Petrol Prices – Ripped Off

November 19, 2019 | By Colin | Filed in: Musings and Ideas for Discussion, Thought Leadership.

Petrol Prices – Ripped Off

Recently I have been noticing a bit of activity on Social Media where people are commenting that they feel ripped-off by gas/petrol prices in particular, but in reality, they are thinking, I believe, on a larger scale. Gas/petrol is just one of the most visible. Let’s declare that we are talking small business in this article. I won’t define small business at this point, as that is a whole different story.

Rip-off

Definitions

What does rip-off mean? In the Urban dictionary it is defined as:

  1. Stealing ideas and/or products to create something of lesser value.
  2. To take credit for something that is not their own.
  3. To slightly alter an existing idea and product for personal benefit.
  4. Disregard the origin of the true creation in attempt to make a quick buck and turn a few heads.

None of which relate to actual pricing of a product or service such as gas/petrol unless the product is being misrepresented. That would be item #1. ie offering a lower octane fuel for the higher octane price. Classic case.

Then there is the Collins Dictionary:

  1. If someone rips you off, they cheat you by charging you too much money for something or by selling you something that is broken or damaged.
    • The Consumer Federation claims banks are ripping you off by not passing along savings on interest rates. (Maybe? All banks have shareholders they must pay. Some of these investors might be you?)
    • The airlines have been accused of ripping off customers. (Hmmmm)

This comes much closer to what people have been saying. But we need to be careful here. Value judgements and subjective thinking can trip us up.

What is too much money? More than you WANT to pay? More than you paid last week? More than Bill bought the same thing for on-line? More than the business owner deserves? How do we decide?

Wage/Salary

When you and me go to work for a boss, we do so, in general to receive a wage or a salary. There is some kind of ‘quid-pro-quo’ here. We provide something the company wants and they pay us for our time. All good.

And we, more or less, happily massage our living expenses to match as closely as possible the weekly/fortnight/monthly money, wages, salary. What happens within the company has very little effect, most of the time, on the workers/employees. They get their money (the same amount) regularly. Usually no matter what. There are retrenchments/layoffs and unfortunate things like that, but they are still exceptions to the rule. You go to work, put in your time, get paid, end of story.

Business

Doesn’t work that way for a business. Those of us who have ever owned a business know this only too well.

Every business (even the big corporations many of us work for) must SELL something to make any money. Every day. And when you are the owner, the actual machinations, the regular daily sales of your product or service matter to you. They matter a lot.

You are in a business, whatever it is, to make this salary employees take for granted. If sales go down one month so does the money in your bank account. You get less or sometimes no pay that month. Bills and costs of running a business very rarely drop. They usually go up. And they are continuous, they don’t stop because sales do. And then there’s stuff like school fees to consider as an example. So we walk a very tight rope in our businesses.

Not In Business For You - The Customer

It may come as a shock to many of you, but a business owner (say the boss of a gas/petrol station) is not in business for you. He is in business for his family. The PRODUCT he sells is FOR you, but that is all.

He/she decides what monthly personal income is needed over and above all expenses (and very often a contingency for lower sales some times of the year). Just like decisions you make when sometimes you decide a job is not for you as the salary is not enough to fund the lifestyle you desire. Same in a business. As well most businesses have a cost structure that includes up-front money. Remember if the business fails, the proprietor loses this up-front money, but the loan (usually this up-front cost is funded by a bank) does not go away just because the business does. So now our business owner has no income but continued personal as well as business expenses. He/she must set up contingencies to cover this possibility.

Contingencies

Speaking of contingencies – many businesses price their goods/service based on a yearly average. Some – the most lucrative - can afford to fluctuate prices to the customer down in good times, up in the not so good, many cannot.

If all else was equal gas/petrol stations could change prices based on the cost of the last delivery of fuel. And this is NEVER the same in any two consecutive deliveries. I spent many years in the fuel industry, and this is a known fact.

But if they have decided to run as close as possible to the bone, this cheaper fuel load sold at the higher cost, is a minor bonus like a salary earner Christmas bonus for example. It may fund an otherwise unlikely holiday, or it may just be set aside as a buffer for the rainy day when sales hit rock bottom for no foreseeable reason.

Charges

Businesses charge what they want? True as far as it goes. But it would be silly to watch your bottom line disappear in the red because you went all altruistic and figured your customers deserved a better deal. “I can’t charge my customer’s that – it’s a rip-off. I’ll just charge this price instead. Of course I may not be able to save up enough for my tax bill, but let’s worry about that another day”.

How does that help anyone?

On the other side of the coin, it would be beyond stupid to charge a price much greater than the opposition for the same product/service, or to charge a price so high that your customer base evaporates.

Must Charge

It is a see-saw (teeter-totter). In fact business can’t really charge what they want for a product/service. They MUST charge what their bottom line requires. And yes, some of this will be discretionary income. Personal funds. To spend as they see fit on - what you may JUDGE as - frivolous things, Perhaps like boats, holidays, houses, restaurants, clothes etc. Most salary earners consider this a right. A direct consequence of putting in 40-50 hours at the coal-face each week.

By the way, most business owners I know would kill to spend only 40-50 hours per week at work. So would their families. It is not possible in almost every small business. A story for another time.

Of course, if the business is huge different scales of economics apply and much of the argument in this article is not accurate.

Summary

To summarise, business owners are in business for THEM. Not for YOU. They charge what they want within reason to fund the lifestyle many wage and salary earners take for granted. It is not for you to judge.

You can CHOOSE to pay the prices asked for many varied reasons, or not. Your CHOICE. You cannot bleat until you can compare the lifestyle you have with that of a business owner. Remember ALL businesses are set-up to provide the owner with an income. Disposable income and costs of doing business income. Unless it is a hobby or a side hustle; but if it is the main wage/salary of a family many things are set in concrete before they even begin.

If a lower price would actually increase the businesses’ bottom line then it is silly to overcharge. If not it is reality.

Take it or leave it. In almost every case there are other choices you can make that better suit your budget or your convenience.

Make them. Don’t play the victim card.

Quick to Blame

What’s it all about? We are in Control of our lives!


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