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accc.gov.au
March quarter 2019
Report on the Australian petroleum market
May 2019
Australian Competition and Consumer Commission 23 Marcus Clarke Street, Canberra, Australian Capital Territory, 2601
© Commonwealth of Australia 2019
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� the Commonwealth Coat of Arms
� the ACCC and AER logos
� any illustration, diagram, photograph or graphic over which the Australian Competition and Consumer Commission does not hold copyright, but which may be part of or contained within this publication.
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Important notice
The information in this publication is for general guidance only. It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. Because it is intended only as a general guide, it may contain generalisations. You should obtain professional advice if you have any specific concern.
The ACCC has made every reasonable effort to provide current and accurate information, but it does not make any guarantees regarding the accuracy, currency or completeness of that information.
Parties who wish to re-publish or otherwise use the information in this publication must check this information for currency and accuracy prior to publication. This should be done prior to each publication edition, as ACCC guidance and relevant transitional legislation frequently change. Any queries parties have should be addressed to the Director, Content and Digital Services, ACCC, GPO Box 3131, Canberra ACT 2601.
ACCC 06/19_1569
www.accc.gov.au
iii Report on the Australian petroleum market — March 2019
ContentsKey messages 1
1. Developments in the petroleum industry 81.1 Changes to the Coles and Viva Energy retail alliance 8
1.2 The Foreign Investment Review Board approved the sale of Woolworths retail sites to Euro Garages Group 8
1.3 ACCC accepted a variation to Woolworths’ shopper docket undertaking 8
1.4 Viva Energy to acquire remaining 50 per cent of Liberty Oil’s wholesale business and enter into a retail joint venture 9
1.5 Two petrol inquiries into the ACT fuel market commenced 9
1.6 Australian Government announced changes to fuel quality standards 10
1.7 Increase in fuel excise 11
2. ACCC activities 122.1 ACCC and the petrol industry 12
2.2 Activities during the March quarter 2019 12
3. Retail petrol price movements in the capital cities 143.1 Retail prices over the year to March 2019 14
3.2 Retail prices compared with Mogas 95 prices 15
3.3 Gross indicative retail differences 15
3.4 Elements of the price change in the quarter 17
3.5 Retail prices in Brisbane and Perth were higher than the other three largest cities 18
3.6 Price cycles in the five largest cities 20
3.7 Prices in the three smaller capital cities 20
3.8 Retail prices of the main petrol grades 21
3.9 Petrol prices in Australia compared with other OECD countries 22
4. Retail petrol price movements in regional locations 254.1 Influences on regional petrol prices 25
4.2 Regional petrol prices in aggregate 25
4.3 Prices in each of the states and territories 26
5. International price movements 315.1 Crude oil and refined petrol 31
5.2 AUD-USD exchange rate 33
6. Diesel and automotive LPG prices 356.1 Diesel price movements 35
6.2 Automotive LPG price movements 36
Appendix A: Petrol price data for monitored locations 37
Appendix B: Update on regional market studies 42
Appendix C: ACCC submission to the ACT Legislative Assembly petrol inquiry 56
1 Report on the Australian petroleum market — March 2019
Key messages
Average retail petrol prices in the five largest cities were significantly lower in the March quarter 2019, although they were trending upwards In the March quarter 2019, average retail petrol prices across the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth) were 130.3 cents per litre (cpl).1 This was a decrease of 11.8 cpl from the December quarter 2018 (142.1 cpl).
During the March quarter 2019 daily average prices (on a seven-day rolling average basis) decreased to a low of 115.4 cpl in early January. This was their lowest level in over two years. Prices then trended upwards to 144.4 cpl in late-March 2019. This is shown in the following chart.
Seven-day rolling average retail petrol prices in the five largest cities: 1 April 2018 to 31 March 2019
cpl
110
120
130
140
150
160
170
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
Source: ACCC calculations based on FUELtrac data.
Note: The area to the right of the dotted vertical line in this and subsequent charts represents the March quarter 2019.
Movements in average retail petrol prices largely reflected changes in international refined petrol prices Retail petrol prices in Australia are primarily determined by international refined petrol prices (which in turn are influenced by international crude oil prices) and the AUD–USD exchange rate. The relevant benchmark for Australia is the price of Singapore Mogas 95 Unleaded (Mogas 95), which is the price of refined petrol in the Asia-Pacific region.
Retail petrol prices in the five largest cities and Mogas 95 prices in Australian cents per litre moved in a broadly similar pattern during the quarter and over the longer term. This is shown in the following chart.
1 In this report, references to petrol are to regular unleaded petrol (RULP) unless otherwise specified. From 1 July 2014, the ACCC has used E10 prices instead of RULP prices for Sydney in the average price for the five largest cities. All prices are nominal prices unless otherwise specified.
2 Report on the Australian petroleum market — March 2019
Monthly average retail petrol prices in the five largest cities and Mogas 95 prices: April 2018 to March 2019cp
l
100
110
120
130
140
150
160
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
cpl
Five largest cities (LHS) Mogas 95 (RHS)
40
50
60
70
80
90
100
Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and the Reserve Bank of Australia (RBA).
