all derived from Experian Catalist data.There are no restrictions on the number of service stations in Ireland. September 2008. In summary. It should be noted. Topaz. therefore data at this level is required in order to make a definitive statement.498 million litres of motor fuels per annum. 200015. Taken in isolation. this suggests that. In terms of the volume of the Irish retail market for petrol and diesel. GreatGas and Applegreen. The number of stations per capita in Ireland is 1 station (taking the higher figure above) for every 2. Energy and Natural Resources. however. the largest operator. Tesco sources its fuel from Topaz. This compares with 1 station per 9.I.113 people in Northern Ireland. there are 10 principal participants in the retail market: Esso and Texaco are vertically integrated to the refinery level. Department of Communications.5m litres per annum while a decent sized company owned site will have a volume of around 3m to 4m litres per annum. The remaining players are all Irish-owned. This average is slightly misleading as it includes a number of small and very small outlets. Competition Authority Submission to OECD Working Party on Competition and Regulation.020 inhabitants. A set of key criteria must be satisfied. ConocoPhillips operate at the refinery and wholesale level. so they should be comparable.539 inhabitants in the UK and 1 station per 3. The two newer entrants. the market is fully liberalised. 15 16 11 . Experian Catalist reports the average volume per station in Ireland at 1. 311 1979. the market structure is competitive compared to Northern Ireland and the UK. Campus. at a national level at least. is integrated to the wholesale level. including full planning permission and the applicant must comply with the Dangerous Substances Act (Retail & Private Petroleum Stores) S. Independently owned service stations typically sell in the region of 0. Maxol and Emo. as are TOP. and European Communities (Control of Major Accident Hazards involving Dangerous Substances) Regulations. along with independently owned sites and some very small (<10) retail networks. that fuel markets are local in nature. are not integrated 16.

the price of refined product. Also called cash price. 3. Commodity traders and speculators also increasingly affect demand. known as Brent Oil. data in 3. 17 02 /0 1/ 16 08 /0 1/ 08 30 /0 1/ 08 13 /0 2/ 27 08 /0 2/ 08 12 /0 3/ 08 26 /0 3/ 09 08 /0 4/ 08 23 /0 4/ 08 07 /0 5/ 21 08 /0 5/ 08 04 /0 6/ 08 18 /0 6/ 02 08 /0 7/ 08 16 /0 7/ 08 30 /0 7/ 13 08 /0 8/ 08 27 /0 8/ 08 10 /0 9/ 24 08 /0 9/ 08 08 /1 0/ 08 22 /1 0/ 05 08 /1 1/ 08 19 /1 1/ 08 Source: Energy Information Administration 12 . taxes. This section will describe these factors in detail. their pricing structure is examined separately. Given the importance of the refinery at Whitegate to the overall market. It then refines this crude oil into final products such as fuel oil. Demand for crude oil is derived from the demand for the finished and intermediate products that can be made from it.1 relates to oil from that area. As most of our imported crude oil comes from the North Sea. Figure 1 Europe Brent Spot Price17 January to December 2008 160 Europe Brent Spot Price Dollars per Barrel 140 120 100 80 60 40 20 0 Spot price is defined as the present delivery price of a commodity being traded on the spot market. company margins etc. with price swings in times of shortage or oversupply. Crude oil is a commodity and as such its value behaves as any other commodity.3 Pricing The price that consumers pay for petrol and diesel in Ireland depends on a number of factors including the price of crude oil. 3. Whitegate refinery is the only entity in Ireland that imports crude oil.1 shows the variability in the price of oil over the period from January to early December 2008. petrol and diesel. transportation costs.1 Whitegate Refinery As mentioned in section 2. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply fluctuations.

the price is based on Platts prices for refined products such as petrol and diesel (Platts prices and the relationship with wholesale prices are examined in more detail in section 3. The price paid for each cargo is the average price of crude. Prices have fallen further since this data was obtained. The reasons for this increased variability are not the subject of this study and are explained elsewhere18.2% of world demand and the EU’s share is 100 times larger than Ireland’s. The pricing mechanism used for charging depends on the type of customer.uk/commons/lib/research/briefings/snsg-02106.Month Average Customers In this case. as priced by Platts (Platts is a provider of energy information including crude oil and refined prices). Figure 2 Refinery Versus Crude Oil Prices 1600 1400 1200 1000 $ per MT 800 600 400 200 0 16/01/2008 02/07/2008 13/08/2008 24/09/2008 08/10/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 12/03/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 21/05/2008 04/06/2008 18/06/2008 16/07/2008 30/07/2008 27/08/2008 10/09/2008 160 140 120 $ per Barrel 100 80 60 40 20 0 Ave Petrol USD MT Ave Diesel USD MT Europe Brent Spot Price FOB (Dollars per Barrel) Source: Energy Information Administration.2). Correspondingly. 5 days around loading day (2 days before loading day. Crude oil is imported into Whitegate by ship approximately every 9 days.1). These prices are “evened” out over the month by trading on the futures market. Platts 18 For example http://www.1 Refined Product Pricing .The average price over the period was $102 per barrel. however the actual price ranged from $44.91 per barrel on November 21st to $143.95 per barrel on July 3rd. There are two segments: those who pay on the average of the current month and those who pay based on a wholesale price that changes twice a week. the day of loading and 2 days after). Ireland’s market does not affect the price of crude oil and Ireland is a “price taker”. As mentioned in section 2 Ireland accounts for only 0. This is because the price of refinery oil is not only dependent on the cost of its raw material but also on the actual demand for petrol or diesel (for example demand for diesel is higher in winter when it is also used as heating oil).parliament. There is an underlying relationship between refinery and crude oil prices but in the short term the two do not always move synchronously (3.1.1.pdf 13 . 3. These large increases and decreases are unprecedented.

