[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Wednesday, 7 September 2005, 09:56 GMT 10:56 UK
Why do petrol prices vary around the UK?
WHO, WHAT, WHY?
The Magazine answers...

Facts and figures behind UK petrol price rises

Petrol prices have passed the 1 a litre barrier in parts of Britain. But why do prices vary so much around the country?

In the wake of Hurricane Katrina petrol prices hit record highs this week, passing the 1 a litre barrier in some areas of Britain.

In Northern Ireland petrol stations were charging as much as 1.04 for a litre of unleaded petrol and prices reached 1.03 in parts of Wiltshire and 1.02 in East Sussex.

But the average cost is 94.6p, with the lowest recorded price being 90p, according to industry analysts. So why do prices vary so much?

It all comes down to size, according to experts. The size of the company running the petrol station, the size of its customer base and the size of the competition.

'Fierce'

WHO, WHAT, WHY?
Question Mark - from original architect's doodle design for BBC TV Centre
A new feature to the BBC News Magazine - aiming to answer some of the questions behind the headlines

Prices are usually higher in rural areas where there is less competition and fewer customers. Petrol stations in those areas are also more likely to be run by smaller, independent retailers, who have to charge more to cover business costs.

The cheapest prices are found in major cities, where petrol stations have to compete for customers. They are also more likely to be run by big companies - like supermarkets - who can offer more competitive rates.

"Supermarkets use motor fuel to promote the rest of their business, so they hide the cost in other goods they sell," says Ray Holloway, director of the Petrol Retailers Association (PRA).

"Local services are often seen as not being as cheap as supermarkets, but people don't do all the sums. In rural areas fewer people means there will be fewer sales, whereas in urban areas more people mean more sales. It is supply and demand."

Catalist, an analyst which collects information on the retail petrol market in Western Europe, agrees that supermarkets drive competition in cities and keep prices lower than other areas.

Closures

"Prices vary in this country because of competition," says Arthur Renshaw, Catalist's UK and Ireland manager.

"If you are in a rural area maybe you can charge a little more because there is less competition, but in urban areas there is fierce competition. Supermarkets play a big part in that."

Petrol pump and car
But while prices do vary around the country, only 28 petrol stations out of 10,000 are charging over 1 a litre, says Catalist. However, this might not be the case for long.

Currently many petrol pumps are unable to show a price above 99.99p a litre. But with Shell and BP reportedly preparing to spend millions on upgrading pumps and garage forecourts, motorists face the prospect of more petrol stations raising prices above 1 a litre.

But increasing petrol prices are not good news for retailers either. The PRA predicts that by the end of the year the number of petrol stations across the country will drop below 10,000, from a high of 39,000 in the early 70s. Some 400 stations have already closed in the first six months of 2005, the association said, on top of 600 closures last year.

"If you aren't selling much petrol, it doesn't take long to work out the economics," says Mr Holloway.

There are some winners when petrol prices rise, apart from the oil companies. Around 62% of the cost of a litre of petrol goes to the government, says Catalist. So every time the price goes up it benefits.


Got a question about the news? Maybe Who, What, Why? can help. Send the Magazine your question using the form below.

Name
Your e-mail address
Town/city and country
Comments

The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide.





RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites

PRODUCTS AND SERVICES

Americas Africa Europe Middle East South Asia Asia Pacific