Fuel Price Economy: A Study on the Influence of Fuel Prices on Consumer Choice of Service Providers

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Contents
Executive summary.................................................................................................... 3
Section (1): Introduction............................................................................................. 3
Section (2a): What is the shape of the distribution of the variable Price?..................4
Section (2b): Is the average price of petrol is in all service station in September
2016 is more than 115 Australian cents?...................................................................5
Section (3a): Give numerical summary and appropriate graphical display for
comparing the price of petrol of those four major Brands..........................................6
Section (3b): Perform a suitable hypothesis test at a 5% level of significance to test
whether there a price difference among these four major Brands.............................8
Section 4: Sample survey at KOI University...............................................................8
Conclusion.................................................................................................................. 9
References............................................................................................................... 10

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Executive summary
Fuel price economy is perhaps one of the most imperative overlooked factors that
determine consumers’ choice of fuel service provider. Research has shown that fuel
price is indeed a major factor that influence fuel consumer’s choice. However some
studies argue that fuel quality and service trump the influence of prices on choice of
consumers. The aim of the study was to investigate whether fuel prices have a
significant influence on choice of the consumer on the fuel service provider.
Analysis carried on historical fuel prices data and service providers indicated that
fuel prices had indeed a significant relationship with consumer choice of service
providers. The study found the biggest fuel market owner had the lowest prices and
also the lowest price fluctuations. Caltex and seven eleven owned more than half of
the market share with a market with a mean price of 122.6 compared on the overall
mean price of 123.3.
Section (1): Introduction
Fuel is a highly consumed commodity across the globe especially in the
developed nations (Hinterhuber, 2015). Although there are complaints from its
detrimental effect on the environment, the demand for fuel continues to grow. This
can be attributed to the population increase, globalization and the individual’s
increased interest in owning personal mode of transport. High demand for fuel
attracts many fuel service providers. There are a number of factors that affect the
one’s choice of fuel service providers such as service quality (Klaus & Maklan, 2013),
proximity, fuel and lastly and arguably the most important is the fuel price (Li, Shen,
Wang & Jiang, 2016). More established service providers are able to sell fuel at lower
prices to attract more consumers thus maintaining a large market share (Liu-
Thompkins & Tam, 2013). In this discussion the effect of price on the demand of fuel
based on the price in eight different fuel services providers in Australia is invested
and discussed. The aim of the research was to find whether fuel prices has a
significant effect on the consumers’ choice of service provider. The investigation
further focuses on the four major fuel providers in Australia to further investigate
their market share and compare it to the fuel prices offered by the service
providers.
The first dataset comprised of eight service station fuel price history located
in Australia. The dataset was collected from Australian government and thus
secondary and was contained of six variables (ckbarth & Madlener, 2016). Five of the
variables were explanatory variable and one was the response .The first
explanatory variable was service station name which was a string variable. Second
and third explanatory variables were fuel stations’ address and suburb and were
also a string variable. Fourth explanatory variable in the dataset was the postal
code of the sampled fuel station and its data type was numeric. The fifth
explanatory variable in the dataset was fuel code, the variable was categorical
dataset and comprised of the different types of fuel sold at the fuel stations under
study. The fifth and final variable under study was the fuel prices, the variable was
the response variable of the study and its data type was numeric. The data is

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suitable to carry may be used to investigate fuel prices in various suburbs and
preferred brands different in various suburbs. (Yeung, 2013)
The second dataset was composed of primary data. The data was collected
by conducting a survey on 30 students from King’s Owen University. Interviews
method was used in the study to collect quantitative data. Random sampling
method was used in the selecting the population sample. Individuals that did not
buy fuel from any fuels station were disregarded. The collected dataset contained
two variables. The first variable was students’ number which was a numeric
datatype and represented the students sampled in the survey. The variable was the
explanatory variable in the study. The other variable wad the students preferred
brand of fuel service provides. This was the response variable in the study and its
data was numeric. There was however some limitations that were identified in the
survey. Firstly the sample size of thirty was significantly small therefore the data
may have been biased. Secondly, the individuals sampled in the survey was from a
relatively small geographical area. This may have also contributed to biasness of
the data. (Van-Vliet, Shove & Chappells, 2012).
Section (2a): What is the shape of the distribution of the
variable Price?
The shape of the distribution of the price variable was investigated using
descriptive statistics, histogram and box and whisker plot (Stevens, 2010). Excel
Analytics was used in the conducting the hypothesis test and the results were as
displayed in the table 1 below.
Table 1
Price
Mean 123.3709
Standard Error 0.403144
Median 123.9
Mode 129.9
Standard Deviation 12.74853
Sample Variance 162.5249
Kurtosis -0.18395
Skewness 0.101395
Range 106.7
Minimum 78.9
Maximum 185.6
Sum 123370.9
Count 1000
The mean of the price of fuel in all the fuel station services was 123.4
Australian cents. The mode or the most occurring price of fuel across all sampled