A lack of competition has led to consistently high prices in the Armidale petrol market, according to the Australian Competition and Consumer Commission's latest regional petrol report.
“Armidale motorists have been paying on average around 8 cents per litre more than motorists in the five largest cities. Prices in Armidale have also been consistently higher than in smaller surrounding towns such as Glen Innes and Inverell” ACCC Chairman Rod Sims said.
Petrol prices in Armidale have been significantly higher than those in Sydney, Melbourne, Brisbane, Adelaide, and Perth from 2012–13. Between 2012-13 and 2014-15 Armidale motorists paid on average around 8 cents per litre (cpl) more for E10 (i.e. regular unleaded petrol (RULP) with up to 10 per cent ethanol) than motorists in the five largest cities paid for RULP. This differential was almost three times higher than it was between 2009-10 and 2011-12.
“The main reasons for the higher prices in Armidale were higher transport costs, higher retail operating costs per litre and, importantly, higher retail margins and profits,” Mr Sims said.
Relatively weak retail competition in Armidale, reflected by a lack of price discounting, has contributed to the increase in retail margins and profits in recent years. The Armidale market is small and relatively concentrated, and until recently did not have an active price discounter.
In June 2016 a Liberty-branded independently operated retail site commenced operations in Armidale, with consistently lower prices than its competitors. Around the same time, the NSW Government launched FuelCheck, an online tool providing consumers with real-time fuel price information covering almost every retail site across NSW.
“The introduction of an active discounter, as well as greater price transparency, has led to average petrol prices in Armidale decreasing relative to those in nearby Glen Innes,” Mr Sims said.
Over the last seven years Armidale E10 prices were consistently higher than prices in Glen Innes. In 2015-16 annual average E10 prices in Armidale were 9.5 cpl higher than those in Glen Innes. In the September quarter 2016 the difference decreased to 3.4 cpl.
“Easy access to current retail petrol prices enables motorists to shop around and find the lower priced retail sites. This promotes competitive market behaviour and rewards discounters,” Mr Sims said.
“Motorists that react to pricing behaviour by shopping around give petrol retailers less incentive to increase and maintain high prices. Continuing monitoring and publication of prices and margins by governments, media organisations, and motoring bodies can shine a light on what is happening in the market.”
Other findings in the report
Motorists in NSW use significantly more E10 and premium unleaded petrol (PULP), and less RULP, than the rest of Australia as a result of the ethanol mandate introduced by the state government in October 2007.
“While recognising possible environmental and other benefits that may be associated with the use of E10, the ethanol mandate has had a significant effect on competition and consumers in NSW by reducing the availability of RULP from many retail sites and reducing consumer choice,” Mr Sims said.
In 2015-16 annual average PULP 95 prices in Armidale were around 11 cpl higher than RULP prices and PULP 98 prices were around 18 cpl higher. Between 2007-08 and 2015-16 sales of PULP in NSW increased by 147 per cent, whereas in the rest of Australia the increase was only 42 per cent.
“The ACCC calculates that if motorists in Armidale had purchased the various types of petrol in the same proportions as the rest of Australia they would have saved over 2 cents on every litre of petrol purchased,” Mr Sims said.
See also Report on the Armidale petrol market.
Background
Regional market studies
In December 2014 the Australian Government directed the ACCC to monitor the prices, costs, and profits of unleaded petroleum products in Australia for a period of three years.
The ACCC collects retail petrol prices for all capital cities and over 190 regional locations across Australia. Following extensive assessment of price and other data for these locations, the ACCC announced in August 2015 that Armidale would be the third of its regional studies.
Previous market studies were on Darwin (released in November 2015) and Launceston (released in July 2016). The ACCC is currently working on a market study on Cairns (announced on 19 April 2016). On the conclusion of these regional market studies the ACCC will review the overall lessons learned and how they may apply in other regional locations.
Armidale retail market
There are currently eight retail sites in Armidale that sell petrol: four Caltex, one Coles Express, one Woolworths, one BP-branded (operated by Lowes), and one Liberty-branded (operated by an independent). Only three of these retail sites sell RULP; the remaining retail sites sell E10. There is only one retail site which sells both E10 and RULP. All eight retail sites sell at least one of PULP 95 and PULP 98, with six selling both.
FuelCheck
On 24 August 2016 the NSW Government launched FuelCheck, an online tool providing consumers with real-time fuel price information covering almost every retail site across NSW. It is accessible on any device connected to the internet, including smartphones, tablets, desk top computers and laptops.
Motorists can use this tool to identify those sites in Armidale selling the lowest E10 and RULP prices.