As the volatility of the fuel price increased over the past years. but changed to euros using official ECB exchange rates. however.200 the oil company can sell the product at a higher price than it paid for it. of course. For example if the average of the previous month was $1. Previously prices were changed on a weekly basis. In the UK prices are changed daily. Product is sold either through the jetty (jetty sales) or is loaded onto trucks (rack sales). added to which are On-costs. The reverse is. In general.2 shows the area that ConocoPhillips’ customers come from. the amount depending on the particular circumstances). 20 It is important to note that when comparing ConocoPhillips wholesale prices with oil wholesalers (next section) that ConocoPhillips do not deliver so the price charged will be lower. days as opposed to weeks. evaporation costs etc (see 3. true in a falling market. Instead they buy at Platts plus ConocoPhillips’ “mark-up” or margin (converted to euro cents per litre).2. 3. Wednesday price changes use the average of the daily Platts quotes from the previous 3 days while Friday’s price corresponds to 2 quote days.2 Refined Product Pricing . The final price charged is the month average for Platts (plus a Platts Premia. the industry has moved towards more regular price changes to protect both supplier and customer against significant market movements. 3. the average is based on data for every available day during that month. In general. The greatest level of exposure occurs when prices either rise or fall in a short period of time e. the “wholesale” price will move up and down directly with Platts prices20 and Euro to US$ exchange rate. Buyers.2). They are open to price volatility (upward and downward movements) and must take the risk on pricing and currency changes over the month. added to which are “On-costs” to account primarily for the costs for marine freight.g. These prices are only released at the end of every month.Twice Weekly Price Changes This price change method reflects the extent of oil price volatility in the market. Customers in this segment can only take delivery off the truck loading rack. Since September 2008 prices for most companies have changed twice a week 19. originally denominated in dollars. jetty sales would be larger volumes so they would be more cost effective than collecting from a truck loading rack. 19 14 .The month average is priced in dollars per tonne. Prices in this case are denominated in euro cents per litre.1.1. The length of time for which this mark up is fixed for varies according to contractual terms but in general it is for one year. on Wednesday and Friday at midnight. storage and throughput. port dues. The price ConocoPhillips charge for product is in line with competitive forces in the market so as to optimise their sales volumes and margins. do not purchase at this wholesale price. The price charged will depend on the method of collection.000 per tonne but the current price is $1. insurance. The customers in this segment are larger oil companies. They are based on Platts averages for refined product. The gap between the two is explained in section 3.

15 . Dublin). The ratio of average of month customers to twice weekly is 60/40. for example. it is only economical to buy from Whitegate if one operates in the southern half of the country (it may also be economical if you are a large customer who can purchase a large quantity and move it by ship to.Figure 3 Whitegate Customer Area Derry Belfast Galway Dublin Imports from UK and Europe Limerick/Foynes New Ross Cork Source: ConocoPhillips Whitegate It can be seen that. in general.

e. Due to the volatile nature of the market. The wholesale prices change twice a week and are based on the average of Platts over the previous 2 or 3 days.v . It is therefore incorrect to directly compare the price of crude oil with wholesale or retail petrol and diesel prices. as mentioned in section 2. Instead wholesale prices should be compared to the relevant Platts quotations for refined product taking into account US$ . for anything up to 5 years (Solus agreement. the size of this rebate depends on a number of factors including: ♦ Whether or not an upfront payment has been granted as part of a Solus agreement. Distributors or retailers pay this wholesale price minus a fixed rebate. but increasingly are reviewed more often).The difference between the purchase price of crude and the price of the refined product is the refinery margin. Therefore the price that the retailer pays for product should move up and down in conjunction with Platts quotes. due to periodic adjustments for inflation and margin alterations but over time they should track each other closely. As mentioned previously. 16 . The scale is not on this figure in order to preserve commercially sensitive information. oil wholesalers buy on the average of the month and sell to distributors or retailers. For the most part. refining margins vary daily. The rebates are fixed. the portion apart from ConocoPhillips) do not purchase crude oil. they import refined products such as petrol and diesel. Figure 4 Whitegate Refinery Margin Source: ConocoPhillips Whitegate 3.1. Given that the price of the crude oil varies widely (especially in recent times) there is great uncertainty as to the size of the margin. for example.2. as relevant.2 Wholesalers The key point to note here is that oil importers/ wholesalers in this segment of the market (approximately 70% of volume i.Euro exchange rates. The movements of wholesale and Platts prices will not always match exactly. shown in 3.

Duration of the business relationship.2 to 3. The original dollar figures are changed to euros using the official ECB rate on the relevant day and finally changed to cents per litre using standard densities to match the wholesale prices.8 cents per litre for petrol and diesel respectively) and costs of getting the product to Ireland to the point of the loading rack whilst the Platts data exclude the NORA and excise. Wholesale prices are readily available (some are published on the oil companies’ websites) and are published together on a website www.com. 17 .♦ ♦ ♦ ♦ Volume of sales. NORA and excise duties are excluded.com data can be verified. 21 Platts quotes are refinery prices. This “gap analysis” is an area that requires further study over a longer time period. Trend lines are added to each graph to facilitate comparison. The enormous volatility in product prices and exchange rates seen in 2008 does not help current analysis. exclude any supplier costs or taxes and charges.2 to 3.9 and 36. In the following figures the Platts quote21 for each day is the average of the high and low quote. The gap between the Platts quotes and the wholesale prices is explained below.fuelpricesonline. This is done in 3. Wholesale prices have also been acquired directly from some of the major oil companies so that the www. As a good measure to see how consistent the oil companies are in lowering and increasing prices it is useful to compare the differential between the schedule price and the Platts average. The Agency has obtained wholesale prices from this source for all the major oil retailers in Ireland and 3.2 under each of the figures. Credit rating and credit terms applicable. The wholesale price includes the NORA levy of 1 cent per litre and excise (currently 50.2 compare relevant Platt’s quotations with wholesale petrol and diesel prices in Ireland for each major firm in Ireland. Inland transport costs. In this case to facilitate comparison. The gap should be fairly constant during the year apart from some minor alterations to account for inflation.fuelpricesonline.

