Petrol cartel

Letter of the Day

KEITH ALLUM
Last updated 07:16 27/02/2013
petrol stand
Petrol prices have surged in past weeks, but is there a level of orchestration about those price rises?

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OPINION: So here we go once again. Petrol price increases have been accompanied by the usual tear- jerking spin from the oil company media people about exchange rates and the price of oil. After a few days, the prices at all petrol stations in the area settle down to identical values.

What the oil companies don't say is that each company has different long-term arrangements with crude oil suppliers and that the price of crude depends on the source.

For example, the prices of Brent, West Texas and Arabian crudes differ widely.

Each company buys different crudes, has different supply arrangements, has different operating costs and has different stock levels (ie the petrol you buy today was typically manufactured several months ago).

Yet the price of petrol at the pump in any area is identical and the prices move in unison.

The reason for the identical pricing is that the companies set the price by the Singapore spot price, which has nothing to do with their actual costs.

Basically there is an informal cartel and they go for the easy life and to hell with real competition.

KEITH ALLUM

New Plymouth

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- Taranaki Daily News

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