http://www.bbc.co.uk/news/business-15308005

I see. I wonder how long that will last. I’m noting that petrol prices haven’t dropped, and I can’t say I’ve seen any improvement since Gideon promised to “watch them like a hawk”.

It's just the standard placatory noises, prompted by reading Daily Mail headlines no doubt, to try and keep the proles in line.

Standard political "look, let me be clear, I'm a caring human being, no honestly I am" bullsh!t.

Ignore them, is my advice.

I'll believe it when I see it.

They might do a token thing where you end up saving a whole £1 off your bill. The bills have been cut, Cameron keeps his promise, the greedy companies still have their money and the public still suffer.

Just so you know, the news reported today that tax on petrol is due to go up by 4p a litre in January. At this rate, I’ll be selling the car and buying an electric bike.

As usual, this government thinks more competition will solve the problem. The fact the major domestic sellers are operating in informal cartel (see how long it takes the rest to put their prices up once one of them does) doesn't really seem to have occurred to them.

Agreed. As far as petrol prices are concerned, there is no competition. You’re locked into one source of fuel, and one method of obtaining it. You’ll have seen how quick they all are to put prices up, and how slowly reductions are implemented, if at all.

Dear Mr Cameron.

Stop making us subsidise pointless, unreliable, ugly wind turnbines through our energy bills.

Ta.

As I see it, a competitive market is one where prices are determined by supply and demand with margins determined by competitive pressure. And a cartel distorts markets by allowing the competitors to set prices through collusion.

I don't understand what an 'informal cartel' could possibly be. Surely there either there is collusion (which is the 'form') or there is not? I wonder how we are to distinguish between a cartel which lacks form and a market that happens to driven in an annoying direction. Is it just that whenever prices go up, this is seen as evidence of the function of a cartel, but we lack evidence of form, and so we arrive at an unjustified accusation of informality?

In either case, surely the government is entirely correct that more competition will solve the problem, given that the problem of cartels (formally or otherwise) is lack of that same thing?

OPEC is a cartel. They set prices, and control the amount of oil pumped and therefore the prices.
http://en.wikipedia.org/wiki/OPEC

Gordon Brown, when he was chancellor, had to go to them to beg them to lower oil prices. And that was a time when we were looking at the price of a litre of petrol was around £1.00. There was some easing of fuel prices, but they quickly went up when his eye was turned.

The plain fact is that even when wholesale prices go down, the price of petrol at the pump remains steady. When the wholesale prices go up, the price of petrol goes up. If there was proper competition, then prices would fluctuate far more than they do. I think it was BigDave who told us a while back that in Germany, petrol pricesd can change by as much as €0.10 a week. The only way we can get a decent price reduction in petrol here is to spend £50 in Tesco and use their 5p off a litre voucher.



The government is either colluding or certainly acting to ensure that petrol prices do not decrease. On budget day this year, petrol prices rose by 1p, just in time for Gideon to announce a 1p reduction. Result: no change. There is no market. If there was, then surely there would be keener prices at the forecourt? Surely we would see prices fluctuate more wildly like they do in Germany. Surely that kind of pricing is indication of competition working. Here prices steadily rise and rarely drop. When they do, that lower prices is not there for any length of time. That’s not competition. That’s smells of price fixing - and that indicates that there is some form of collusion in play. A cartel within a cartel, as it were.

The current government is hell bent on “competition” to get us out of any or all problems, real, imagined or projected. It’s the Friedman way. I’m for more regulation and, right now, I think we need a regulator to look at the cost of petrol, oil and diesel to ensure that there is no collusion.

OPEC is a cartel, operating in exactly the way I described. It has the form AND the function, with collusion and price fixing. But my question is what is an "informal cartel" supposed to be? I don't see how OPEC has any bearing on that question other than as an example of what an informal cartel is not.

I also fail to see how any of those arguments support any conclusion other than that more competition is required? I offer no argument about whether this requires more open competition between incumbents or the import of new competitors. I just don't understand why we are calling the PM names when he argues for more competition, even though you and John are also arguing for more competition?

It seems like you are complaining because somebody you don't like is agreeing with you, and therefore you have elected not to agree with yourselves out of spite.

There is probably no smokey basement in which they all meet, but when one petrol price goes up in the area, it’s a pretty short time before all the competition put theirs up too. I fail to see anything to do with competition in that move - but much to do with implied collusion. There is no competition in an area where the difference in petrol prices is 1 or 2p. It costs more to drive across town than that saving would give you.