Both Brent crude oil (the most widely used benchmark on global markets) and Mogas 95 prices decreased in the March quarter 2019:
�� Quarterly average Brent crude oil prices were around USD 63 per barrel (a decrease of USD 6 per barrel from the previous quarter).
�� Quarterly average Mogas 95 prices were around USD 67 per barrel (also a decrease of USD 6 per barrel). In Australian cents per litre, quarterly average Mogas 95 prices were 59.0 cpl in the March quarter 2019, a decrease of 4.8 cpl from the previous quarter.
Changes in international crude oil and refined petrol prices over the past year have been influenced by a number of factors, the major one being the agreements made since late-2016 by the Organisation of Petroleum Exporting Countries (OPEC) cartel, and some other crude oil producing countries (including Russia), to cut production. This was compounded by concerns about international crude oil supplies arising from US sanctions against Iran, the political and economic crisis in Venezuela and a decrease in US crude oil inventories. The sharp fall in crude oil prices from early-October 2018 was due to concerns over a global trade war (with worries that it would reduce economic activity and subsequently demand for crude oil) and increasing US shale oil production.
Increases in Brent crude oil prices since early-January 2019 have been due to increasing compliance with production cuts among OPEC countries and Russia.
Refiner margins for petrol continued to decreaseThe refiner margin is the difference between the price of refined petrol and the price of crude oil. In the March quarter 2019, the average refiner margin decreased to USD 3.9 per barrel, a decrease of USD 0.4 per barrel from the previous quarter (USD 4.3 per barrel). This was the lowest quarterly average refiner margin since the December quarter 2008. The decrease in the refiner margin over the past two quarters was influenced by increased supply of refined petrol (from China and South Korea) and concerns about an economic slowdown in the Asian region.
Gross indicative retail margins across the five largest cities were the lowest in four years In the March quarter 2019, average gross indicative retail differences (GIRDs) in the five largest cities were 9.5 cpl, a decrease of 4.4 cpl from the previous quarter. This was their lowest level in four years (in both real and nominal terms).
3 Report on the Australian petroleum market — March 2019
Average GIRDs decreased in all five largest cities:
�� GIRDs were the lowest in four years in Sydney (6.5 cpl) and Brisbane (10.8 cpl), and the lowest in three years in Melbourne (9.6 cpl)
�� GIRDs in Adelaide (9.6 cpl) and Perth (10.9 cpl) also decreased from the previous quarter, but they were not as low as in the September quarter 2018.
GIRDs are a broad indicator of gross retail margins. They are calculated by subtracting average wholesale prices (as indicated by published terminal gate prices (TGPs)) from average retail prices. TGPs are the prices at which petrol can be purchased from wholesalers in the spot market and are posted on a regular basis on the websites of the major wholesalers. TGPs vary across brands and cities. TGPs reflect the wholesale price of petrol only, and exclude other retail operating costs (such as freight, branding, rent, labour and utility costs). As GIRDs include these costs, they should not be confused with actual retail profits.
GIRDs reported by the ACCC are averages across the five largest cities over time. The level of prices, costs and profits vary significantly between retail operations and not all retail petrol sites will be achieving these gross margins. Some will be achieving higher gross margins, others lower. The petrol market studies prepared by the ACCC between 2015 and 2017 found that profits per retail petrol site could vary considerably between retailers, with some retail sites making substantial profits, while other retail sites make very little.
When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018 and the March quarter 2019) lags between changes in TGPs and changes in retail prices often have the effect of reducing GIRDs. Conversely, when TGPs decrease by large amounts in a short period (which occurred in the December quarter 2018) these lags often have the effect of increasing GIRDs.
Decreases in international refined petrol prices and GIRDs were the main factors contributing to lower retail petrol prices in the quarterThere are three broad components of the retail price of petrol: the international price of refined petrol, taxes (excise and GST) and other costs and margins at the wholesale and retail levels.
The following chart shows the change in these components across the five largest cities between the December quarter 2018 and the March quarter 2019. The chart separates the other costs and margins component into two elements: other wholesale costs and margins (which includes international shipping costs and other import costs, and wholesale costs and margins), and retail costs and margins (represented by GIRDs).
4 Report on the Australian petroleum market — March 2019
Changes in the components of average retail petrol prices in the five largest cities: December quarter 2018 to March quarter 2019
0
20
40
60
80
100
120
140
160
180
Dec–18 Mogas 95 Exchange rate Other wholesalecosts and margins
Taxes GIRDs Mar–19
Mogas 95 Other wholesale costs and margins Taxes GIRDs
-11.8 cpl
130.3 cpl142.1 cpl -5.2 cpl -4.4 cpl-0.5 cpl-2.1 cpl+0.4 cpl
-4.8 cpl
52.9
13.9
11.59.4
52.4
9.5
63.8 59.0
cpl
Source: ACCC calculations based on data from FUELtrac, OPIS, the RBA and the Australian Taxation Office (ATO).
Notes: All prices are in Australian cents per litre.
The taxes component includes fuel excise and wholesale GST. The small amount of retail GST is included in GIRDs rather than in taxes, to be consistent with GIRDs reported elsewhere in this report.
The decrease in the average retail price in the five largest cities by 11.8 cpl in the March quarter 2019 was largely driven by the decrease in Mogas 95 prices and GIRDs.
