Lack of competition explains all

A difficult question to answer about a Conservative Cabinet Minister, obviously, but one that does rather need to be resolved. For he’s decided to order an inquiry into why motorway service stations charge a lot for petrol. The answer being that there’s only ever one retailer of petrol on a motorway service station, the next one usually being 30 to 50 miles away. Monopolies are bad, M’Kay?

Motorway service stations are to face an official probe into rip-off fuel prices.

As millions of motorists prepare for the Easter getaway, Transport Secretary Chris Grayling has written to competition watchdogs to ask for an investigation into sky-high motorway petrol and diesel prices.

The widening gulf in the cost of fuel means filling a family car on the motorway can cost up to £14 more than refuelling at a nearby forecourt.

Mr Grayling said drivers feel ‘exploited’ and warned lives could be put at risk if motorway motorists who are reluctant to fill up run out of petrol.

Quite why this needs a public inquiry to investigate is uncertain. The answer is obvious to all but the meanest of intelligences. A near captive market with no competition will mean higher prices. Because capitalists are greedy bastards, just as everyone says they are. It being that choice in a market which limits the amount of gelt they can gouge out of us in that frenzy of greed.

There are thus two possible answers. Insist on having two petrol retailers at each station or tell drivers to just suck it up.

But then Grayling and meanest intelligences…..

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  1. A second petrol retailer would change nothing.

    Margins on petrol are poor. Petrol retailers tend to use petrol to draw in customers. They make their money on the other stuff customers buy.

    A motorway petrol station has to make its money on the petrol itself.

    BWTM. From Business 101: generally, you set prices to balance margins and volume. Motorway petrol stations charge more BECAUSE THEY CAN.

    BWTM2. Motorway retail space is extremely restricted. Said petrol retailer is probably paying a pretty penny to have that space.

    BWTM3. The retailer’s contract for the space surely includes the clause that what they charge is their business. Therefore, an inquiry serves only to spotlight the sanctimonious. If government sticks their nose in too far, there will be NO retailers on motorways. The retailer is there to make money, not to serve some public good.

  2. What an utter dickhead. Seriously, how the fuck does such a monumental twat get to be transport minister and in a position to demand an investigation into something that the department of transport sets the rules about?

    This is nothing short of virtual signalling cockrot and anyone should know what’s behind it. “Look, I’m on your side”.

    The reality is that the government sets the locations, and then makes demands on the service stations. Everyone, whether they’re buying porn, a drink, petrol or nothing at all, can stop at motorway services for a piss and 2 hours of parking. That’s free. Also, the onramp to get to the services is free. Someone has to clean a lot more toilets rather than just patrons of the petrol station. Someone has to pay for it.

    And frankly, I’d like to think the fucking minister would have better things to worry about than the odd driver who messes up his plans (been there occassionally) and shoves a couple of gallons in, costing him a princely 50p, until he can get to another station.

  3. I think it’s mostly Gamecock’s BWTM2.

    jgh – there aren’t most of the way down most of my motorway journeys. But where there are, the difference is closer to 25p per litre, at the moment.

  4. Its not just the monopoly on motorway service stations. Service stations are responsible for the upkeep of onsite roads, the carpark and the slip roads. These are big, expensive and often easily damaged by lorries.

    The extra markup on petrol is easily explained by the cost of maintaining the site, whereas a city centre petrol station only has a small forecourt to maintain and rarely sees lorries.

    There are multiple apps to find alternative stations, many of which are only minutes from the motorway junctions. Even a city car will do ~400 miles on a single fill up and many cars these days can do 800 miles plus. I can’t remember the last time I filled up at a motorway service station.

    As you say the man is an idiot.

  5. The other things about motorway service stations is that they have to be open 24/7 and they also have a lot of other regulations they have to follow which normal petrol stations don’t have. Extra regulation –> extra cost. The real reason why petrol at motorway service stations is more expensive? The government.

  6. Also presumably the turnover on a motorway petrol station will be pretty low, as most people aren’t stupid enough to pay the high prices, so its a vicious circle: less turnover = less profit = raise prices = less turnover. Their market is basically people too dim to fill up before setting out on a long trip. No sensible person ever uses them. I don’t think I have ever bought a drop of fuel at a motorway service station.

    • No, it isn’t a vicious circle, or prices would be infinite and all the service stations would be shut. There are other factors too (see Nautical Nick’s reply, below), and the price reaches equilibrium. Under some conditions, not just involving failure to plan ahead, sensible people do gas up on the motorway – chiefly those for whom price is not the overarching criterion.

    • What Spike said – time / convenience versus price.

      There are many people for whom time and convenience is worth far more than the price gain to be had messing around trying to find a cheaper option, or planning ahead or othwewise.

      When I was doing a lot of variable commuting on business, it would have been completely counterproductive to focus any effort on say leaving a quickest route motorway (and before apps), to go off looking for some cheaper option?

      • Spike

        Indeed, but actually it doesn’t matter. It’s all part of the time / price equation.

        Am I “reimbursed”, do I charge a fee for time, or a fee for time plus “miles”, whatever? Ultimately the equation, whether anecdotally or for everyone else, is loosely price versus time.

        It was all a response in the context that it’s not just dim (or desperate) people who use motorway service stations for fuel – they quite obviously provide a highly valuable service.