60 Maximum 8.18 Source: Energy FuelPricesOnline.21 Average 7.14 End 8. Platts Table 1 Platts Variation Versus ConocoPhillips Wholesale Prices Cents per Litre Petrol Diesel Start 7.68 Minimum 6.Figure 5 Platts Quotes/ ConocoPhillips Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 19/11/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol ConocoPhillips Schedule Petrol Linear (ConocoPhillips Schedule Petrol) Platts Diesel Linear (Platts Petrol) Linear (ConocoPhillips Schedule Diesel) ConocoPhillips Schedule Diesel Linear (Platts Diesel) Source: Energy FuelPricesOnline.47 9.65 10.69 10. Platts 18 03/12/2008 .60 8.40 9.

70 End 15.89 18.92 8.Figure 6 Platts Quotes/ Campus Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 19/11/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) Campus Schedule Diesel Linear (Campus Schedule Petrol) Campus Schedule Petrol Linear (Campus Schedule Diesel) Source: Energy FuelPricesOnline.36 Diesel 17.52 18. Platts 19 03/12/2008 . Platts Table 2 Platts Variation Versus Campus Wholesale Prices Cents per Litre Petrol Start 14.89 18.97 Minimum 14.70 Average 15.33 Source: Energy FuelPricesOnline.95 Maximum 15.

Platts Table 3 Platts Variation Versus Emo Wholesale Prices Cents per Litre Petrol Start 17.81 21. Platts 20 03/12/2008 .86 18.69 Average 18.75 21.68 Minimum 17.73 End 18.08 Source: Energy FuelPricesOnline.67 Maximum 18.39 21.33 Diesel 19.Figure 7 Platts Quotes/ Emo Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 19/11/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) EMO Schedule Diesel Linear (EMO Schedule Petrol) EMO Schedule Petrol Linear (EMO Schedule Diesel) Source: Energy FuelPricesOnline.

Platts Table 4 Platts Variation Versus Esso Wholesale Prices Cents per Litre Petrol Start 13. Platts 21 03/12/2008 .28 End 15.Figure 8 Platts Quotes/ Esso Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 19/11/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) ESSO Schedule Diesel Linear (ESSO Schedule Petrol) ESSO Schedule Petrol Linear (ESSO Schedule Diesel) Source: Energy FuelPricesOnline.00 Minimum 12.75 21.81 21.86 18.10 Maximum 16.34 Average 14.06 Diesel 19.08 Source: Energy FuelPricesOnline.39 21.

66 End 15.34 19. Platts Table 5 Platts Variation Versus Maxol Wholesale Prices Cents per Litre Petrol Start 14.69 17.Figure 9 Platts Quotes/ Maxol Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 27/02/2008 02/01/2008 16/01/2008 30/01/2008 13/02/2008 12/03/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 21/05/2008 04/06/2008 18/06/2008 02/07/2008 16/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 19/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) Maxol Schedule Diesel Linear (Maxol Schedule Petrol) Maxol Schedule Petrol Linear (Maxol Schedule Diesel) Source: Energy FuelPricesOnline.88 Source: Energy FuelPricesOnline.87 18. Platts 22 03/12/2008 .87 19.95 Maximum 15.95 Minimum 14.29 Diesel 17.66 Average 15.

04 Maximum 16.37 Figure 11Platts Quotes/ Topaz Wholesale Prices 140 Diesel 18.01 19.70 Average 15. Platts 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) Topaz Schedule Diesel Linear (Topaz Schedule Petrol) Topaz Schedule Petrol Linear (Topaz Schedule Diesel) Source: Energy FuelPricesOnline.73 16. Platts Table 6 Platts Variation Versus Morris Wholesale Prices Cents per Litre Petrol Start 14. Platts 23 03/12/2008 03/12/2008 .55 19.69 18.83 Source: Energy FuelPricesOnline.13 Minimum 14.77 End 16.Figure 10Platts Quotes/ Morris Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 16/01/2008 12/03/2008 21/05/2008 16/07/2008 19/11/2008 19/11/2008 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 04/06/2008 18/06/2008 02/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) Morris Schedule Diesel Linear (Morris Schedule Petrol) Morris Schedule Petrol Linear (Morris Schedule Diesel) Source: Energy FuelPricesOnline.

57 Figure 12Platts Quotes/Texaco Wholesale Prices 140 Diesel 18.74 Minimum 14.26 Diesel 17.54 17. Platts 120 100 Euro Cents Per Liter 80 60 40 20 0 02/01/2008 16/01/2008 30/01/2008 13/02/2008 27/02/2008 12/03/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 21/05/2008 04/06/2008 18/06/2008 02/07/2008 16/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 19/11/2008 Platts Petrol Linear (Platts Petrol) Platts Diesel Linear (Platts Diesel) Texaco Diesel Linear (Texaco Schedule Petrol) Texaco Schedule Petrol Linear (Texaco Diesel) Source: Energy FuelPricesOnline.00 Average 15.11 18.49 Minimum 14. Platts 24 03/12/2008 .82 18.77 End 16.37 Source: Energy FuelPricesOnline.39 End 15.78 19.21 18. Platts Table 8 Platts Variation Versus Texaco Wholesale Prices Cents per Litre Petrol Start 14.Table 7 Platts Variation Versus Topaz Wholesale Prices Cents per Litre Petrol Start 14.97 17.68 20.39 Average 15.14 Source: Energy FuelPricesOnline.23 19.68 Maximum 15.27 Maximum 16.