The AUD–USD exchange rate is a significant determinant of Australia’s retail petrol prices because international refined petrol is bought and sold in US dollars in global markets. Excluding the effect of changes in the exchange rate (which decreased by around USD 0.01 in the quarter), Mogas 95 prices would have decreased by 5.2 cpl in the quarter. However, the decrease in the exchange rate offset the influence of the decrease in Mogas 95 prices by 0.4 cpl. The net effect of movements in Mogas 95 prices and the exchange rate was that Mogas 95 prices decreased by 4.8 cpl.
GIRDs decreased by 4.4 cpl and other wholesale costs and margins decreased by 2.1 cpl in the quarter.
The two largest components of the average retail price of petrol —Mogas 95 and taxes—accounted for around 85 per cent of the average price in the March quarter 2019.
The influence of the supermarket chains in the retail petrol market is diminishing The supermarket chains (Coles Express and Woolworths) recently changed how they participate in the retail petrol market.
On 6 February 2019, Coles and Viva Energy announced an extension of, and changes to, their retail alliance. As a result, from early March 2019, Viva Energy has been setting the retail price of fuel at Coles Express retail sites, with Coles becoming a commission agent. Coles remains responsible for operating the stores and providing convenience store offerings.
In late-2018, Woolworths announced that it would sell its 540 Woolworths-owned retail fuel sites to Euro Garages (EG) Group. The sale received regulatory clearance from the Foreign Investment Review Board in late-February 2019 and completion of the sale occurred in early-April 2019.
Coles will continue to offer loyalty benefits and shopper docket discounts across the alliance sites. Similarly, Woolworths’ shopper docket discounts and Woolworths Rewards loyalty program will continue across the network of EG retail sites.
5 Report on the Australian petroleum market — March 2019
With these changes, the presence of the supermarket chains in the retail petrol market is significantly reduced from a short time ago when they had a substantial presence for many years.
Before the changes, the supermarket chains operated and set retail petrol prices at around 1 250 retail sites for a number of years. This represented around 17 per cent of total retail sites at the end of December 2018.2 At the height of their presence in the retail market in 2012-13, the supermarket chains accounted for 51 per cent of the retail petrol market by volume (Coles Express had 26 per cent and Woolworths had 25 per cent). Although the shares declined in recent years, in 2016-17 Coles Express had the largest share of total volume of petrol sales in Australia (around 19 per cent), followed by Woolworths (with around 18 per cent).3
The ACCC intends to monitor the impact of these changes over time, including the levels of retail petrol prices offered by these retailers.
Two petrol inquiries into the ACT petrol market commencedOn 11 February 2019, the Chief Minister of the ACT announced two inquiries into high petrol prices in the ACT: one undertaken by the ACT Legislative Assembly and the other by the ACT Independent Competition and Regulatory Commission (ICRC). Both inquiries are to report in June 2019.
On 8 March 2019, the ACCC provided a submission to the ACT Legislative Assembly inquiry.4 On 28 March 2019, staff of the ACCC attended a public hearing of the ACT Legislative Assembly inquiry in Canberra. They noted that the major reason for higher retail prices in Canberra is weak retail competition and that fuel price transparency may help promote a more competitive outcome.
The ACCC has also provided assistance and advice to the inquiry being undertaken by the ACT ICRC.
Brisbane and Perth petrol prices were higher than other large Australian citiesBrisbane prices are generally the highest among the five largest cities. However, in the March quarter 2019, retail prices in both Brisbane and Perth were the highest of the five largest cities. Quarterly average retail petrol prices in both Brisbane and Perth were 131.9 cpl, 5.6 cpl higher than in Sydney (126.3 cpl), 1.5 cpl higher than in Melbourne (130.4 cpl) and 1.2 cpl higher than in Adelaide (130.7 cpl).
The city–country petrol price differential decreased The ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. In the March quarter 2019, the differential between average prices in regional locations in aggregate and prices in the five largest cities was 7.0 cpl. This was 4.4 cpl lower than in the December quarter 2018 (11.4 cpl).
Diesel and automotive LPG prices were significantly lowerIn the March quarter 2019, diesel and automotive LPG prices in the five largest cities both decreased:
�� Average retail diesel prices decreased by 14.5 cpl, from 158.1 cpl in the December quarter 2018 to 143.6 cpl in the March quarter 2019.
�� Average retail automotive LPG prices decreased by 6.9 cpl, from 88.4 cpl in the December quarter 2018 to 81.5 cpl in the March quarter 2019.
2 ACCC calculations based on data from the Informed Sources Netwatch database.
3 As a share of ACCC monitored companies. See ACCC, Retail and wholesale petrol market shares in Australia, September 2018, p. 4, at: https://www.accc.gov.au/publications/petrol-industry-reports/retail-wholesale-petrol-market-shares-in-australia.
4 A copy of the ACCC submission is at appendix C.
6 Report on the Australian petroleum market — March 2019
ACCC regional market study locationsBetween 2015 and 2017, the ACCC undertook four regional petrol market studies—in Darwin, Launceston, Armidale and Cairns—and continues to monitor retail prices and GIRDs in those locations.