      • I agree with that; both your time and your money are charged, and it is a plus if those hiring you believe you are weighing the two properly. However, spending ten minutes to save two quid is a bad decision on duty. Off the clock, that two pounds is all yours, tax-free. I agree with your final paragraph.

        • “Off the clock, that two pounds is all yours, tax-free.”

          Not when your life is full (and because work takes up a very substantive chunk) Free time was highly valuable – hence, opportunity cost..:) Otherwise, yes, agreed.

  7. So you decide to buy cheaper petrol a couple of miles off the motorway. lt’s see now, that’s about 40-50 pence in fuel to get there and back, plus an extra 10 minutes or so. At minimum wage that’s a quid or so. And just like the economics of coffee to go, the profit seeps through to the property value. So no, I dout they are making excess profits, nor that the motorist is being ripped off. They are paying for the convenience, or being penalised for their lack of forethought.

  8. That a government minister would be virtue-signalling is not remarkable. Howver, that the Transport Minister does not know the basics of the free market and of setting prices suggests that Britain will not solve its transport problems by embracing the free market. Imagine writing to “competition watchdogs” about a situation where there is no competition, asserting the proper price if all other things were equal when they obviously are not.

  9. Answer to the headline question is explained thus, he is a politician – both characteristics are required to qualify.

    On French motorways there are signs before a service area showing prices and brand of fuel, plus distance to next one/two service areas with their fuel prices. But then French motorways are toll roads and privately run.

    UK motorways are monopoly, as is NHS, BBC, railways (yes they are) and other public services.

    So, State monopolies…. gooooood, not ‘rip off’. Because monopolies are good for consumers.

    Private monopolies…. baaaaad, ‘rip off’. Because monopolies are bad for consumers.

    That’s cleared that up.

  10. We need a new law.

    “The Political Stupidity Act”.

    A member of the public puts forward a point that a bureaucrat/polipig is being stupid in advocating whatever. The case must be made logically as Tim has done with Grayling. The logic would be verified by logicians from around the world cross checked by other logicians. If the case is logically consistent enough to be provable then the polipig instigating it and his SCS scum aides ( who probably thought of it since most polis are thicker than pigshit mixed with cement) must report to the Public Boxing Booth. Where they are obliged to fight a five rounder against any of a selection of public volunteers picked out by electronic lottery.

    This will apply to females also. They will fight female boxers.

    After having their fucking stupid faces punched in a few times that should discourage morons like Grayling from opening their gobs before having done some thinking. If they can manage that much in the first place.

  11. On French motorways there are signs before a service area showing prices and brand of fuel, plus distance to next one/two service areas with their fuel prices. But then French motorways are toll roads and privately run.

    Exactly, and because of this they can’t compete on price. Instead, being France, they compete on quality and price of restaurant (you can get a pretty decent meal in a French aire. Look for the Arche sign, they’re pretty good.

    Also, they compete on toilet cleanliness. One of the big French retailers figured out that it is women who decide which service station to use based mainly on the quality and cleanliness of the toilets. The men then fill up with petrol at whatever station that happens to be. So they put a lot of effort into keeping their toilets clean.

      • The prices are almost identical, mainly because so much of it is made up of tax and the crude price. Whatever difference in price there is in motorway fuels, it’s not enough to differentiate one from another so they have to turn to other things. The chief of a French petrol retailer told me this.

    • Golf trip to Aiken, SC, on Wednesday. I went into a gas station in Columbia, SC, to use the toilet. Walked in front door, and looked around. There was a huge sign on the back left wall that said, I kid you not, “CLEAN RESTROOMS.”

      I thought, “Good marketing!,” and wondered where the “dirty restrooms” were.

      • (They are extra-cost!) I’ve seen the same signs in the Northeast (where vagabonds are Dreamers too). Gulf/CumberlandFarms had signs just below the price. You don’t see them now because it is a given, among the name-brand stations.

        Competing on restroom quality followed a long era in which gas stations shut their restrooms entirely, this surely following a long era of vandalism by patrons. Vandalism is minimized, outside the big chains, by giving the patron a key (with a fob that keeps it from being flushed down the toilet). This adds eye contact, and implicit pressure to actually make a purchase.

        • NH mandates that restaurants have ’em, but not gas stations. Gas stations do sell convenience, some offering shrink-wrapped meals, and these would be on the edge. But there are some tiny gas stations where even the employees can only use a toilet in the maintenance closet behind the cash register. I can even get in there sometimes, the cashier informally deciding I am not there either to rob him or to leave a mess for the next guy – a courtesy he would not extend to a Dreamer.

  12. Might be worth pointing out. The costs of running a fuel station on a motorway are not inconsiderable.
    For a start, there’s money paid for the permission to have a fuel station on a motorway. Ultimately copped by government. Which has a monopoly on permissions to have fuel stations on motorways. And charges appropriately. And other costs are higher. Because they’re stuck miles out of town on a bloody motorway. How much do you have to pay staff when the commute’s a 50 mile round trip needing a car?

  13. The answer (if needed) is surely to reduce the captivity of the market and add signage at junctions indicating the direction (and distance) to the nearest petrol station. It isn’t uncommon that there are actually ones within a few hundred yards of the junction.

    Then again most people have GPS which can do that function, so perhaps the problem will solve itself.