Petrol prices increased during the March quarter but fuel price apps can help motorists

30 June 2017

The Australian Competition and Consumer Commission’s tenth quarterly report on the Australian petroleum industry has found that the quarterly average price for petrol in the March quarter 2017 was 129.1 cents per litre (cpl), which is the highest since the September quarter 2015 (133.2 cpl).

Prices in the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide, and Perth) increased by 7.1 cpl. Retail prices in Perth were the highest with the average retail petrol price in Perth reaching 132.1 cpl.

“Higher petrol prices were primarily due to increases in international crude oil and refined petrol prices following the agreement by the Organisation of the Petroleum Exporting Companies (OPEC) cartel in November 2016 to limit crude oil production,” ACCC Chairman Rod Sims said.

In addition to high prices, price cycles remain a concern as the average price cycle increase across the five largest cities was 19.3 cpl, with the largest average increase seen in Adelaide at 24.8 cpl and smallest in Perth at 13.2 cpl.

“Many motorists are annoyed by the price cycles in the larger cities, which are the result of the profit maximising pricing policies of petrol retailers. The size of these price hikes, however, do show that motorists can benefit from using information from fuel price apps to shop around as price cycle increases vary across petrol stations,” Mr Sims said.

Buying petrol at the trough of the price cycle rather than the peak can make a significant difference for motorists. For example, the difference for motorists in Adelaide filling up an average 60-litre petrol tank at the price cycle trough rather than the peak would be in the region of $15. Motorists can also make savings during the price cycle because there are often large differences in retail prices at different sites at the same time.

“Increasing the availability of fuel price data to motorists will help them shop around to get the best deal,” Mr Sims said.

Motorists using the growing number of fuel price apps, such as the MotorMouth app, the GasBuddy app, and the FuelCheck website in NSW were able to access site-specific petrol prices.  Further initiatives in this area were announced in the March quarter 2017:

  • the Northern Territory Government announced that it would introduce a territory-wide real-time mandatory retail fuel price reporting scheme identical to the NSW FuelCheck scheme. This is expected to be in place in the second half of 2017.
  • the Tasmanian Government announced that it would provide a one-off grant to the Royal Automobile Club of Tasmania to support a crowd-sourced Tasmanian fuel price app in partnership with GasBuddy.

High margins

The report noted that average gross retail margins (i.e. the difference between average retail prices and average wholesale prices) in the five largest cities in the March quarter 2017 were 12.3 cpl, an increase of 1.0 cpl from the previous quarter. As they do not include costs, gross retail margins should not be confused with actual retail profits.

Margins in Perth and Melbourne in the March quarter 2017 were the highest quarterly average margins in real terms since the ACCC began monitoring them in 2002.

“The ACCC believes that the increase in margins in recent quarters cannot be adequately explained by an increase in regulatory and compliance costs,” Mr Sims said.

“Petrol retail margins are currently higher than we think they should be.”

Regional Market studies

The ACCC’s report on the Cairns petrol market was released in May 2017 and found that the main reasons for the higher prices in Cairns were: higher wholesale prices; higher retail operating costs per litre, higher retail margins on petrol, and higher profits.

The Cairns report also examined retail margins and profits in Brisbane and found them to be very high. The ACCC will examine the high retail prices, margins and profits in Brisbane in more detail in a separate, short, dedicated report. The ACCC intends to release this report in August.

The ACCC has undertaken three other petrol market studies in regional locations (Darwin, Launceston, and Armidale) and continues to closely monitor prices in these locations. The quarterly report found that in the March quarter 2017:

  • Darwin petrol prices and margins increased relative to the five largest cities in the quarter but remain below a competitive cost-based price

Rolling annual average retail prices and a competitive cost-based price in Darwin

  • Launceston prices increased significantly in the quarter and remain above a competitive cost-based price

Rolling annual average retail prices and a competitive cost-based price in Launceston

  • Armidale prices also increased in the quarter and remain above a competitive cost-based price.

Rolling annual average retail prices and a competitive cost-based price in Armidale

The competitive cost-based price provides a benchmark against which to compare current price levels. Its calculation reflects the fact that costs (such as freight and operating costs per litre) are higher, and assumes that retail margins should be broadly similar to long-term average retail margins in the five largest cities.

See: Report on the Australian petroleum industry—March quarter 2017

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.

The ACCC collects retail petrol prices for all capital cities and over 190 regional locations across Australia.

Release number: 
MR 104/17
ACCC Infocentre: 

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