The ACCC has compared actual retail prices in these locations with estimated retail prices calculated on a long-term competitive cost basis. This calculation reflects the fact that costs (such as freight and operating costs on a per litre basis) are higher in these locations, and assumes that retail margins in these locations should be broadly similar to long-term average retail margins in the five largest cities.
This long-term competitive cost-based price provides a benchmark against which to compare current price levels. It is not static and will change as its underlying elements change over time. If retail prices are constantly above this benchmark price for a sustained period, this may be indicative of a less-competitive market in which retailers are earning higher margins at the expense of consumers.
Darwin petrol prices decreased significantly
In the March quarter 2019, average retail petrol prices in Darwin were 130.0 cpl, a decrease of 23.1 cpl from the December quarter 2018 (153.1 cpl). The quarterly average price in Darwin was 0.3 cpl lower than the five largest cities, a decrease of 11.3 cpl in the differential between the two from the December quarter 2018 (11.0 cpl).
In the March quarter 2019, Darwin GIRDs were 5.0 cpl, a decrease of 15.0 cpl from the December quarter 2018 (20.0 cpl). Darwin GIRDs in the March quarter 2019 were 4.5 cpl lower than the five largest cities (9.5 cpl) and were at their lowest level since the June quarter 2016.
Over the March quarter 2019, the differential between rolling annual average petrol prices in Darwin and a rolling long-term competitive cost-based price decreased significantly. In the quarter, average quarterly retail petrol prices in Darwin reflected a competitive cost-based price.
Motorists in Darwin can use the MyFuel NT website and app to identify the highest and lowest priced retail sites in Darwin. For example, on 13 May 2019 there was a 4.5 cpl range between the highest priced retail sites in Darwin (144.9 cpl at four Coles Express retail sites) and the lowest (140.4 cpl at FuelXpress Winnellie).
Launceston petrol prices decreased significantly but remained substantially above a long-term competitive cost-based priceIn the March quarter 2019, average retail petrol prices in Launceston were 146.4 cpl, a decrease of 15.5 cpl from the December quarter 2018 (161.9 cpl). The average differential between prices in Launceston and the five largest cities was 16.1 cpl, a decrease of 3.7 cpl from the December quarter 2018 (19.8 cpl).
In the March quarter 2019, Launceston GIRDs were 19.8 cpl, a decrease of 8.5 cpl from the December quarter 2018 (28.3 cpl). The differential between rolling annual average petrol prices in Launceston and a rolling long-term competitive cost-based price decreased over the March quarter 2019, but remained significantly high.
Motorists in Launceston can use available fuel price websites and apps, such as MotorMouth and GasBuddy, to identify the highest and lowest priced retail sites in Launceston. For example, on 13 May 2019, using the GasBuddy app, there was a 10.1 cpl range between the highest priced retail sites in Launceston (161.9 cpl at one BP retail site) and the lowest (151.8 cpl at one United retail site and one BP retail site).
Armidale petrol prices decreased significantly but remained above a long-term competitive cost-based priceIn the March quarter 2019, average retail petrol prices in Armidale were 137.7 cpl, a decrease of 17.7 cpl from the December quarter 2018 (155.4 cpl). The average differential between prices in Armidale and
7 Report on the Australian petroleum market — March 2019
the five largest cities was 7.4 cpl in the March quarter 2019, a decrease of 5.9 cpl from the December quarter 2018 (13.3 cpl).
In the March quarter 2019, average GIRDs in Armidale were 18.0 cpl, a decrease of 10.4 cpl from the December quarter 2018 (28.4 cpl). The differential between rolling annual average petrol prices in Armidale and a rolling long-term competitive cost-based price remained broadly stable.
Motorists in Armidale can use the FuelCheck website and app to identify the highest and lowest priced retail sites in Armidale. For example, on 13 May 2019, the FuelCheck website showed that there was a 3.0 cpl range between the highest priced RULP retail site in Armidale (148.9 cpl at Caltex Armidale) and the lowest (145.9 cpl at Lowes Armidale). There was a 2.0 cpl range between the highest priced E10 retail sites (146.9 cpl at three Caltex retail sites, one Woolworths retail site and one Coles Express retail site) and the lowest (144.9 cpl at Lowes Armidale).
Cairns petrol prices decreased significantlyIn the March quarter 2019, the average retail petrol price in Cairns was 130.7 cpl, a decrease of 26.0 cpl from the December quarter 2018 (156.7 cpl). The average differential between prices in Cairns and the five largest cities was 0.4 cpl in the March quarter 2019, a decrease of 14.2 cpl from the December quarter 2018 (14.6 cpl).
In the March quarter 2019, average GIRDs in Cairns were 6.1 cpl, a decrease of 18.7 cpl from the December quarter 2018 (24.8 cpl). Cairns GIRDs in the March quarter 2019 were 3.4 cpl lower than in the five largest cities (9.5 cpl), and were the lowest since the ACCC began collecting Cairns data in the September quarter 2009.
The difference between rolling annual average petrol prices in Cairns and the rolling long-term competitive cost-based price was significantly lower in 2018 and the first quarter of 2019 than in 2017. This may have been due to more vigorous competition following the increasing presence of United in the Cairns area since the March quarter 2018. In the March quarter 2019, average quarterly retail petrol prices in Cairns reflected a competitive cost-based price.