over the period under investigation. transportation costs etc. the gap between Platts quotes and wholesale prices includes the price of crude oil or refined product (where applicable).Figure 13Platts Quotes/ TOP Wholesale Prices 140 120 100 Euro Cents Per Liter 80 60 40 20 0 21/05/2008 04/06/2008 27/08/2008 19/11/2008 02/01/2008 16/01/2008 30/01/2008 13/02/2008 27/02/2008 12/03/2008 26/03/2008 09/04/2008 23/04/2008 07/05/2008 18/06/2008 02/07/2008 16/07/2008 30/07/2008 13/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 AA Petrol Linear (AA Petrol ) AA Diesel Linear (AA Diesel) Top Schedule Diesel Linear (Top Schedule Petrol) Top Schedule Petrol Linear (Top Schedule Diesel) Source: Energy FuelPricesOnline.90 21.90 19.2 gives an example of these different costs for a large wholesale oil company in Ireland. 3. 3. This company would buy on the average of the month and set its wholesale prices twice weekly.94 Maximum 17.2 to 3. taxes.94 Minimum 15.01 End 17. Platts Table 9 Platts Variation Versus TOP Wholesale Prices Cents per Litre Petrol Start 15.48 Source: Energy FuelPricesOnline.20 17.2 “On Costs” includes all costs from jetty to loading rack including marine freight. As mentioned previously. Platts To summarise. when an allowance for inflation is taken into account. 25 03/12/2008 . wholesale prices have for the most part tracked Platts refinery prices and that the variation between the two datasets remained fairly constant in increasing and decreasing markets. transit losses.91 Diesel 17.18 21. In 3. storage and throughput.2 to 3.2 show that. off loading costs.2 and 3.01 Average 15. port dues. marine insurance. exchange rates. The exact costs would vary over time and from location to location but these are indicative of current costs of importing into Dublin. and operational losses (evaporation).

2 -2.5 30.2 26.8 Wholesale Price Net of Excise and NORA Levy 40.75 537. It is worth reiterating that this does not include fuel card sales.9 36.8 Cents per litre Source: Industry Sources. Platts 26 .Cost of Product per litre) 26.5 346.7 1325. In this case Government taxes and levies account for 69% of the petrol pump price and 54% of the diesel price. distributor and retailer. minus or 0 depending on the circumstances $ per tonne ECB Data € per tonne € per tonne Average Density Platts Premia Total Platts US$ to € Platts Price On Costs Subtotal Litres per tonne Cost of Product per litre Estimated Gross Margin to Wholesale Schedule Price (Wholesale Price Net of Excise and NORA Levy .5 cent per litre would be a wholesaler selling to a decent sized service station.01 per litre for petrol and €0. credit and profit etc.17 $ per tonne Can be plus. NORA Levy 1. which represent very significant volumes and are much more competitively priced than “conventional” retail sales.3 1. The actual cost of product makes up 26% and 37% respectively (3. The remaining margin is what is available to the wholesaler.3 320. Platts The estimated gross margin includes the rebate given to distributors and or retailers.6 0.5 404.0 1183.3 425. is accounted for by inland delivery.3 Platts Price 406.Table 10 Petrol and Diesel Price Build-up early December 2008 Petrol Diesel Note Cents per litre Wholesale Price 92. these are the same company).0 1. sometimes of course. This 2.0 14.0 537.0 38.2). In this example the pump price is taken to be €1.5 456.5 cent per litre. This varies significantly and will depend on volume and distance travelled. The remainder.1 NO VAT incl.1 16. (for wholesaler.2 1.3 55. This is very significant in the context of changing retail prices (see discussion hereafter). Table 11 Petrol and Diesel Prices –Cost of Product and Taxes Petrol Diesel Refinery Product Price 26% 37% Government 69% 54% Product + Government = 95% 91% Pump Price 100% 100% Source: Industry Sources. as discussed above.1 93.0 Excise Duty 50. In this example the actual margin would be approximately 2.93 per litre for diesel.

what might be thought of as small fluctuations can have an important impact on the bottom line. and correspondingly higher volume per station. on a volume of 3m litres over a year. 22 International Energy Agency.5 to 2. The Agency has. ♦ Distance from port or distributor depot. The next section compares Platts quotes to retail prices. some once a day or more. October 2008. which dilutes it further. Oil Market Report.3 Oil Distributors /Retailers This segment of the market buys from wholesalers or direct from Whitegate refinery based on a fixed rebate off prices set twice a week. The margin in the retailer segment of the market is generally quite small and will depend on: ♦ Volume. For independent retailers the volume of sales will on average be in the region of 0. included in this would be the station’s operating costs. This is not generally possible due to the high costs of storage and also to the fact that retailer’s tank sizes are strictly regulated under planning regulations.5 cent a litre. the gross margin in the UK would be slightly higher. In the long term the amount of diesel that is produced may increase to meet this additional demand and wholesale and retail prices may fall. The gross margin at this level of the market is around 2. By comparison. ♦ Whether the station is owned by an oil wholesaler. which reflects the smaller number of petrol stations per capita. 27 . ♦ Local competition. Another topical concern is that diesel prices have become more expensive than petrol. Most retailers receive a delivery once a week. the figures are a close match to the margins presented above.000. Oil distributors must share their margin with the retailer. For example. The International Energy Agency22 has said that longer-term increases in demand from Europe and across the world (China especially) have left Europe ‘structurally short’ of diesel and hence refinery margins have increased. when historically the opposite was the case. A common misconception is that oil companies or retailers store product when the cost is rising and sell it at later at the higher price. a distributor or independently owned (and in the latter case if there is a Solus agreement in place). on a confidential basis. Given the volumes involved. number and size of stations in the area and ♦ Presence of a forecourt shop/convenience store. reviewed actual pricing and rebate data for a number of retailers.3. if a station could charge an extra cent. This trend has been observed throughout Europe. this would result in an “extra” profit of €30.5 million litres per annum.

UK or European Refiners Platts quotes for refined produc t Oil distributors or retailers or directly to consumers through own fuel stations Retailers. Table 12 Setting of Price . large oil company or oil distributors Twice Weekly or daily for own stations Wholesale minus a rebate 28 .Summary Market Buys Buys from Price Sells to Segment Based on Refinery Crude International Platts Oil Oil Market Crude Companies or retailers Wholesaler Refined Product Whitegate. Topaz Esso Tesco Applegreen Retailer Refined Product Whitegate. directly to consumers through own fuel stations Directly to consumers through own fuel stations Price Changes Monthly or Twice Weekly Twice Weekly for Distributors.2 presents a summary of the market. Distributor Refined Product Whitegate or large oil company Platts quotes for refined produc t Platts quotes for refined produc t Twice Weekly or daily for own stations Wholesale minus a rebate TOP Esso East Cork Oil Amber Oil Etc.3. up to daily for own stations Price Based on Platts as a benchmark Platts as a benchmark Examples ConocoPhillips Whitegate Topaz Maxol Texaco TOP Esso Etc.

