CONSUMER AFFAIRS | 30.08.2011

Aral rewards fuel stations for charging higher prices

 

Aral wants to pay a commission to stations that charge more

Germany's leading chain of gas stations, Aral, is testing a new business model that rewards operators for charging higher prices. The company says it's trying to stabilize a volatile market, but critics aren't convinced.

 

Germany's largest chain of fuel stations, the BP subsidiary Aral, is testing a new price structure that compensates station operators for maintaining higher prices for a longer period of time.

The newspaper Die Welt reported Monday it had obtained internal memos detailing Aral's strategy. The company confirmed the trial and described the move as an attempt to bring stability to a market that has become increasingly volatile.

"The fuel station market is highly contested and requires new contracts so Aral fuel stations can stay competitive," Aral said in a statement. "The intense competition in the German fuel station market determines prices. Without prices conforming to the market, Aral would lose customers to the competition."

But not everyone is sold on the company's benign intentions.

Companies like Aral say they barely profit from the fuel itself"If the market leader decides to do this, the others will follow, as is usual for an oligopoly," Steffen Bock, who runs fuel comparison website clever-tanken.de, wrote in an email to Deutsche Welle. "The new model would be very appealing for gas station operators because it would give them higher margins, because the price is centrally determined," he added.

Highs and lows

Last year, German fuel stations upped their prices 196 times, lowering them gradually over a period of hours or days in an attempt to outmaneuver the competition before raising prices again and repeating the cycle. By comparison, there were only 43 such pricing rounds in 1999.

Critics say modern computerized systems have made it easier for the five companies that control 70 percent of the nation's gas stations to adjust prices based on each other's actions.

On average, German gas station leaseholders only make about 1 euro cent of profit on every liter of fuel they sell. As a result, less than 20 percent of the average operator's revenue comes from gasoline and diesel sales. Nearly two thirds is generated by other items like newspapers, cigarettes, snacks and beverages.

Karin Retzlaff, of the Berlin-based Association of the German Petroleum Industry (MWV), says fuel station operators need to offer low gas prices to lure customers into their lucrative shops.

Getting drivers to buy drinks and cigarettes is a priority for station operators"People only shop in the stores if they've tanked there," she told Deutsche Welle. "Every fuel station operator is interested in getting as many people as possible into the shop."

Price fixing accusations

In May, Germany's federal cartel office announced the results of a three-year study of fuel prices nationwide and leveled charges that aggressive price jockeying was driving up prices.

It said Aral, Shell, Jet, Esso and Total - the five companies that dominate the German market - were potentially running afoul of cartel regulations.

That's a charge the MWV roundly rejects.

"Compared to other European countries, fuel prices in Germany are - before taxes - among the most affordable in Europe," Retzlaff said.

Author: Gerhard Schneibel
Editor: Sam Edmonds

 

 

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