Quantifying the “Gull effect”

Households better off by $159 annually. What Competitive Pressure Brings

Quantifying the “Gull effect”

Auckland, 18 December 2012 - Pukekohe, South of Auckland is the most recent community to be experiencing what has been described by the AA as the “Gull Effect”. A new fuel outlet has opened in town and the price of the fuel sold in that town has dropped by up to 9 cents per litre.

Comparing Pukekohe prices versus the standard national price charged by the major oil companies both before and after the new Gull site opened in late October indicates Regular 91 octane prices for Pukekohe motorists have fallen significantly. As at today the prices for 91 octane petrol are 5.0 cents per litre lower – regardless of what outlet you shop at.

Dave Bodger General Manager for Gull New Zealand estimates that around 14.7 million litres of ‘91’ is being sold to private motorists annually in Pukekohe.

“A saving of 5.0 cents per litre equates to $753,000 annually across all of Pukekohe. The 2006 Census data showed there were 4,623 households in ‘Puke’. Quick maths puts this saving at $159 per household, per year.

“Competition has to be the best and simplest tax system there is,” notes Bodger.

“Simply by opening we reallocate basically three-quarters of a million dollars annually from the Oil Giants’ coffers to the motorists of Pukekohe, regardless of whether people shop at Gull or not. If you do shop at Gull, today we are a further 4 cents per litre cheaper than the opposition in Pukekohe so on a weekly fill of $60 at Gull you will save a further $62 annually.

“Gull has 35 outlets where we observe this effect. It’s fantastic our competitive approach can influence fuel prices in 35 communities to help all motorists not just our customers.”

Bodger says it’s time to ask:
• If the Oil Giants can extend this pricing policy to neighbourhoods where Gull is why can’t they do it elsewhere?
• Are cross subsidies in effect from one region to another?
• Is there additional margin available to pass on to the consumer in communities where Gull does not operate?
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