The Australian Competition and Consumer Commission has released its 2011 report on the prices, costs and profits of unleaded petrol in Australia.
“For many Australians, petrol costs are an unavoidable outlay accounting for a significant proportion of household expenditure at around 4%. It is not surprising then that the community is very interested in ensuring that petrol prices are as low as possible and that they reflect competitive forces,” ACCC commissioner Joe Dimasi said.
ACCC monitoring shows that over 2010-11 prices were around 8 cents per litre higher than in 2009-10. Across the five largest cities, retail petrol prices at the bowser increased to an average of 132 cpl, in line with the relevant international benchmark price (Singapore Mogas 95) and the exchange rate. Despite this, petrol prices in Australia remain among the lowest in the OECD.
This close parity has been the case since 2002, with the average retail price rising 122.5%, while the price of Mogas rose 123.4% over the same period.
Higher retail petrol prices this year reflected geopolitical tension in the Middle East and continuing strong economic activity in Asia, which led to stronger demand and higher crude oil prices during 2011.
The trend shows continuing higher demand for oil. The International Energy Agency and other experts have concluded that world oil prices (and subsequently retail petrol prices) have reached a new and significantly higher average price.
Overall the ACCC did not find evidence of excessive profits in the Australian downstream petrol industry. It estimates that net profit to the petrol companies on each litre of petrol sold was around 2.2 cents. Other profit measures such as return on assets are comparable to other Australian manufacturing industries and petrol industries in other countries.
Prices cycles in major metropolitan markets and relatively higher prices in regional centres continue to be the main sources of consumer concern.
“The sharp price rises during a price cycle drive many complaints to the ACCC, though it is also the case that many consumers take advantage of the low point in the cycle to purchase petrol,” Mr Dimasi said.
Petrol price cycles are not responses to changes in cost but are the result of the deliberate pricing policies of major fuel retailers. The ACCC remains concerned about the level of co-ordination apparent in the price cycles and is analysing the likely effects of this behaviour on outcomes for consumers.
Prices in regional areas generally tend to be higher than in major cities due to lower turnover at regional retail sites, higher transport costs and lower levels of competition. As a result, high prices in many regional locations in Australia are another major cause of complaint from motorists to the ACCC.
The ACCC monitors prices in regional locations to ensure that markets remain as competitive as possible and are not subject to anti-competitive conduct, such as price fixing or collusion that would be in breach of the Competition and Consumer Act 2010 (CCA).
The ACCC focuses particular scrutiny on local markets for petrol where retail outlets changing hands may substantially lessen competition. In addition the ACCC will review prices in regional markets where there appear to be concerns. If information is provided to the ACCC that suggests a breach of the CCA has occurred, it will take further action.
Another issue of concern to the ACCC is the continuing quotation of the West Texas Intermediate (WTI) oil price. Consumers may see a change in the price of ‘oil’ quoted in the media and expect it to be reflected in the retail price. However, the quoted price is often WTI which is not relevant to Australia and references to it can provide an inaccurate picture to the public. The ACCC considers that the more heavily traded Brent or Tapis benchmarks better reflect the price that Australian refiners pay for crude oil.
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