Table 13 Oil Company Accounts 2007 Cost of Sales Gross profit Operating profit Net profit pre tax Net profit after tax Maxol23 €696. 000 3.193.144.365.078.670.9% Chevron25 €1.768. Applegreen is a brand name used by Petrogas Trading as Texaco 29 . low margin business.1 Oil Company Performance 3.385.4.9% Petrogas24 €140.8% €17.736.0 00 2.000 0. 000 2.966.0% €5.380.698.785.0 00 1.130.158.5 % Topaz €1.0 00 8.257.244.153.0 00 0.8% €6. derive to a far greater extent from extracting crude oil from the ground than from operations in the downstream segment of the market.4.0 00 11.6% €36.0 00 4.0 00 €47.8% €14.6% Source: Companies Registration Office It is clear from this table that while cost of sales are large. Profits are not differentiated by activity i.303.1% €2.0 00 1. 000 2.3.012. It would therefore appear that the very large profits such as those announced by oil companies.657.4 Competitiveness of the Market Oil company representatives have said repeatedly in public that the oil market in Ireland is very competitive.0 00 €47.014. Car Wash.319.0 00 0.8% €29.383.6 58 5.091. 23 24 25 Note that these figures refer to Maxol’s operations in the Republic of Ireland and Northern Ireland.2% €18.674.098. Two key metrics can be used to assess this statement: • Oil company performance as measured by their company accounts and • The number of stations in the market.0 00 0. This statement was reiterated in all the discussions the Agency had with oil companies and with other industry sources that might be considered to be more impartial than the former.3 84 €39.0 00 0.0 00 2.6% Esso €589. 000 €16.229. 3. Royal Dutch BP.8% €7. Note that vertically integrated oil companies operate each segment of their business separately.3% €6.4% €30.2 % €10.0 00 1.7 % €11.3% Conoco Phillips €2.029.6 % €13. for example.762. profits on fuel sales are combined with profits from shop and other forecourt sales e.8% €26.209. 064 0.3% €3.e.0 00 €49.0 00 1.g.6 10 1.0 00 0. This would suggest that this is a high volume.0 00 1. profits are modest.635.8 31 1.000 €26.3% €2.1 presents data from the company accounts of a number of the larger oil companies in Ireland.266.6% €6.056.0 00 0.

The Irish Petroleum Retailers Association have expressed concern about the spread of combined service station/retail outlets such as those operated by Tesco. particularly hot beverages and food. up to €500. The cost associated with fitting out a store is significant. Experian Catalist have stated that 105 sites closed in 2007. therefore customers will have to travel further to purchase fuel. 26 30 . following 107 closures in 2006 27. These new stations tend to be larger in size and boast retail outlets. on the basis that increasing numbers of large stations (using a large store to subsidise the fuel side of the business) drive smaller operators out of the market. The consensus in the industry is that the profit to be made in Ireland was not sufficient to make their continued presence worthwhile. would have been due to the high value of the land and ensuing property development. therefore data at this level is required in order to make a definitive statement. can be relatively large. It is argued that whilst margins are small on the fuel side of the business. for example. Another indication of the current competitiveness of the market is the limited presence of multi -national oil companies.000 in the case of larger sites. at a national level at least the number of stations per capita could suggest that the market is more competitive than the UK or Northern Ireland26. However. the margin on a cup or coffee. which negates some of the effect of current lower prices. A number of new sites opened in the same period. It is known that Tesco’s expansion plans for their fuel business in Ireland has been constrained by current planning restrictions. which offer a wide range of goods.4. the total number of stations has been in decline for the last 20 years or so. Only Esso and Texaco remain after Shell and Statoil sold their Irish interests to Topaz.3.4.2 Numbers in the Market As stated in section 2. They are of the opinion that the result in years to come will be that there will be a much smaller number of stations. particularly in Dublin. As stated earlier it is acknowledged that fuel markets are local in nature. 27 Some of these closures.

directly from the oil companies. data published monthly is of limited use. the fall in November was also a record with a reduction of 10. www. While the data is considered to be relatively accurate and it provides a good time-series. A national average is published for petrol and diesel each month. the Agency also conducted 4 widespread and detailed surveys in November.2. Comparisons are also made with data from motoring groups throughout the world.com 31 . from AA Ireland and via websites such as Pumps. albeit 28 Data from The AA. the results of which are detailed in section 4.8% for petrol and 7. 4. members of the public and some. AA Ireland is seeking to increase the frequency of data releases and has had initial discussions with the Agency on a proposal for a joint survey. in comparison to petrol.1.6% for diesel. As part of this study. 4. By comparison in the UK28.1.1 presents data from AA Ireland for the period July 2000 to November 2008.4 Collection of Retail Price Data Petrol and diesel retail prices in Ireland are available from a number of Government sources. Figure 14Petrol and Diesel Prices 150 140 130 120 Cents Per Litre 110 100 90 80 70 60 01/04/2001 01/07/2001 01/10/2001 01/01/2002 01/04/2002 01/07/2002 01/10/2002 01/01/2003 01/07/2004 01/04/2005 01/07/2005 01/10/2008 01/07/2000 01/10/2000 01/01/2001 01/04/2003 01/07/2003 01/10/2003 01/01/2004 01/04/2004 01/10/2004 01/01/2005 01/10/2005 01/01/2006 01/04/2006 01/07/2006 01/10/2006 01/01/2007 01/04/2007 01/07/2007 01/10/2007 01/01/2008 01/04/2008 01/07/2008 Petrol Diesel Source: AA Ireland The fall in November 2008 (11.theaa. in the current climate of rapidly fluctuating prices. The increasingly volatile nature of prices is evident as is the increasing price of diesel.8% for petrol and 8% for diesel) is the largest increase or decrease recorded over the period.ie. It will be noted that these decreases are less than those recorded in Ireland.1 Retail Price Data 4.1 AA Ireland Data Collection Data collected by AA Ireland comes from its rescue fleet.

