Lack of competition driving high Brisbane petrol prices

9 October 2017

The ACCC has today released the findings of its study into the Brisbane petrol market, which shows a lack of competition is causing Brisbane motorists to pay more for petrol than in Sydney, Melbourne, Adelaide and Perth.

Between 2009–10 and 2016–17, Brisbane motorists paid 3.3 cents per litre (cpl) more for petrol on average than motorists in Australia’s other four largest cities.

“The ACCC’s report confirms Brisbane drivers’ suspicions that they are paying too much for petrol, and that some local fuel retailers are enjoying high profit margins at their expense,” ACCC Chairman Rod Sims said.

The report found that the average net profit per site in Brisbane was significantly higher than the average net profit per site across Australia. In 2015–16, for example, in Brisbane it was around 55 per cent higher.

Retailers in Brisbane achieved higher margins and profits due to weak retail competition. Over the first four months of 2017, the difference between retail prices and wholesale prices at the bottom of the price cycle was substantially higher in Brisbane than Sydney. This was also true at the peak of the price cycle.

“The high retail prices and margins for petrol in Brisbane have cost motorists there around $50 million per year more than their interstate counterparts since 2009–10. This is despite wholesale prices in Brisbane being similar to those in the other four largest cities,” Mr Sims said.

The report found that over the first four months of 2017, the extent of aggressive retail pricing by independent chains was significantly lower in Brisbane than Sydney.

“Independent chains can be competitive price setters in large metropolitan markets, and their absence means that prices are otherwise higher. There are only four independent chains in Brisbane: 7-Eleven, Puma Energy, Freedom Fuels and United,” Mr Sims said.

“By comparison, Sydney has seven independent chains, some of which explicitly state their aim to sell competitively-priced petrol. A key reason that Brisbane prices are higher than other capital cities is the lack of independent chains,” Mr Sims said.

The attached charts show that in Brisbane, the four lowest priced retailers were on average only around 1.3 cpl below the market average price, while in Sydney the four lowest priced retailers were on average around 3.8 cpl below the market average price.

Information about current petrol prices, which is readily available through a number of apps and websites, can enable consumers to shop around and purchase fuel at relatively lower priced retail sites. The ACCC’s charts below show the wide range of petrol prices by petrol retailers.

“In Brisbane, there is usually a wide range of prices at retail petrol sites across the city. By timing their purchases of petrol, and choosing to buy from the lowest priced retailer, motorists filling up a vehicle with a 60 litre tank could save themselves in the region of $10–$15 per tank of petrol,” Mr Sims said.

“I strongly encourage drivers to download fuel price apps and check websites to decide when to buy petrol and from which site as this may encourage stronger price competition among Brisbane retailers.”

The report is available at Report on the Brisbane petrol market

Background

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. This included undertaking regional market studies.

The ACCC monitors retail petrol prices for all capital cities and around 190 regional locations across Australia and has now conducted four regional market studies - Darwin, Launceston, Armidale and Cairns.

As part of its Cairns regional market study, the ACCC also examined retail margins and profits in Brisbane and found them to be high. This resulted in a separate, short report on the Brisbane petrol market.

In the Brisbane report, the ACCC has considered an independent operator that runs 10 or more retail sites with the same brand, and sets the retail price at those sites, to be an independent chain.

The chart below shows the difference between each major retailer’s average regular unleaded petrol (RULP) price and the market average RULP price in Brisbane in the period 1 January to 30 April 2017.

Source:   ACCC calculations based on data from Informed Sources.

Note:       Informed Sources collects price data electronically from its subscribers and manually for other brands.

The chart below shows the difference between each major retailer’s average E10 price and the market average E10 price in Sydney in the same period. E10 prices are used in Sydney rather than RULP because there are more sales of E10 than RULP in Sydney.

Source: ACCC calculations based on data from Informed Sources.

Note: Informed Sources collects price data electronically from its subscribers and manually for other brands. Data is also obtained from FuelCheck.

A comparison of the average prices by major retailer in Brisbane with those in Sydney shows that the extent of aggressive retail pricing by independent chains was significantly greater in Sydney than in Brisbane.

Release number: 
MR 167/16
ACCC Infocentre: 

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