Motorists in Cairns are now able to access site-specific petrol price data made available by websites and app providers under the Queensland fuel price reporting trial (which commenced on 3 December 2018) to identify the highest and lowest priced retail sites in Cairns. For example, on 13 May 2019, using the MotorMouth website (which draws on Queensland government data), there was a 9.4 cpl range between the highest priced retail sites in Cairns (156.9 cpl at Stratford Driveway Discount Fuels) and the lowest (147.5 cpl at White Rock General Store).
8 Report on the Australian petroleum market — March 2019
1. Developments in the petroleum industry
1.1 Changes to the Coles and Viva Energy retail allianceOn 6 February 2019, Coles Group Limited (Coles) and Viva Energy Australia announced an extension of, and changes to, their retail alliance.5 The new agreement took effect in early March 2019 and lasts until 2029. As part of the agreement, Viva Energy will make a one-off payment of $137 million to Coles.
Changes to the alliance mean that Viva Energy will set the retail price of fuel at Coles Express retail sites, and Coles will become a commission agent. Viva Energy will be responsible for the marketing of retail fuel and Coles will remain responsible for operating the stores and providing convenience store offerings. Viva Energy will receive a royalty on convenience store sales. Customers will receive loyalty benefits and shopper docket discounts across all alliance sites. Shopper docket discounts will be funded by Coles.
1.2 The Foreign Investment Review Board approved the sale of Woolworths retail sites to Euro Garages Group
On 9 November 2018, Woolworths Group Limited (Woolworths) announced that it had entered into a binding agreement to sell its 540 Woolworths-owned fuel sites to Euro Garages (EG) Group for $1.725 billion.6 EG Group is a fuel and convenience retailer that operates around 4 700 retail sites across Europe and North America.
On 28 February 2019, Woolworths announced that EG Group had received confirmation from the Foreign Investment Review Board (FIRB) that the Commonwealth has no objection to EG acquiring these retail sites.7 Completion of the sale occurred on 1 April 2019.8
1.3 ACCC accepted a variation to Woolworths’ shopper docket undertaking
On 1 March 2019, the ACCC announced that it had accepted a variation to an undertaking provided by Woolworths in 2013 relating to its shopper docket fuel discount offers. The variation changes how Woolworths can fund the discounts.
Under the 2013 undertaking, Woolworths’ fuel discounts linked to supermarket purchases were limited in size and scope. The undertaking required these discounts to be funded only through Woolworths’ petrol division. Given the sale of Woolworths’ service stations to EG Group, the ACCC accepted a variation proposed by Woolworths to vary the undertaking to remove this requirement and allow Woolworths to fund fuel discounts linked to supermarket purchases from outside its petrol division.
5 Coles Group, New alliance partnership to restore leadership position and convenience trading update, ASX release, 6 February 2019, at: https://www.asx.com.au/asxpdf/20190206/pdf/442dnsb80wsxc0.pdf, accessed on 16 May 2019; and Viva Energy Australia, Viva Energy and Coles Express extend and strengthen the retail Alliance, ASX release, 6 February 2019, at: https://www.asx.com.au/asxpdf/20190206/pdf/442dnngvjxnx6s.pdf, accessed on 16 May 2019.
6 Woolworths Group Limited, Woolworths Group to sell petrol business and enter into commercial alliance with EG Group, press release, 9 November 2018, at: https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-group-to-sell-petrol-business-and-enter-into-commercial-alliance-with-eg-group/, accessed on 16 May 2019.
7 Woolworths Group Limited, FIRB approval of EG Group’s proposed acquisition of Woolworths Petrol, ASX announcement, 28 February 2019, at: https://www.woolworthsgroup.com.au/icms_docs/195497_firb-approval-of-eg-groups-acquisition-of-woolworths-petrol.pdf, accessed on 16 May 2019.
8 Woolworths Group Limited, Woolworths Group market update, press release, 1 April 2019, at: https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-group-market-update/, accessed on 16 May 2019.
9 Report on the Australian petroleum market — March 2019
The undertaking, as varied, continues to operate after the sale of Woolworths’ service stations to EG Group and allows Woolworths to continue to fund the shopper docket fuel discounts it offers to supermarket customers. Of most importance, fuel discount offers linked to supermarket purchases remain limited to 4.0 cpl.9
1.4 Viva Energy to acquire remaining 50 per cent of Liberty Oil’s wholesale business and enter into a retail joint venture
On 27 February 2019, Viva Energy announced its intention to acquire the remaining 50 per cent interest in Liberty Oil’s wholesale business.10 The business includes a network of 17 regional storage depots, a transport fleet of more than 50 vehicles, and supply to a network of more than 250 dealer owned service stations carrying either the Shell or Liberty brands. Viva Energy acquired an initial 50 per cent stake in Liberty Oil’s wholesale business in 2014.
Viva Energy and Liberty Oil will also enter into a new retail joint venture, where Viva Energy will own 50 per cent of Liberty Oil’s retail business. Viva Energy intends on maintaining Liberty Oil Holdings as an independent business. The joint venture also provides Viva Energy with the option to acquire the remaining 50 per cent of the Liberty Oil retail business in 2024.
The transaction is subject to regulatory approvals from the ACCC and the FIRB.
