The Australian Competition and Consumer Commission has released its 2012 report on the prices, costs and profits of unleaded petrol in Australia.
“The main influences on domestic petrol prices in Australia are international prices, which reached record levels during 2011-12 despite weak global economic conditions,” ACCC commissioner Joe Dimasi said.
ACCC monitoring shows that across the five largest cities, retail petrol prices at the bowser increased to an average of 143 cents per litre (cpl), in line with the relevant international benchmark price (Singapore Mogas 95). This was despite the high Australian dollar providing some protection from higher international prices. Even with the recent increases, petrol prices in Australia remain among the lowest in the OECD.
Over the last decade the average retail price (excluding taxes and subsidies) has risen around 120 per cent, while the price of Singapore Mogas 95 has risen around 122 per cent.
The monitoring report shows that the international price of petrol plus taxes account for 88 per cent of the retail price of petrol, while the local wholesale and retail industries account for 12 per cent of the final price.
Weak economic conditions in developed countries and slower growth of Asian economies were not enough to offset the effects of Middle East unrest and continued depletion of low cost conventional crude oil supplies which kept crude oil prices at their highest annual levels ever during 2011-12.
Profits in the Australian downstream petroleum industry across all products in 2011-12 were $408 million or around 0.5 cents per litre. The profit result for the downstream industry for 2011-12 represents a fall of 81 per cent compared with the previous twelve months.
The retail sector earned an average of 1.5 cpl on all its fuel products. This increased to 2.4 cpl when convenience store sales are included.
Results in 2011-12 were affected by losses in refining. The total supply sector (which includes refining and imports) incurred a loss of 1.54 cpl on all products.
Australia’s refining sector is vulnerable to overseas competition. Mobil ceased operations at the Port Stanvac refinery in Adelaide in 2003 and formally closed it in 2009. In October 2012 Shell closed its Clyde refinery in Sydney while Caltex has recently announced its decision to close the Kurnell refinery, also in Sydney, in 2014. These refinery closures will bring to five the number of refineries operating in Australia and are evidence of the refining sector adjusting to the challenges of import competition.
Price cycles in major metropolitan markets and relatively higher prices in regional centres continue to be the main sources of consumer concern.
“The sharp price rises during a price cycle drive many complaints to the ACCC although it is also the case that many consumers take advantage of the low point in the cycle to purchase petrol,” Mr Dimasi said.
Petrol price cycles are not responses to changes in cost but are the result of the pricing policies of major fuel retailers.
Another major source of complaints from motorists to the ACCC is prices in regional areas which generally tend to be higher than in major cities. This is generally due to lower volume of petrol sold at regional retail sites, higher transport costs and lower levels of competition. Lags between changes in prices in regional locations and capital cities sometimes accentuate the country-capital city differential.
The ACCC is sensitive to consumers’ concerns about regional prices and monitors prices in around 180 different regional locations to ensure that markets remain as competitive as possible. As many regional locations have a small number of retail outlets, the ACCC also pays particular attention to sales of retail sites to ensure that changes in ownership do not result in a substantial lessening of competition.
The ACCC has indicated during the year that it is undertaking two investigations into issues pertaining to the petrol industry. In 2012 the ACCC commenced an investigation into information sharing arrangements in the retail sector. These information sharing arrangements allow for private and quick exchange of comprehensive price information between major petrol retailers. The ACCC is concerned that these arrangements may lessen price competition in retailing.
The ACCC is also investigating the effects of shopper docket discount schemes on competition and consumer welfare. The ACCC is examining the size and duration of the discounts and whether they may in the long term lead to consumer detriment.
Both investigations are continuing.
The ACCC also provides regular updates and information on petrol on its web site including on price cycles.