News & Views

ACFO fears impact of pricing on fleets’ fuel budgets
4th July, 2017

Software being touted to UK retailers, which could result in pump prices fluctuating up to 10 times a day, would impact the ability of fleets to control fuel costs, ACFO has warned. The system, made possible by an artificial intelligence (AI) program called Price-Cast, has been developed by Denmark-based fuel pricing company a2i Systems.

Already in use across Europe and the United States, Price-Cast adapts to changing customer behaviour using a series of algorithms to predict when price increases should be implemented, in order to maximise profit. If adopted in the UK, it would mark a significant change to the current pricing model of fuel retailers, where pump prices depend on significant and sustained changes in wholesale prices, and are usually amended on a weekly basis. It is for this reason the concept has caused consternation among industry professionals, who see the technology as troublesome.

“This could be extremely difficult for fleets regarding fuel cards and control,” ACFO chairman John Pryor said. “It adds yet another complexity to fleets and businesses trying to keep up in today’s world. I cannot imagine businesses [operating fleets] seeing this as an advantage – I suspect the prices will predominantly be higher than lower.”

The AA’s public affairs officer Luke Bosdet shares Pryor’s concerns. “Watching the pump price on billboards is a national pastime, second only to weather watching,” he said. We think it will be just a matter of hours before a retailer who moves prices three or four times in a day is rumbled. If drivers already complain about retailers, particularly of the same brand, being 2p a litre more expensive in neighbouring towns, an extra £1 or more for a tank of fuel during busy periods will go down badly. The UK fuel market isn’t like the Danish fuel market and I think there would be a storm of protest if it became so.”

However, a2i Systems chief executive Ulrik Blitchfeldt defended the technology. He told Fleet News: “The changes in prices would amount to fractions of a penny. It won’t necessarily generate higher prices during peak times and implement rapidly changing rates. It is not as simple as that. If it raised prices then the petrol station down the road would get the business. Price-Cast is an advanced tool based on modern technology, empowering the user to reach their objective in an efficient way using sophisticated pricing methods.”

Siemens commodity manager Paul Tate said he felt it was “only a matter of time” before on-demand fuel pricing came into play in the UK market.

He said: “It was to be expected. Many pricing structures are based on algorithms. It was only a matter of time before fuel pricing followed suit to maximise profits. The people it will affect the most are smes, traditional multi-vendor fuel card users and business drivers who are not paying for fuel out of their own pocket. However this can be countered by fleet managers by communicating with fuel providers and/or collaborating with strategic partners. It is possible an app could be created to counter this change in the fuel market.”

Blitchfeldt was not willing to disclose which fuel retailers the company was talking to.

Source: Alphabet Digest