2,000 petrol stations `at risk'
Sunday 21 April 1996
Last year, two petrol stations a day closed down as competition from supermarkets and the oil majors intensified. But the PRA, which represents Britain's 9,000 independently owned outlets, warns the death toll will rise markedly this year.
Attempts by some operators to lift pump prices have not worked, according to Paul Sykes, the PRA president. "The supermarkets tried to raise prices by 2p a litre a fortnight ago. But Shell didn't follow suit, forcing all the others to cut prices again."
The PRA submitted written evidence on the effects of low petrol prices to the House of Commons' Trade and Industry Select Committee last week ahead of an oral hearing in May.
It failed to convince the Director-General of Fair Trading, John Bridgeman, of the need for an inquiry in January when Esso introduced its "Pricewatch" campaign.
Mr Bridgeman commented: "Competition is beneficial to consumers. But I realise that more vigorous price competition may have an adverse effect on smaller independent retailers." He added: "We will continue to monitor the situation, given the importance of the market to consumers."
Esso rolled out its "Pricewatch" campaign nationwide after trials in Scotland and the North-east. Ian Upson, Esso's managing director, denies that it amounts to a price war. "We have not started a price war, and we're not undercutting the market but matching low prices which already exist. And it is not our intention to put anyone out of business."
Central to Esso's strategy is meeting the pump prices of supermarkets. Grocery chains Tesco, Safeway and Sainsbury, have doubled market share in the past five years by pricing petrol a few pence per litre cheaper than neighbouring garages. They now speak for more than 22 per cent of the UK petrol retail market. But price cutting is hurting even them. Tesco, announcing annual figures last Tuesday, admitted: "Profits from petrol will be impacted in the current year, if these conditions continue throughout the year."
The petrol majors will also suffer. NatWest Securities estimates the price war will wipe around pounds 1bn from profits this year. But, it adds, domination of the petrol retailing market would allow them to recoup their losses within three-and-a-half years.
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