One station will decide to reduce its price to increase sales. Other stations then start to lose sales so reduce their prices to regain the lost sales. This pattern is repeated over several days. Without rebates, franchised dealers would soon face losses as pump prices fell. Over the course of a discount cycle, with rebates, dealers retail margins don t vary substantially.
Rebates are available to all locations, both city and country.
After several days of the discount cycle, with prices decreasing, one wholesaler will no longer be able to sustain the low wholesale prices and will advise its franchised dealer that rebates will cease from a particular time. The dealer may set the pump price at any level but typically will increase it in line with the increase in wholesale price. Other wholesalers, observing the pump price increase, may also cease rebates, so that all pump prices may increase in rapid succession. This behaviour is neither anti-competitive nor illegal and in fact results in lower prices on average over the cycle. There are about 8000 service stations in Australia.