The Australian Competition and Consumer Commission is concerned that some petrol wholesale pricing arrangements in Australia may lead to higher average retail prices.
A report, Terminal gate pricing arrangements in Australia and other fuel pricing arrangements in Western Australia, was provided by the ACCC to the Federal Government after its request to monitor the arrangements.
"In broad terms, terminal gate pricing refers to the sale of fuel from the terminal gate without additional services that may be provided such as freight, branding and marketing", ACCC Chairman, Professor Allan Fels, said today. "However, various conditions may be imposed on suppliers – such as a ceiling on prices - that can have the effect of reducing discounts they provide.
"To the extent that the discounts are reduced, this may have an adverse effect on competition and lead to higher wholesale and retail prices".
Terminal gate pricing arrangements were introduced on a regulatory basis in Western Australia and Victoria in 2001 and on a voluntary basis in the other states by a number of the oil companies in 2002. With respect to the Victorian terminal gate pricing arrangements introduced in August 2001, the ACCC found it difficult to form a view on their impact because the extent to which they apply to the petroleum market in Victoria was not clear. The arrangements apply to both spot and contract sales and the ACCC was unable to determine how many contracts fell under the arrangements.
However, the report noted that since the introduction of the arrangements in Victoria, average retail prices in both Melbourne and country Victoria had increased by 1.0 and 0.5 cents per litre (cpl) respectively against a benchmark indicator.
"The introduction of the terminal gate pricing arrangements may have contributed to this increase, although it is not possible to conclude with certainty that is the case", Professor Fels said.
With respect to the fuel pricing arrangements in Western Australia, the report said that the ACCC found it hard to conclude that fuel pricing arrangements introduced by the State Government have been successful to date.
The report noted that the terminal gate pricing arrangements introduced in Western Australia had not worked as intended, as few sales had been made under these arrangements.
"This has been recognised by the Western Australian Government, which introduced revised terminal gate pricing arrangements in December 2002", Professor Fels said.
With respect to other arrangements in Western Australia, he noted that the 24-hour rule (under which petrol retailers are required to fix their prices for 24 hours) is likely to have reduced rather than increased competition because it adversely affected independent operators.
The report noted that Perth petrol prices had increased by 2.5 – 3.0 cpl against various benchmarks.
"A significant proportion of this increase could be attributable to the higher fuel standards in WA but some of it is likely to be due to other factors such as the 24-hour rule and a reduction in competition as a result of the fuel standards.
"The ACCC is concerned at the impact on the petroleum industry in WA of the combination of the extensive fuel price regulations and the tighter Western Australian fuel standards. These arrangements have significant implications for the nature of competition in the market and influence the amount of investment undertaken".
The report also examined the terminal gate pricing arrangements introduced by the oil companies in 2002, but was unable to meaningfully form a view on the outcomes of the arrangements. This was because they had only been in place for a short period of time and it was likely that a significant proportion of the petroleum market was not covered by them. However, the report noted that some of the larger independents were concerned that these terminal gate pricing arrangements may result in them obtaining smaller discounts than they had received in the past.
The report will be available on the ACCC website.