Letter: It’s a costly takeover

This letter sent to the Star was written by Mike Lawton, Grenoside

Friday, 24th September 2021, 6:47 am
Asda, Pictures: Getty Images.

It would seem that the takeover of the Asda Supermarket chain, by the Issa brothers, is proving costly to the general public.

A few weeks ago, there was an article in The Star, in which Brian Madderson, chairman of the Petrol Retailers Association, was speaking about the high cost of petrol, and diesel, the prices having risen to their highest for some time, driven by the higher cost of crude oil.

He said that customers should get used to higher prices, and that they were likely to go up even further.

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The jump in crude oil prices appeared to be caused by speculators. They were judging that there would be a big increase in demand due to people going back to work after the pandemic, so were buying huge quantities of oil, thereby pushing the price up, which reached $90 a barrel. Crude oil is traded in dollars, so the pound/dollar exchange rate has a bearing on the cost of fuel.

That exchange rate has been fluctuating between $1.36 and $1.39 to the pound over those weeks, while there has been a significant drop in the price of crude oil, due to demand not meeting the speculators’ expectations. The price at one time dropped to less than $70 a barrel, but is currently hovering around $75.

What has this got to do with the Issa brothers takeover of Asda, you might say?

Well, prior to the takeover, the Asda Group were the prime leaders in reducing the price of petrol, and if one of the other supermarkets announced a price reduction first, Asda would immediately match that reduction, or drop prices further.

Sometimes, just before prices fell, the likes of Morrisons or Sainsbury would offer a 10p per litre reduction on fuel for spending a certain amount in their supermarkets. This was done when they were making extra profits on fuels, before reducing the pump prices.

With the crude oil price having dropped significantly, while the pound/dollar exchange rate has remained fairly stable, there should have been a big drop in forecourt prices.

This has not happened, because Asda has not led the way, and the other supermarkets seem to have an unwritten agreement to keep the prices high, thus pocketing the extra profits.

It is not just on forecourt pricing that the Asda Group is making more profits.

The Star publishes a regular chart of prices at local supermarkets. In the past, Asda were always competitive, to within a few pence of the cheapest.

In the latest chart, a basket of goods cost £25.74p at Jack's, while the same basket of goods was a whopping £5.04p extra, at £30.78p.

It looks like customers need to change their shopping habits for fuel, and supermarket shopping, if they wish to avoid paying more than they should be doing in order to finance the debt taken on by the Issa brothers to buy the Asda Group.