Petrol profits highest in 10 years: ACCC
The ACCC has issued a new warning to petrol retailers, but concedes there is little action it can take if they don’t pass on tumbling oil prices to motorists.
Petrol retailers have been warned not to use the current coronavirus pandemic to further increase margins, after a new report found profit in the sector is the highest it’s been in more than 10 years.
The Australian Competition and Consumer Commission said wholesale prices had dropped by 50 cents per litre but retail had fallen short in major capitals, only decreasing around 45c.
Prices in Hobart, Canberra, Darwin and many other regional locations have been much slower to come down and the extent of those falls has varied widely, the ACCC said in a statement issued on Wednesday.
ACCC chair Rod Sims said the price falls were good news for Australians but that retailers have been taking too long to pass on the savings. This “did not reflect well on them”, he said.
“Especially at this difficult time, retailers must not take advantage of the situation to increase their profits, but should pass on savings to motorists,” Mr Sims said.
But he conceded there was little the ACCC could do beyond naming and shaming fuel outlets with exhorbitant pricing.
“The ACCC cannot control the petrol prices companies set, but we can call out problematic price setting which can influence company behaviour,” he said.
“The ACCC’s role is to monitor the market closely, and we will continue to do this, particularly to keep the pressure on the petrol retailers at this time.”
Today’s announcement comes after market movements on Monday night saw American oil futures trade into negative territory, as global demand collapses under an economic contraction caused by the coronavirus pandemic.
The ACCC was directed at the end of 2019 by Treasurer Josh Frydenberg to prepare a report on prices, costs, and profits in the supply of fuel across Australia.
The report found net profit for the total downstream fuel industry between 2017 and 2018 was the highest recorded since 2007-08 and more than double the profits recorded in 2013-14.
Premium fuels, which only account for one-third of sales volume, represented 60 per cent of net profit for retailers.
“Petrol stations make most of their profits from convenience sales and premium fuel. The average net profits on regular unleaded, at about 1.5 cpl are only a small part of the price motorists pay,” Mr Sims said.
Data from 11 refineries, wholesales, independent and chain petrol stations were all analysed as part of the study.
Mr Sims said the ACCC was concerned about a lack of “effective competition” in regional locations as the cause for high prices.
“Where there is competition, you tend to see lower prices. Giving your business to outlets that are pricing competitively sends a strong message to those that have high prices that they will lose your business,” he said.
“We recommend motorists compare prices on fuel price apps and websites, such as MotorMouth and the government schemes in NSW, WA and the NT, which also provide information on retail prices in regional locations.
But Australasian Convenience and Petroleum Marketers Association CEO Mark McKenzie rejected any suggestion petrol stations were profiting off the slump in prices, noting the huge reduction in sales meant retailers were saddled with tanks that they’d bought at higher prices.
“We’re still buying at the same rate, but we’re consuming at half the rate, so we’re backing up the system,” he said.
“So (retailers) have got one of two choices, sell at the price they paid or sell at a loss.”
Mr Mckenzie said the increased profit on premium fuel was simply due to retailers selling more of it.
“I’m selling more of my premium product that comes at a higher price, for a premium product, you can charge whatever the market will let you charge,” he said.
“We’ve got consumers voluntarily electing to pay the high price and we’re responding to that market.”
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