1.5 Two petrol inquiries into the ACT fuel market commenced
On 11 February 2019, the Chief Minister of the ACT announced that there would be two inquiries into high petrol prices in the ACT: one undertaken by the ACT Legislative Assembly and the other by the ACT Independent Competition and Regulatory Commission (ICRC).11
On 14 February 2019, the ACT Legislative Assembly referred matters related to fuel prices in the ACT to a Select Committee on Fuel Pricing for inquiry and report.12 The Committee is required to report by 6 June 2019. Matters to be addressed by the Committee are:
�� fuel price methodology and key determinants
�� characteristics of the ACT fuel market, including historical changes
�� the impact of fuel prices on the ACT community
�� reasons for significant pricing discrepancies within the ACT and when compared to other Australian communities and capital cities
�� consideration of best practice approaches and initiatives in other jurisdictions which have a meaningful impact on reducing fuel prices
�� regulatory and legislative solutions and barriers, particularly around competition and retail margin.
9 ACCC, Woolworths fuel discount undertaking varied, media release, 1 March 2019, at: https://www.accc.gov.au/media-release/woolworths-fuel-discount-undertaking-varied.
10 Viva Energy, Viva Energy to acquire remaining 50% interest in Liberty Oil’s wholesale business, media release, 27 February 2019, at: https://www.asx.com.au/asxpdf/20190227/pdf/4430df1bzjrxfm.pdf, accessed on 16 May 2019.
11 The Riot ACT!, Dual fuel inquiries to probe ACT’s bowser pain, by Ian Bushnell, 11 February 2019, at: https://the-riotact.com/dual-fuel-inquiries-to-probe-acts-bowser-pain/286363, accessed on 16 May 2019.
12 ACT Legislative Assembly, Select Committee on Fuel pricing: Invitation to make a submission, February 2019, at: https://www.parliament.act.gov.au/in-committees/select_committees/fuel-prices, accessed on 16 May 2019.
10 Report on the Australian petroleum market — March 2019
On 22 February 2019, the ICRC received a reference from the ACT Treasurer to undertake a factual analysis of petrol prices and competition in the ACT market.13 This involved consideration of a number of matters including:
�� comparisons of average petrol prices and costs faced by petrol suppliers with other capital cities and regional towns in proximity to the ACT
�� how petrol prices are determined in the ACT
�� the nature of costs faced by ACT petrol suppliers
�� the structure of the market, including any variation observed across different locations within the ACT
�� whether there is effective competition in the ACT market, including whether barriers to entry exist and the level of information available to consumers.
The ICRC released a draft report outlining its draft findings on 8 May 2019.14 The final report is to be provided to the ACT Treasurer by 28 June 2019.
1.6 Australian Government announced changes to fuel quality standards
On 25 February 2019, the Australian Government announced the ‘Climate Solutions Package’, a $3.5 billion investment to deliver on Australia’s 2030 Paris climate commitments.15 This included changing Australia’s fuel quality standards by:
�� reducing sulphur in petrol to 10 parts per million from 1 July 2027, while retaining RULP for now
�� reducing the pool average of aromatic content in petrol from 42 per cent to 35 per cent, effective from 1 January 2022
�� reviewing the aromatic content in petrol limit by 2022 to set a reduced limit by 2027 or establish an alternative solution
�� the Department of the Environment and Energy continuing to consult with industry on the remaining parameters in the fuel standards to finalise these before the current standards sunset on 1 October 2019.16
According to the Better fuel for cleaner air: Regulation impact statement, released in August 2018, this approach is estimated to deliver the following benefits and costs:
�� $1.7 billion avoided in health and vehicle maintenance costs between 2027 and 2040. Benefits would increase to $2.1 billion if a reduction in the limit of aromatics to 35 per cent was also decided as a result of the aromatics review.
�� In 2027, there will be a small increase of 0.9 cpl in the price of RULP, increasing to 1.0 cpl in 2030. This amount will then decline as lower sulphur fuel becomes the benchmark in the region.
– The small increase in petrol price due to the improved fuel standards is expected to be offset by the significant health benefits, better vehicle operability and improved fuel efficiency for those that purchase the advanced vehicle technology in Euro 6 vehicles.17
13 ICRC, Petrol Price Inquiry, https://www.icrc.act.gov.au/industry-references/petrol-price-inquiry, accessed on 16 May 2019.
14 ICRC, Commission releases draft report on the ACT petrol price investigation, media release, 8 May 2019, at: https://www.icrc.act.gov.au/__data/assets/pdf_file/0003/1361073/Petrol-inquiry-draft-report-media-release.pdf, accessed on 16 May 2019.
15 The Hon Scott Morrison MP, Prime Minister of Australia, and the Hon Melissa Price MP, Minister for the Environment, Meeting our climate change commitments without wrecking the economy, media release, 25 February 2019, at: https://www.pm.gov.au/media/meeting-our-climate-commitments-without-wrecking-economy, accessed on 16 May 2019.
16 Department of the Environment and Energy, Fuel quality standards, at: https://www.environment.gov.au/protection/fuel-quality/standards, accessed on 16 May 2019.
