How can I save at the gas pump?

11/01/2013 | FxM – Nacho Sainz-Ezquerra

Everyone’s always talking about the high price of gasoline (or petrol) and how it changes from week to week.

So is the case in the mass media, for example, in the blog Nada es Gratis (Nothing’s for Free) or in the newspaper ABC.

And the truth is that this topic requires some analysis. Starting with a report by the Spanish National Energy Commission (CNE) which offers some insight into this question, we find the “Monday Effect”. By, what is the “Monday Effect”? This report from November 2012 says that one can observe that the price of fuel follows a certain weekly pattern. Mondays have the lowest prices while on Thursday and Friday the prices rise to their highest point. The decrease on Monday is greater for diesel fuel (2%) than for gasoline 95RON (or 91AKI at 1%). This is the “Monday Effect”.

There are two reasons (or theories) that “Monday Effect” may exists:
– On one hand, there’s the theory that says this effect exists on Monday because of the Ministry of Industry makes petrol companies emit a weekly report in the European Union on their prices on the first working day of the week, hence, Monday. Therefore, it seems that these companies want to make it apparent that their fuel prices are lower than what they are on average, at least to the public’s eye.
– On the other hand, there is the theory of supply and demand. The consumption of fuel can increase as the weekend approaches. People make more trips: going to restaurants, visiting family members, travelling to a second home or vacation destination, etc. Consequently, the increase in the prevision of the greater demand makes the price go up. It then decreases along with the demand after the weekend on Monday.

And depending on which service station you choose, can you find ways to save?

Aside from choosing the day (as previously mentioned), another aspect to take into account is to choose the correct type of service station. According another report from the CNE, you have to know where to fill your tank. The stations that offer the lowest prices are those located at hypermarkets (supermarkets fused with department stores, sometimes called big-box stores) with a difference of 2.6€ cents/litre for gasoline and 2.5€ cents/litre under the national average. The most expensive fuel can be found at service stations on motorways or freeways with an increase of 0.4€ cents/litre for gasoline and 0.3€ cents/litre for diesel.

These types of stations at hypermarkets are included called “non-affiliated” or “generic”. These are different than the large distributors of fuel such as Repsol, Cepsa, etc. (in Spain). The “non-affiliated” service stations buy fuel from distributors but they have a competitive advantage in that they are free to establish their own prices, unlike the large distributors that pre-set sale prices.

It is true that these types of gas stations obtain a lower profit per litre of fuel than the large distributors. However, their strategy is to achieve greater turnover than their competitors. So, even by having a lower margin, they are still able to capture the fidelity of their customers and to give them incentives to buy their product because of having their point-of-sale next to where people do their shopping.

So, does this price difference influence the quality of the fuel?

Alfredo Hernández, a legal advisor for the Spanish Confederation of Service Stations (CEEES), states in an article in the newspaper El Mundo that: “basically, any fuel that is sold in any service station is completely comparable”.

Similiarly, the Compañía Logística de Hidrocarburos (CLH Group) that is in charge of the transport, storage and distribution of fuel in Spain states that the basic fuel is the same for all service stations. Nevertheless, each supply company can add certain additives that slightly modify the fuel within controlled parameters. It might be possible that certain additives produce modifications: a slight variability in the viscosity of the fuel, its energy efficiency, the dispersion of certain metals, the oxidations and, sometimes, the emission of pollution.

Why is it said that the price of fuel is more or less than in other countries?

According to the Spanish Association of Petroleum Product Operators (AOP), you can´t make a good comparison between different countries since all of them have different ways of reporting their prices. For example, in countries like Italy or Ireland, the prices are sent after having applied certain discounts (preferred customer card discounts, prepaid gas cards, etc.) while in Spain the prices are emitted without applying any discounts.

Another thing to take into account is the date that the reports are emitted. Spain sends them on Monday but Portugal and Poland send them on Tuesday and Finland and France send them on Friday.

It is also worth mentioning that aside from the reports that are emitted, each country has different prices, costs and discounts to take into consideration. The fixed costs are a good example of this. Some countries include taxes in their fixed costs while others subtract them. There are also costs like transport, finance, and marketing, among others to consider. This make is it clear that the final price for a consumer can be very different and difficult to compare.

And why are there different prices in Spain?

To be able to answer that question it is necessary to analyse the different factors that lead to the final price of fuel, such as:
– The actual cost of fuel at its international rate.
– The taxes on fuel, which can be between 35€ and 45€ cents/litre, depending on if it’s diesel or gasoline, respectively.
– The tax on retail sales of certain fuels.
– The vat
– The well-known “healthcare cent” in each Autonomous Community. This cost causes the greatest variation in price among the Communities.

According to a report by the Royal Automobile Club of Catalunya (RACC), holiday periods and long weekends have the same influence on prices as do the weekly patterns (the Monday Effect). This report shows that prices increase several cents as the periods approach known as the “holiday exodus”.

In conclusion, when you’re going to fill up your gas tank it’s important to remember the different factors that influence the prices of fuel like the day, the type of service station, the type of fuel, the Autonomous Community, etc. since these little tricks will save you a few euros in a given moment but over a year
you could save hundreds.