No. I’ve not argued for more competition. If this is free, unfettered competition in operation, then it’s clearly broken. Otherwise, I’d see my two local garages at each other’s throats with big price differences. But they aren’t. The fact that the price is much the same across the town, I’d say that there was some form of price fixing going on somewhere - either locally, or nationally where prices are banded according to some criteria to which we have no access. If this were not the case, then I’d see prices between £1.20 and £1.35 a litre here. They are all within £1.30 and £1.32 (according to petrolprices.com) - that, to me, seems too uniform.

Compare this to the camera shops in town when I watched the price of a camera drop over £100 in a month as the two vied with each other for custom. Surely competition should be driving prices down and not up, as the customer inevitably decides on the value and price.

So, I’ll reiterate. We need a regulatory body to ensure that prices are not being dictated by a formal or informal collusion.

Oh - Gideon is our esteemed chancellor’s middle name. But you knew that.

The problem is the government's definition of what competition is. To the government 'more choice of suppliers' = 'more competition'. This is patently not true. In the current UK utility market, suppliers follow each other closely and simply adding more companies doing the same thing does not increase pressure on price, it just means more choices offering the same poor deal.

I suspect you're taking the phrase 'informal cartel' a little too literally. I did not mean to suggest the companies are colluding, merely that they operate a collective pricing regime for their own common good i.e. if one puts their price up the rest follow and as they hardly ever reduce prices, so there is no 'competitive' pressure on prices because they never try to compete on price.

To put it bluntly, there is no real competition in the utility 'market' and having more players in it will not present that. In fact, IMO, it has the opposite effect. As more players enter the market, market share is spread thinner and thus profit reduced. One player then puts its price up to protect its profits and all the rest follow, leaving the consumer little time to shift to lower tariffs at the other players before their prices also rise. This is exactly the opposite of the behaviour competition is meant to cause.

Compare this to the price of bread in supermarkets. They're all the same to within a penny.

Except for Waitrose...

Your argument assumes that either there must be widely varying prices, or there must be no competition. But it seems to me that if all the vendors are buying a fungible product from an open market, then the effect of true competition would be to force all the vendors to reach roughly the same low price. If the competition has lead them all to the same undervalued price, then one vendor must eventually succumb to inflationary pressure, and their competitors must be under the same pressure, therefore I would expect them to all move to roughly the same new price. If one vendor is able to sustain a substantially lower or higher price than others given that they all have roughly similar costs - surely that would indicate lack of competition in some respect?

So I am wondering now if there is any valid way to infer the level of competition simply from prices? I am thinking the answer may be no.


That isn't valid at all. The customer is in charge of one aspect of pricing - demand. The camera shop has the supply. Only when demand does not meet supply can you be sure of prices falling, something your poor camera shop owner understands all too well. Before too long it seems that you will only have one camera shop, and if the petrol market becomes as cut throat as you seem to desire, you won't need to compare petrol prices for very long either.


I can assure you that I know none of the cabinet's middle names, and also that I feel no need to rectify that situation. As for going to the trouble of referring to a politician by the most obscure detail of their identity - that strikes me as pointless and indulgent.

And I remain entirely unsold on this oxymoronic notion of "informal collusion". It still looks to me like an attempt to redefine competition in negative terms on the grounds that you can't show an actual absence of competition.

If the various suppliers are all buying the same product on the same market, then all they have to distinguish themselves against their competition is their purchasing strategies. Whoever predicts the fluctuations of the market best, and makes best use of the futures market to secure their supplies at the best price, makes a fraction of a penny per pound more margin than the others. I don't understand how we are supposed to expect major competitive gains for the end user from that sort of difference.

You talk of switching suppliers without (IMO) considering the importance of this. The sheer fact that one supplier's gas is exactly the same product as any other's indicates that the market is entirely fungible. That surely leads to the conclusion that in a competitive market, all suppliers should have almost exactly the same prices. So it is not coherent to complain that these indetikit suppliers are doing their job wrong when they do it right and end up with identikit pricing.

That BBC article contains the most telling point:

Now in a market that turns over many billions of pounds per year, that's not a lot of margin to play with. And I have to ask, what benefit do we actually expect from all this shouting? If everything goes to plan and your energy bills are reduced at the expense of these companies' profits, the most you could expect is for your gas bill to drop by £125 per annum, and for nobody to have any reason to invest billions of pounds in new terminals etc. That hardly sounds like a win-win scenario to me.