Tesco set to spark petrol price war

TESCO is plotting a petrol price war by opening more fuel stations at some of its 80 stores in Ireland.

Consumers spending 40 filling up their petrol tank can save €5.40 by buying their petrol at Tesco.

The Society of the Irish Motor Industry (SIMI) claims five fuel stations have been forced to close down in Killarney, Co Kerry, and several more are on the verge of going out of business, since Tesco began selling petrol at its store in the town.

A litre of petrol at Tesco sells for 79.9c, compared to a national average price of 90.8c. A litre of diesel retails for 72.9c at Tesco, compared to a national average price of 83.4c.

Tesco Ireland has two petrol stations at present, in the forecourts of their stores in Killarney and Finglas in Dublin. The Killarney outlet has been open for a year. It is too early to definitively show the impact in Dublin as the Tesco petrol station only opened in December. However, it is understood that surrounding stations have reduced their prices dramatically.

Now Tesco, buoyed by the success of both their operations, are planning more fuel outlets nationwide initially in Malahide in Dublin and Maynooth in Kildare in a move that is certain to force down the price of petrol and diesel. A Tesco spokesperson confirmed "several more" stations are planned.

The cost of a litre of petrol in Killarney is now 79.9c compared to 85.9c when Tesco launched its service there a year ago. Diesel is now selling for 72.9c per litre compared to 76c in February 2003.

The British retail giant, which employs over 10,000 people here, already has a large share of the British market with 288 stations nationwide.

However, some of Tesco's plans to cut motoring costs have been criticised by SIMI, which unsuccessfully appealed the retailer's plans to open petrol outlets to Bord Pleanála.

SIMI chief executive Cyril McHugh said entire towns are suffering because of Tesco's low fuel prices. "Towns will be wiped out because of this. Even places in Kerry like Caherciveen, 40 miles from Killarney, are in trouble," he said.

"People there are driving to Killarney to buy groceries and petrol and they're leaving no money in their hometown."

Mr McHugh believes tourism in the popular Kerry visitor town will also suffer. "In Scotland the government has to fund fuel stations so visitors can complete tourist trails, the same will happen in Kerry," Mr McHugh said.

But Killarney Chamber of Commerce said they have no evidence Tesco's arrival sparked the closure of filling stations. Chamber executive Gerry O'Grady said lower petrol prices should boost business. "Before this we were hearing people were travelling out of town to buy petrol. The prices are more competitive now and that has to be welcomed," he said.

The Automobile Association (AA) has also given the thumbs up to Tesco's fuel prices. "We're delighted they've shaken up the market here," AA spokesperson Conor Faughnan said.

"They're bringing down the cost of motoring which we welcome."

A Tesco spokesperson said it will continue to offer consumers cheap fuel despite the criticism.

"What we have done is given customers a choice and they make up their own minds where to buy fuel."