The Australian Competition and Consumer Commission’s sixth quarterly report on the Australian petroleum industry shows that petrol prices decreased significantly in the March quarter 2016.
The average petrol price in the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth) in the March quarter 2016 was 111.0 cents per litre (cpl), which was 13.4 cpl lower than in the previous quarter and 22.2 cpl lower than in the September quarter 2015.
“Motorists benefited from the lowest quarterly petrol prices in inflation adjusted terms since 1999,” ACCC Chairman Rod Sims said.
“The low petrol prices were due to two main influences: firstly, crude oil prices and international refined petrol prices in inflation adjusted terms fell to lows not seen since 2002 and 2008, respectively.”
“Secondly, gross retail margins decreased in the quarter. The ACCC believed that retail margins were unreasonably high in the second half of 2015 and wrote to the major petrol retailers in early February 2016 seeking an explanation for the high retail margins,” Mr Sims said.
The report notes that the reasons for increased margins identified by the companies included:
- time lags in the supply chain when wholesale prices are falling
- some retailers’ expectations that wholesale prices would increase following a period of low prices which limited discounting
- the higher operating and regulatory costs faced by retailers, which meant that they required higher margins to operate a sustainable business.
The ACCC will be further analysing these issues in coming months.
The chart shows the components of Australian petrol prices in the five largest cities in the March quarter 2016 and the December quarter 2015. It highlights that the largest contributors to the 13.4 cpl decrease in retail prices in the March quarter 2016 were international crude oil prices (down by 8.3 cpl) and retail margins (down by 2.6 cpl).
Components of retail petrol prices in March 2016 quarter and December quarter 2015 in cents per litre, five largest cities.
“The report also notes that a number of petrol price apps were released during the March quarter 2016 which will provide more information to consumers and help them find lower prices,” Mr Sims said.
- On 3 March 2016 7-Eleven introduced its new mobile app. The 7-Eleven Fuel App allows customers to view their closest five 7-Eleven fuel retail sites (of 434 sites on the app), find the cheapest price at these sites and lock in that price to redeem at any 7-Eleven store in Australia within seven days.
- On 6 March 2016 the GasBuddy mobile app launched in Australia—the first time that it has been available outside North America. GasBuddy is a crowdsourcing app that allows motorists to report fuel prices and find the cheapest fuel in their area.
Furthermore, on 20 May 2016 MotorMouth updated its app to provide motorists with access to near real time petrol price information for the first time. These changes to the MotorMouth app were a result of the settlement between the ACCC and data provider Informed Sources to resolve ACCC proceedings on petrol price information sharing.
“The release of these mobile apps, and more apps to come, will allow consumers to make better informed purchasing decisions and reward retailers who discount prices, therefore promoting greater price competition in petrol markets. This should also lead to downward pressure on retail margins,” Mr Sims said.
Prices in Brisbane remain relatively high. In the March quarter 2016, the average petrol price in Brisbane was 114.8 cpl, which was 4.8 cpl higher than the average of the four other largest cities (110.0 cpl). The high relative retail prices in Brisbane are likely to reflect inadequate competition at the retail level. It is to be hoped that greater price transparency can affect the high petrol prices and profits in Brisbane over coming months.
The difference between Darwin prices and the five largest cities has decreased substantially in the last year, following the ACCC report into the Darwin petrol market. In the year to March 2015 Darwin retail prices were on average 21.3 cpl higher than the five largest cities. This differential decreased substantially in the next four quarters. In the March quarter 2016 prices in Darwin were 9.6 cpl higher than those in the five largest cities, which seems much closer to where they should be, based on historical differentials.
The report also noted that, as with petrol prices, diesel prices in the five largest cities decreased significantly in the March quarter 2016. Quarterly average prices in the March quarter 2016 were 113.7 cpl, a decrease of 11.8 cpl from the previous quarter, and the lowest since the June quarter 1999 in real terms.
Further details can be found in the key messages of the March quarter 2016 petrol monitoring report, which are at Attachment A.
See: Report on the Australian petroleum industry – March quarter 2016.
Background
On 9 December 2014 the then Minister for Small Business, the Hon Bruce Billson MP, directed the ACCC to monitor the prices, costs and profits relating to the supply of unleaded petroleum products and report at least quarterly for a period of three years.
The ACCC produces two types of reports under these arrangements:
- quarterly 'macro' reports on petrol price movements and the overall drivers of Australian fuel prices; and
- market studies that look at 'micro' issues in considerable depth. These include an analysis of the price drivers of petrol in regional markets.
Informed Sources operates a petrol price information exchange service which allows for subscribing petrol retailers to exchange prices on a near real-time basis. The ACCC was concerned that this arrangement allowed for the highly frequent and private exchange of information between petrol companies, which had the effect or likely effect of substantially lessening competition for the sale of petrol.
In December 2015 the ACCC’s Federal Court proceedings against Informed Sources and five petrol retailers (7-Eleven, BP, Caltex, Coles Express and Woolworths) were resolved by way of court-enforceable undertakings. As part of the resolution, Informed Sources made its price information available to consumers for free from 20 May 2016 on a near real-time basis at the same time as it is received by the five retailers. The pricing information is also available to third parties (including app developers and motoring and consumer organisations).