British petrol stations will start introducing demand-based surge pricing within months, similar to the model used by taxi company Uber, according to media reports.
The move is being driven by the major supermarket chains, who control more than 1,000 petrol stations across the UK. The supermarkets are also looking at plans to apply demand-based pricing to all their stores, not just petrol stations.
The Telegraph reported last month that the supermarkets are in the final stages of their plans to roll out surge pricing across their stations, using technology developed by Danish company a2i Systems, and that it could be live within a matter of months.
As petrol stations have become more automated over the years, implementing this kind of technology is now relatively simple. Pricing information on signs and individual pumps can be updated in a matter of seconds, and can be changed up or down continuously throughout the day.
Using artificial intelligence to control surge pricing
The technology, already commonly used in Europe and America, uses artificial intelligence to predict how consumers behave. Like Uber’s fare prices, it means petrol and diesel prices will rise during busy period and fall during quiet times.
It is likely that the system software will work in both predictive and reactive modes. That means it will not only react to high demand, but also predict when those busy times will come. The most obvious cases, as pointed out by the Telegraph, are that prices will skyrocket around holiday times and during the morning and afternoon school runs. But the software will also be able to log how many customers are visiting the station each hour and nudge prices up or down accordingly.
The supermarkets are already gathering your fuel-buying data
The systems will also be programmed with existing customer knowledge, which the supermarkets have been gathering for years. Every time you scan your Clubcard or Nectar loyalty card, the supermarket knows how much of what type fuel you have bought, as well as where and when you bought it.
Even if the data has been properly anonymised, it is still building a pattern of millions of customers’ fuel-buying habits. That data can be fed into the software to help retailers know when customers are most likely to need fuel. Each station will be able to collect its own data, rather than relying on national trends, to maximise profits.
How will customers respond to surge pricing for petrol?
Polls conducted by the Telegraph and the Mirror on their websites have shown, unsurprisingly, that about 85% of their readers thought that surge pricing for fuel and/or groceries was a bad idea.
Uber has faced a public backlash over the last few years for its surge pricing practices. However, that backlash has diminished significantly as consumers became accustomed to how the company’s pricing model worked. The company continues to grow and its surge pricing has become accepted practice, especially in major cities like London.
A similar backlash is likely to happen in the world of petrol pricing, no doubt fuelled by the tabloid media. But petrol retailers will be hoping that the story follows the same pathway as Uber’s, with consumers eventually accepting the idea (however reluctantly).
What are your thoughts on surge pricing for petrol and diesel? Let us know in the comments below.