17 Department of the Environment and Energy, Better fuel for cleaner air: Regulation impact statement, August 2018, p. xii, at: https://www.environment.gov.au/system/files/resources/0a047a41-f521-4f4f-8122-a114e2fb394d/files/better-fuel-cleaner-air-ris.pdf, accessed on 16 May 2019.
11 Report on the Australian petroleum market — March 2019
1.7 Increase in fuel exciseIn the 2014-15 Budget the Australian Government announced that it would reintroduce biannual indexation, by the Consumer Price Index, of excise and excise-equivalent customs duty for all fuels except aviation fuels. Under these arrangements excise is generally increased on 1 February and 1 August each year. The announced excise changes took effect from 10 November 2014.
On 4 February 2019, excise on petrol and diesel increased by 0.4 cpl to 41.6 cpl. Excise on automotive LPG increased by 0.2 cpl to 13.6 cpl.18
18 Australian Taxation Office, Excise rates for fuel, at:https://www.ato.gov.au/business/excise-and-excise-equivalent-goods/fuel-excise/excise-rates-for-fuel/, accessed on 16 May 2019.
12 Report on the Australian petroleum market — March 2019
2. ACCC activities
2.1 ACCC and the petrol industryThe main role of the ACCC is to enforce the Competition and Consumer Act 2010 (the Act) across the Australian economy, including the fuel industry. The ACCC’s activities under the Act include enforcement and compliance, mergers and acquisitions assessments, authorisations and notifications, and administration of the Oil Code.
Wholesale and retail petrol prices in Australia are determined by market forces. The ACCC does not set prices in petrol markets and does not have the powers to do so. In the absence of conduct that is in breach of the Act, high petrol prices are not illegal.
The ACCC’s petrol monitoring role is to assist consumers to navigate this complex industry. Through its petrol monitoring reports, industry reports and other information channels, the ACCC promotes transparency in the Australian petroleum industry and improved public awareness of the factors that determine retail petrol prices.
2.2 Activities during the March quarter 20192.2.1 ACT inquiries into fuel pricingOn 11 February 2019, the Chief Minister of the ACT announced that there would be two inquiries into high petrol prices in the ACT: one undertaken by the ACT Legislative Assembly and the other by the ACT ICRC. Both inquiries are to report in June 2019.
On 8 March 2019, the ACCC provided a submission to the ACT Legislative Assembly inquiry. A copy of the submission is at appendix C.
On 28 March 2019, staff of the ACCC attended a public hearing of the ACT Legislative Assembly inquiry in Canberra. They noted that the major reason for higher retail prices in Canberra is weak retail competition and that fuel price transparency may help promote a more competitive outcome.19
The ACCC has also provided assistance and advice to the inquiry being undertaken by the ACT ICRC.
2.2.2 Variation to Woolworths fuel discount undertakingOn 1 March 2019, the ACCC accepted a variation to an undertaking provided by Woolworths in 2013 relating to its shopper docket fuel discount offers. The variation changes how Woolworths can fund the discounts.20
The undertaking, as varied, continues to operate after the sale of Woolworths’ retail sites to EG Group and allows Woolworths to continue to fund the shopper docket fuel discounts it offers to supermarket customers. Of most importance, fuel discount offers linked to supermarket purchases remain limited to 4.0 cpl.
2.2.3 Stakeholder engagement and communications activityIn the March quarter 2019, the ACCC responded to fuel-related media enquiries on price and competition issues. Responses were also prepared for Ministerial and other correspondence on consumer fuel-related price concerns, including: high fuel prices in the smaller capital cities and a
19 ACT Legislative Assembly, Transcript of Evidence, available at: http://www.hansard.act.gov.au/hansard/2017/comms/fuel03a.pdf, accessed on 16 May 2019.
20 ACCC, Woolworths fuel discount undertaking varied, media release, 1 March 2019, at: https://www.accc.gov.au/media-release/woolworths-fuel-discount-undertaking-varied.
13 Report on the Australian petroleum market — March 2019
number of regional locations; retail fuel price differentials between regional locations; and fuel price movements in the larger Australian cities.
In the March quarter 2019, the fuel-related pages on the ACCC website received 110 889 page views, a decrease of 70 714 page views (around 39 per cent) from the December quarter (181 603 page views). Of this total, the petrol price cycle webpage received 108 557 page views, a decrease of 70 362 page views (around 39 per cent) from the December quarter (178 919 page views). The petrol price cycle webpage was the most viewed page on the ACCC website in the quarter.
14 Report on the Australian petroleum market — March 2019
3. Retail petrol price movements in the capital cities
This chapter focuses on petrol prices across the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth). It also examines retail prices in the three smaller capital cities (Canberra, Hobart and Darwin). Petrol prices in regional locations across Australia are discussed in chapter 4.
3.1 Retail prices over the year to March 2019Chart 3.1 shows that seven-day rolling average retail petrol prices in the five largest cities in the year to March 2019 were very volatile.21
Chart 3.1: Seven-day rolling average retail petrol prices in the five largest cities: 1 April 2018 to 31 March 2019
cpl
110
120
130
140
150
160
170
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
Source: ACCC calculations based on FUELtrac data.
