Forecourt retail: pay-as-you-drive may pay off in the shop
Published:10-June-2005
By BR staff writer
The UK transport secretary's pay-as-you-drive satellite charging plans may be controversial, but the removal of petrol duty and fuel tax would signal a greater transparency of fuel costs. Rather than damaging oil majors' downstream activities, road charging would reduce pump prices and, in fact, increase forecourt shop spend.
The new UK road charging proposals could have a positive impact on the forecourt.
Alistair Darling, the UK's transport secretary, has announced revolutionary plans for a pay-as-you-drive scheme in an effort to avert 'LA-style gridlock' on Britain's already congested road network. Under the proposal, fuel tax and petrol duty would be scrapped in favor of charging motorists according to the distance, route and time they travel via a satellite tracking device. A decision as to whether the scheme would be implemented nationally is expected in the next three to four years.
The proposal has already been met with opposition from motorists and some environmentalists who say the scheme will remove the incentive to purchase greener vehicles. However, on the forecourt, despite the potential reduction of vehicles on busy, urban routes, oil majors are set to benefit overall. Petrol duty currently accounts for E0.70 per liter and so, once removed, UK petrol prices would in fact be the cheapest in Europe - at least in the short-term.
Oil majors have long been a target for criticism and resentment from motorists. Despite the fact that they are prohibited across Europe from subsidizing downstream activities with upstream profits, a combination of rising pump prices and news of record-breaking earnings has cast them in the role of profiteer. High petrol prices have seen motorists less inclined to spend in the forecourt shop, particularly if it is owned by a fuel retailer rather than the more consumer-friendly supermarkets. While oil majors have invested heavily in shop concepts in an effort to compensate for wafer-thin fuel margins, they have often found partnerships with supermarkets, such as the recently announced joint venture between Marks & Spencer's Simply Food and BP, a more lucrative option.
Greater fuel price transparency will force motorists to reevaluate their perception of oil majors. Drivers will not associate road charging with oil companies' profits and, with petrol prices potentially halved, the money saved when refueling may then be ploughed back into the purchase of non-fuel items.
