UK Supermarkets Entering Battle Over Fuel Prices

Cheaper petrol prices (for now)
In recent days a price battle has started between some of the UK’s major supermarkets over what they’re charging for petrol and diesel at the pumps. It all started with a move from Asda when they announced on the 18th that their fuel prices would be dropping from Tuesday the 19th just in time for the upcoming bank holiday weekend.

Inevitably the others would have to follow, and right on cue they are doing so like falling dominoes. This morning (Wednesday the 20th) press releases from both Tesco and Sainsbury’s were sent out stating that they’re also dropping prices by the same margin of 2p per litre of petrol and 1p per litre of diesel.

It may not seem a lot for a supermarket to trim off their margin, but petrol and diesel are largely loss leaders to get people into their store and buying additional goods where the real money lies. Therefore a small cut of 2p  in petrol prices can actually be the difference between someone doing their weekly shop at one supermarket over a competitors.

One of the most interesting developments of this will be to see when prices go back up (and who is the first to make that move).

Past Fuel Wars Between SuperMarkets

This isn’t the first time that fuel price wars have broke out amongst the UK’s supermarkets. Back in 2009 Asda was again the catalyst for such a pricing battle [2] when they dropped prices to keep things below the psychological £1 per litre barrier. Just as before, other major supermarket chains were forced to follow suit and lower their prices to keep footfall through the door.

It really puts forward the question how much power one supermarket has over its competitors in terms of pricing for such staple items such as petrol, milk and bread? Probably none of them would admit weakness in this area, but time has shown that pricing of such goods is very sensitive amongst competitors.

Let’s just enjoy the cheaper fuel while it lasts; have a good bank holiday everyone!

References:
[1] Image sourced under creative commons licence from MIke Kirby on Geograph.org.uk
[2] Geoff Riley, Tutor 2 U (2009), “Petrol Price War Breaks Out”.