4ppl.the data collection methodology differs in the UK so direct comparisons are not entirely reliable It is interesting to note the type of information that is published in the UK by The AA: London recorded the highest price for unleaded at 95. is problematical for studies of this nature in that there is no verification of user driven content. 4. by inputting a postcode on the AA website. In addition. Figure 15AA Ireland versus Platts 160 140 120 100 80 60 40 20 0 02/01/2008 30/01/2008 13/02/2008 27/02/2008 26/03/2008 09/04/2008 07/05/2008 21/05/2008 02/07/2008 16/01/2008 12/03/2008 23/04/2008 04/06/2008 18/06/2008 16/07/2008 30/07/2008 13/08/2008 27/08/2008 10/09/2008 24/09/2008 08/10/2008 22/10/2008 05/11/2008 Cents Per Litre AA Petrol AA Diesel Platts Petrol Platts Diesel Source: AA Ireland.4ppl. The Agency has had initial discussions with Experian Catalist to see if a similar process could be set up in Ireland. The available of weekly or daily data would greatly improve the quality of the analysis and therefore the conclusions that could be made. Supermarket prices for unleaded also fell over the month by 10. Data are obtained from fuel card transactions made at stations the day before. The fuel card is unbranded so it can be used in any filling station.2ppl.2ppl.1.ie. Experian Catalist collects fuel price data on a daily basis. The North West and Yorkshire and Humberside recorded the lowest price for unleaded at 94. consumers can see prices in their local area. The gap between supermarket prices and the UK average for unleaded has fallen to 1. An examination of the data suggests that there are 32 .2 Website Data Data collected as user driven content from websites such as pumps.5ppl. In the UK. Yorkshire and Humberside has the cheapest diesel at 108. The AA uses this data to publish a national average price for petrol and diesel each day.8ppl to 93. Platts 4. while an admirable initiative for consumers. the dataset is limited in that trends are aggregated over a month but it can be seen that the trends broadly move in the same direction.8 pence per litre (ppl) followed by Northern Ireland at 95.5ppl. Scotland recorded the highest diesel price at 109.1 compares AA Ireland retail prices with Platts quotes.1.

This information is.1. The result is that comparisons across countries are not valid and can be quite misleading. the following are members of the IPIA: Campus. more so regarding names and locations of sites. As mentioned in section 2. The Agency is aware from its discussions with the oil industry in recent months that this view is shared. These prices have attracted significant media attention in Ireland. Chevron. As part of its regular inflation report. While this system did not cause difficulties when prices were stable. currently collects petrol and diesel prices. with a view to improving data in the short term (DCENR is also aware of the need to consult other retailers). Emo Oil. the reporting system varies across member states.problems with accuracy. In addition. Both DCENR and the European Commission are aware that improved data is required as a matter of urgency. 4. DCENR has met with industry representatives through the IPIA. significant progress has been made in this regard. Energy and Natural Resources (DCENR). Only 5 oil companies are surveyed at a total of 210 sites nationally. Since the Agency started this study. such as Tesco and Applegreen. rather than incorrect prices. as a matter of priority. the result is that the same figures are published for Ireland for 4 weeks in a row. on behalf of the Irish Petroleum Industry Association.3 Central Statistics Office Data Collection There are two official sources of data in Ireland. DCENR has indicated that it is establishing a working group of industry and relevant government bodies.1. ConocoPhillips. 33 . An independent company. it cannot accommodate the frequent price fluctuations that have been a feature of the market in more recent times. the Central Statistics Office (CSO) and the Department of Communications. Ernst and Young. The data may not be representative. The prices are only collected once a month and are communicated to DCENR. Data is not used in this report for these reasons. Details of the sampling frame used are not publicly available but the robustness of the data is not in question.4 EU Data Collection The EU Market Observatory for Energy publishes consumer prices and net prices (excluding duties and taxes) of petroleum products in EU member states each week. Maxol. DCENR then reports these figures to the Commission. who are not IPIA members. Data gathered by DCENR are provided to the EU for this purpose. There are a number of issues with regard to this data. The latest data available at the time of writing (December 10 th) relates to October 14th. TOP and Topaz. as there is a significant portion of the market serviced by operators. Given that prices now change twice a week the data’s usefulness is therefore extremely limited and is not an accurate reflection of the level or frequency of price changes that actually occur in the market. Esso. however. with a view to reviewing and improving the national price data collection system. 4. published with a significant time lapse. the CSO collects data from approximately 82 stations throughout the country on a monthly basis and publishes a national average price for petrol and diesel.

As a first step towards improving the comparability of data at EU level. The results will be used to design a system that will better capture comparable information. 34 . Ireland and other Member States are now actively engaging in dialogue with the Commission with a view to establishing a more transparent reporting system across the EU. across member states. the European Commission has issued a questionnaire to all member states.

the purpose of which was to ascertain if falling international prices were being passed on to consumers in a timely manner. in addition. The second collates the results over the 4 Fridays and compares data with international Platts data. 35 .4. but there was some verification of the telephone survey by NCA Inspectors each Friday. ♦ A proportion of the retailers may have given incorrect prices. All the prices collected on November 7st were gathered by Agency staff. the same sites were surveyed each Friday. The surveys also highlight the inadequacy of collecting data once a month. the first looks at the data from November 7th. it was amended slightly to account for market share. As a result the issue is not considered to be to be significant. The sample frame was based on population per county. In order to obtain this data the Agency had to make concessions with regard to how the data would be used. this would not be reflected here. 21st and 28th November only national averages can be presented. In order to maintain consistency. where possible. Presentation of the results is split into two sections. An average of 302 stations were surveyed on each Friday in November by telephone and by visits from NCA inspectors. ♦ A larger share of the retailers co-operated with Agency telephone requests on the first Friday than in subsequent surveys (the number of sites surveyed was increased in order to mitigate this but it was not possible to eliminate the effect). There are a number of caveats with the results: ♦ Prices would have changed during each Friday. This.2 National Consumer Agency Surveys The NCA conducted 4 major price surveys on consecutive Fridays in November. This was not the case on subsequent Fridays where some data was provided directly by the oil companies. to decreased cooperation means that for 14th.

