Petrol Prices

As an economist, it's been fascinating to me to see how little impact competition from the Canberra Airport petrol stations is having on the rest of the market.

Here's a screenshot from PetrolSpy, a handy iPhone app that tracks petrol prices. Right now, the best price in Braddon is 125.9 cents per litre, compared with 98.7 cents per litre at the airport.

Let's put that into perspective. If you're filling up with 50 litres, a 27.2 cent/litre price difference translates into a $13.60 difference in the final bill. 

Now, suppose you had to drive the 16 kilometre round-trip from Braddon to the airport. Even in a car with average fuel economy (say 10 litres per 100km), you'd spend just $1.60 on the fuel to get there. That leaves the question of whether the net $12 saving in is worth the time taken to make the trip.

The fact that a large price gap persists suggests to me that either people don't know about cheap petrol at the airport (which would be surprising, since it's on the front page of today's Canberra Times). Or maybe Canberrans just aren't that price-sensitive (I don't use a fuel card, but I expect there are quite a lot of people who do). Or perhaps the law of one price will eventually kick in - it'll just take a month or two.

Any other theories?

Showing 2 reactions

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  • commented 2015-01-14 16:05:37 +1100
    *that said best value before. The pun doesn’t work with cheapest; no offence intended!
  • commented 2015-01-14 16:04:19 +1100
    Nice post, Andrew. The last stop coming in from Sydney to the north is also surprisingly cheaper than the city all the time, maybe even more than the airport. I suspect they price based on income data, like insurers and supermarkets tend to do. I know someone who did a thesis on this in Brisbane, who found that the inner-city independents were the cheapest (true story, not just for the pun).

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