A new report from the Australian Competition and Consumer Commission (ACCC) shows that the price of petrol was historically high in 2013–14.
“At 150.6 cents per litre (cpl), 2013-14 saw the third highest average price on record in real terms. This was primarily driven by the international oil price and the Australian/US dollar exchange rate,” ACCC Chairman Rod Sims said.
“However, retail profits declined in 2013-14 – possibly as a result of ACCC action that limited the subsidy that supermarkets could provide to fuel discount offers. The ACCC was concerned these offers could have had short term effects on fuel markets and long-term effects on the structure of the retail fuel market.”
In 2013–14, the annual average retail regular unleaded petrol (RULP) price in the five largest cities in Australia (Sydney, Melbourne, Brisbane Adelaide and Perth) was 150.6 cpl. This was a 9.3 cpl increase from 2012-13.
“International refined petrol prices and retail petrol prices have each decreased by around 20 cpl since July 2014. As the international price is such a large component of the retail price, this should be a welcome relief for motorists,” Mr Sims said.
“The international price of refined petrol made up 54 per cent of the average price consumers were paying at the pump, while taxes made up 34 per cent.”
The rate of taxation of fuel in Australia has been steadily diminishing over the last fifteen years. The percentage of the final retail price of petrol represented by taxes has decreased from around 56 per cent in 1999–2000.
As a result of relatively low rates of fuel taxation, Australia’s petrol prices are among the lowest in the developed world. In the June quarter 2014 Australia had the fourth lowest retail petrol prices in the Organisation for Economic Co-operation and Development.
“In 2013-14 the Australian dollar failed to protect motorists from high international petrol prices, as the AUD-USD exchange rate fell to its lowest levels since 2009-10. While the international market price for refined petrol in 2012?13 and 2013?14 was around 110 $US per barrel, a lower AUD-USD exchange rate in 2013-14 drove the price higher for motorists at the bowser,” Mr Sims said.
“If the annual average exchange rate in 2013–14 had been at the same level as in 2012–13, retail petrol prices would have been around 10 cpl lower.”
The ACCC has been active in the petrol industry in 2013–14.
The ACCC’s investigation into the competition implications of shopper docket discount fuel offers by the major supermarkets was completed in December 2013. This investigation resulted in undertakings being given to the ACCC that prevent Coles and Woolworths offering fuel discounts that are subsidised by their supermarket operations and from bundling supermarket fuel offers greater than 4.0 cpl.
The ACCC later took action against both Coles and Woolworths for breaches of these undertakings. The court found that Woolworths had breached the undertaking by bundling discount offers, but that later offers from both Coles and Woolworths did not.
The ACCC also completed its investigation into price information sharing arrangements in the retail petrol sector. On 19 August 2014 the ACCC instituted proceedings in the Federal Court against Informed Sources (Australia) Pty Ltd and five petrol retailers.
The ACCC considered the acquisition by Peregrine of BP retail sites in South Australia, and the acquisition by Caltex of the fuel division of the Scotts Group of Companies. In both cases the ACCC decided to not oppose the proposed acquisition, subject to court-enforceable undertakings.
The ACCC’s report found that total downstream petroleum industry net profits in 2013–14 were higher than in 2012–13. Net profits for all products and services in the downstream petroleum industry were around $1.16 billion, compared with net profits in real terms of $796 million in 2012–13.
The retail sector reported net profits of $495 million across all products and services in 2013–14, a decrease of 10 per cent in real terms from 2012–13. Lower retail sector profits in 2013–14 may have been influenced by ACCC undertakings relating to shopper docket discount schemes by the supermarkets (Coles and Woolworths). Prior to January 2014 Coles and Woolworths funded a substantial portion of their discounts from their supermarket businesses. Since then, they have fully funded their shopper docket fuel discount offers from their fuel retailing businesses.
The ACCC’s report found that sales of ethanol blended petrol in Australia in 2013–14 decreased by around 8 per cent from 2012–13. The largest volume of ethanol blended petrol is sold in NSW (around 82 per cent of total sales), which is primarily a result of the NSW ethanol mandate (which currently requires that 6 per cent of the total volume of petrol sold in NSW be ethanol).
The ethanol mandate in NSW has had a significant impact on consumers. It has reduced consumer choice: some motorists who cannot use – or choose not to use – ethanol blended petrol in their vehicles turn to premium unleaded petrol (PULP). As PULP retails at a higher price than RULP, it has meant that these motorists have been paying significantly higher prices than if they had continued to purchase RULP.
The ACCC is also re-launching the petrol price cycle page on its website.
The site will provide information on petrol price cycles in the five largest cities. Price cycles do not occur in Canberra, Hobart, Darwin, or in most regional locations across Australia.
“With the information provided on the ACCC website, motorists in the five largest cities will be in a better position to plan petrol purchases and save money at the bowser,” Mr Sims said.
The following information is provided for each of the five largest cities:
- a chart with daily average prices over the last 45 days;
- the duration and shape of the past five price cycles; and
- most important, new buying tips to help consumers understand the position of the current price cycle.
“The savings that motorists can make by buying wisely are not insignificant and we hope our new buying tips service can significantly facilitate this,” Mr Sims said.
“Most motorists will be aware of the significant price jumps that occur during the increasing phase of the price cycle. Prices often jump by between 15 to 20 cpl or more. If a motorist filled up a 60 litre tank at the bottom price rather than the top price, they would save themselves up to $12.”
“In 2014 in the four eastern capitals the length of price cycles has averaged around three weeks. So, if motorists bought at the bottom of the cycle every time, they could save around $200 per year. In Perth, which has regular seven day price cycles, a motorist could save more.”
The report is available via Monitoring of the Australian petroleum industry 2014
The petrol price cycle information, see: Petrol price cycles.
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