9 115.9 112.9 113.9 109.8 109.6 Laois 4 113.9 121. Table 14 Petrol Prices 7 November No.9 114.5 Meath 14 112.9 Mayo 8 112.0 6.9 116.3 Wicklow 8 112.0 6.1 Wexford 11 112.9 114.9 N/A 110.9 117.9 108.9 109.9 120.9 N/A N/A 114.9 109.9 110.8 106.2 presents data for petrol for November 7th.2 Offaly 6 113.4 8.0 7.0 4.4 107.0 5.0 1.2 for diesel.9 111.9 112.7 Cork 31 112.9 112.9 N/A 113.9 114.1 10.9 111.8 109.9 109.9 112.9 109.2 Sligo 4 109.6 Roscommon 4 112.9 Mode 109.3 Kilkenny 7 112.9 110.9 121.9 N/A 115.9 108.0 110.9 110.9 119.9 115.9 115.0 Source: NCA 36 .0 Galway 14 113.9 109.9 Clare 8 115.9 114.9 109. of Petrol Stations Average Carlow 4 109.9 115.9 Limerick 13 113.9 Cavan 4 114.1 4.9 109.9 111.9 117.6 Waterford 7 111.9 113.0 4.1 6.0 6.9 109.9 109.1 3.6 Westmeath 8 111.9 109.9 115.9 117.1 15.0 113.1 2.0 10.9 112.9 Min 106.9 109.0 Dublin 100 113.5 109.8 2008 Max 112.9 113.0 4.9 114.9 117.9 Variation 6. 4.9 115.8 N/A 109.9 107.8 112.0 9.0 11.4 Monaghan 4 112.9 114.5 Longford 4 109.9 109.4 Kerry 10 111.0 2.9 109.4.9 112.9 112.0 5.0 5.9 5.4 National 315 112.9 Louth 6 113.9 113.9 113.9 115.5 10.9 Donegal 10 113.0 6.9 Leitrim 3 112.0 6.9 112.9 Tipperary 10 112.3 Kildare 13 112.8 107.

9 108.9 116.3 Westmeath 8 112.0 6.0 5.2 Sligo 4 110.4 4.4 Cork 31 113.9 113.9 110.0 113.9 113.3 Monaghan 4 111.1 15.9 112.9 109.9 112.1 4.1 3.5 111. of Diesel Stations Average Carlow 4 111.4 109.9 Mode 111.0 4.0 8.8 107.4 National 315 113.1 8.7 Kildare 13 113.8 110. The variation is also the result of the particular market characteristics in each local area. The data illustrates that there is significant variation across the country and also within individual counties.5 4.9 115.9 109.9 109. the average price would be expected to be lower than in areas where there are few stations and where such stations would also be further away from each other.1 5.9 109. it will charge the maximum price the local market can bear.0 13.9 116.9 112.9 117.9 113.9 Variation 2.1 Waterford 7 112.9 122.9 113.0 11.0 Source: NCA The average data is most valuable here.9 115.9 114.0 9.9 110.9 117.2 Clare 8 116.9 117.6 Roscommon 4 112.7 Galway 14 114.9 116.9 109.9 114.9 Dublin 100 113.9 115. This is indeed the case in Dublin and Cork where the average is close to the national average.0 Kilkenny 7 113.9 113.0 4.3 Kerry 10 111.9 107.1 Meath 14 113.8 108.2 Tipperary 10 112.9 113.9 121.9 112.9 109.9 109. There are still significant variations within these counties.9 111.0 9.9 112.9 115.9 112.8 N/A 109.9 115.9 109.Table 15 Diesel Prices 7 November No.0 5.9 6.9 Offaly 6 113. 37 .9 115.6 Laois 4 113.9 114.2 Cavan 4 116.6 Longford 4 112.9 113.9 121.9 114.9 116.9 112. The current survey is not detailed enough to make firm conclusions at the county or micro level.9 117. This is not surprising as the survey captured data from all segments of the market. If one takes the natural assumption that each station will attempt to gain the maximum price for its products.5 Wicklow 8 112.9 122.9 111. which reflect the situation in local or “micro” markets where choice is not so readily available.9 114.9 112.9 113.9 114.0 6.0 Wexford 11 112.0 4. Data would need to be collected on a long-term basis by site in order get an accurate picture at that level.9 110.9 109.9 113.4 Leitrim 3 112.9 109.9 114.0 6.9 N/A 109. from small independent retailers to large company owned stations or supermarket retailers.9 Min 109.9 115.0 6.9 112.9 110. In areas where there are a relatively large number of stations.0 110.8 109.9 114.7 Mayo 8 112.9 108.0 3.8 Donegal 10 112.9 Louth 6 114.0 5.0 0.6 Limerick 13 114.0 3.4 2008 Max 111.9 113.9 112.

Table 16 National Results Petrol Petrol Nov-07 Average 112. delivered and paid for on the same day) Platts prices fell by somewhere in the region of 35% .5 115. Taking this into account29 the data indicates that saving are being passed on to consumers.9 96.1 318 Nov-28 104.e. however that this is a very short time period in which to make definite conclusions.9 Min 106.9 13. of Stations 315 Nov-14 111. at national level.9%).0 111.2 present the combined results from November 7. The data is not sufficient to make this conclusion at 29 I.9 Mode 112. It should be noted.0 105.4.9 99. 14.9 103. In the course of discussions with oil companies the Agency has seen confidential daily data over the period of a year plotting average daily retail prices for company owned sites compared with Platts data. for petrol that there were reductions of 35% to 21% in approximately 26% of the product price.2 116.5 120.0 282 Source: NCA The average national price fall in diesel over the month was 9. Table 17 National Results Diesel Diesel Nov-07 Average 113. Again.9 109. Data would need to be monitored on an ongoing basis. This insulates the pump price against wider variations in price. as stated in section 3 a large part of the pump price (69% for petrol and 54% for diesel in the example given is made up of fixed Government excise and the NORA levy). At first this appears to suggest that all the price reductions are not being passed onto consumers but.9 14.8 111.0 No.2 and 4. 38 .9 104. In conclusion.9 Variation 15. 21 and 28. of Stations 315 Nov-14 110.4cent (8.4 Max 122.8 109. for the most part.9 Mode 113.6 120.2 293 Nov-21 108.9 99.7 111.21% for petrol and 19%.8 109.8 Max 121.9 Min 107.1 cent (8.0 293 Nov-21 107. the trends move in the same direction. data in this section suggests that price reductions in refined product are passed onto consumers in good time but the time period that is studied here is relatively short.16% for diesel.0 No. Over the same period (there is a few days allowance given for the fact that product may not be ordered.9 Variation 15.9 15.9 16.9 98.0 282 Source: NCA The average national price fall in petrol over the month was 10.1 318 Nov-28 102.9 13.9 99.9 21.2%).

which was from 2nd January 200831 to early December 2008. There are a number of issues. for sites with lower volume. wholesale and retail prices do appear to track Platts quotes closely in terms of scale. what forces petrol and diesel prices back down is simply competition. This will not be the case where there are limited numbers of stations in an area. At a national level the available data supports this assertion. The ConocoPhillips refinery does buy crude oil but their pricing strategy is also based on Platts prices for refined product. direction and timing. In the long term crude oil prices will match Platts. When these prices fall. in a competitive market. Oil companies do not buy crude oil. it would be put on the Agency’s website and 30 In some cases. but not in the short term. Currently. There are some indications. it is not possible to make conclusions at a county or local level.the county or local level30. with regard to the price data that is available. In turn this forces competitors to do the same. The Agency's surveys show that collecting data at this frequency is of limited use to consumers. firstly to ascertain if price changes at international level are passed on to consumers in good time and secondly to increase transparency relating to how the oil industry works so that consumers may better understand how the price they pay for fuel is set. the price of petrol and diesel rises because of increases in refinery prices. however. such as the number of stations per capita. If accurate data could be sourced. It is thus concluded that at the national level. DCENR is making progress on improving the frequency and quality of data collection through discussions with the industry. Improved data collection at national and local level is required to make a more definite statement on the matter. A longer-term study would have required correcting for changing distribution costs. retailers are inclined when prices fall significantly in a short period of time to resist passing on the reduction too quickly in order to avoid loss on what they have in stock. one station will lower price. the number of stations that have closed in recent years and the increased emphasis on making profit through retail outlets attached to service stations. and will attract more volume. Based on the data currently available. Also at a national level. 31 39 . however. prices changes are passed on the consumers in good time. Evidence of this is the low level of profits made by oil companies. instead they purchase refined products such as petrol and diesel. Over the period of the study. 5 Conclusions The purpose of this study was twofold. At local level. It is therefore more relevant to compare pump prices with refined product prices (as benchmarked by Platts). In summary. The reason for choosing a relatively short period of time was to simplify the analysis as much as possible. longer term inflation etc. price data is collected once a month. that the market may be more competitive than the UK. the retail market shows strong evidence of competition between players. however. Ireland is a price taker due to its relatively small market size.

40 . There is scope for enhancement in analysis and reporting. current data availability in the Irish market is insufficient to analyse price changes at the local level with any degree of certainty. As highlighted previously.made available in a format that could be used by newspapers for those without Internet access. Consumers could then compare these averages with the advertised prices at stations to see if they are being offered a "fair price". and improvements in this area could serve to better inform consumers of general trends in petrol and diesel prices and to place a sustained spotlight on the competitive environment in this important sector.

This section details the investigations from a number of countries.gov/pub/oil_gas/petroleum/feature_articles/2003/gasolinepass/gasolinepass. petrol and diesel prices are slow to fall.asp 41 .at/BWB/English/annual_report_2006. which is put forward in many countries throughout the world.4%.2%. USA Over the past several years. but when the price of crude oil decreases.concorrencia. This is a view. Austria The Competition Authority in Austria33 built up (with the help of auto-touring associations) a huge data bank covering on average 1700 (out of approximately 2500) gasoline stations over a period of five years.Annex 1 Investigations Investigations As mentioned in section 1. Storage and transport account for 1.2%. with the logistical element (storage and transport) not accounting for more than 3. petrol and diesel prices at the pump rise quickly. 32 33 34 http://www. Storage and transport account for 1. In the case of diesel. and the retail component at around 9. In the course of the analysis. at around 42. When the tax element is factored out. around 80% of the recommended pump price stems from the ex-refinery price. The result of the econometric estimations pointed to a lagged response (of approximately 2 days) of Austrian prices if Platts notations go down in comparison to the reaction to an upward movement of Platts notations. the ex-refinery cost.6%. the main elements making up the recommended pump price are: tax at around 47%. there is a widely held view that when the price of crude oil increases. Prices in this case are sometimes referred to as being “sticky”. EIA found that the relationships between spot and retail prices are consistent and predictable. to such an extent that changes in spot prices can be used to forecast subsequent changes in retail prices for the appropriate regions.htm http://www. at around 31. and the retail component at around 8%.2%. Portugal A Report by the Competition Authority34 on the Fuel Market in Portugal found that the main elements making up the recommended pump price of 95-octane petrol are: tax at around 59.4%. the Energy Information Administration (EIA)32 has extensively studied the relationships between wholesale and retail markets for transportation fuels.pt/en/publications/competition.htm http://www.5%.bwb.gv.doe.eia. the ex-refinery cost.

In the same way. Other Studies The Polish and Spanish Competition Authorities are also conducting investigations. since the logistical and retail costs were constant during the period. 42 .In terms of the move in recommended pump prices (excluding tax). the move in recommended pump prices for 95-octane petrol and for diesel (excluding tax) in the first months of 2008 reflect the move in the ex-refinery price. as regards petrol. as discussed is not accurate for all member states. The EU study is based on Oil Bulletin data however. The Commission’s initial results have found that consumer prices so not react more rapidly to positive price shocks than negative ones. as is the European Commission35. ex-refinery prices in Portugal reflect the Rotterdam CIF price (Platts NWE platform). 35 The report is not available on line. In addition. which. the quotations move parallel to the New York price.