Retail prices were at a low of 138.0 cpl in early-April 2018. They then increased to a high of 159.9 cpl at the end of October 2018. This was their highest level since July 2008.22 Prices subsequently decreased by over 40 cpl, albeit with a short-term increase during mid-December, to end the December quarter at 119.2 cpl.
In the March quarter 2019, prices decreased further to 115.4 cpl in early January 2019. This was their lowest level since September 2016.23 Prices subsequently trended upwards and reached 144.4 cpl in late-March 2019.
Average prices in the March quarter 2019 were 130.3 cpl, a decrease of 11.8 cpl from the December quarter 2018 (142.1 cpl). In real terms, average prices in the March quarter 2019 were the lowest since the September quarter 2017.
21 A seven-day rolling average price is the average of the current day’s price and prices on the six previous days. Traditionally, the ACCC has used a seven-day rolling average to smooth out the influence of petrol price cycles in the larger cities on price movements. This has been less effective in recent years because the duration of price cycles in most of the larger cities has become substantially greater than seven days.
22 In real terms, seven-day rolling average prices were their highest since late-July 2014.
23 In real terms, seven-day rolling average prices were their lowest since early-September 2016.
15 Report on the Australian petroleum market — March 2019
3.2 Retail prices compared with Mogas 95 pricesRetail petrol prices in Australia are primarily determined by international refined petrol prices and the AUD–USD exchange rate. The relevant international benchmark for Australia is the price of Singapore Mogas 95 Unleaded (Mogas 95), which is the price of refined petrol in the Asia-Pacific region.
Chart 3.2 shows that retail petrol prices in the five largest cities and Mogas 95 prices in Australian cents per litre moved in a broadly similar pattern in the year to March 2019. This indicates that, in aggregate, changes in domestic retail prices are predominantly driven by changes in the international price of refined petrol.
Chart 3.2: Monthly average retail petrol prices in the five largest cities and Mogas 95 prices: April 2018 to March 2019
cpl
100
110
120
130
140
150
160
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
cpl
Five largest cities (LHS) Mogas 95 (RHS)
40
50
60
70
80
90
100
Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and RBA.
In the year to March 2019:
�� monthly average Mogas 95 prices varied by 25.9 cpl, from a high of 78.1 cpl in September 2018 to a low of 52.2 cpl in December 2018
�� monthly average retail prices in the five largest cities varied by 34.5 cpl, from a high of 157.9 cpl in October 2018 to a low of 123.4 cpl in January 2019.
Quarterly average Mogas 95 prices were 59.0 cpl in the March quarter 2019, a decrease of 4.8 cpl from the previous quarter.
More details on movements in Mogas 95 prices are provided in chapter 5.
3.3 Gross indicative retail differencesAverage gross indicative retail differences (GIRDs) in the five largest cities were 9.5 cpl in the March quarter 2019, a decrease of 4.4 cpl from the previous quarter (see table 3.1). This was their lowest level since the March quarter 2015, in both nominal and real terms.
16 Report on the Australian petroleum market — March 2019
Table 3.1: Quarterly average retail petrol prices, TGPs and GIRDs in the five largest cities: June quarter 2018 to March quarter 2019
Location QuarterRetail prices
cplTGPs
cplGIRDs
cpl
Five largest cities Jun-18 145.2 132.4 12.8
Sep-18 146.7 136.3 10.4
Dec-18 142.1 128.2 13.9
Mar-19 130.3 120.8 9.5
Year to Mar-19 141.1 129.4 11.7
Sydney Jun-18 143.3 131.2 12.1
Sep-18 145.3 135.2 10.1
Dec-18 137.9 127.0 10.9
Mar-19 126.3 119.8 6.5
Year to Mar-19 138.3 128.4 9.9
Melbourne Jun-18 146.0 132.4 13.6
Sep-18 148.0 136.3 11.7
Dec-18 143.3 128.3 15.0
Mar-19 130.4 120.8 9.6
Year to Mar-19 142.0 129.5 12.5
Brisbane Jun-18 148.4 132.9 15.5
Sep-18 148.8 136.7 12.1
Dec-18 142.9 128.6 14.3
Mar-19 131.9 121.1 10.8
Year to Mar-19 143.1 129.8 13.3
Adelaide Jun-18 142.7 132.7 10.0
Sep-18 145.1 136.6 8.5
Dec-18 142.1 128.5 13.6
Mar-19 130.7 121.1 9.6
Year to Mar-19 140.2 129.8 10.4
Perth Jun-18 145.3 132.7 12.6
Sep-18 146.5 136.7 9.8
Dec-18 144.4 128.5 15.9
Mar-19 131.9 121.0 10.9
Year to Mar-19 142.1 129.7 12.4
Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch.
Note: Retail prices, TGPs and GIRDs in Sydney are for E10.
GIRDs are calculated by subtracting average TGPs from average retail petrol prices. TGPs are the prices at which petrol can be purchased from wholesalers in the spot market and are posted on a regular basis on the websites of the major wholesalers. Although few wholesale transactions occur at TGPs, they can be regarded as indicative wholesale prices. TGPs, which vary across brands and cities, reflect the wholesale price of petrol only, and exclude other retail operating costs (such as freight, branding, rent, labour and utility costs).
GIRDs are a broad indicator of gross retail margins, and should not be confused with actual retail profits. The GIRDs reported by the ACCC are averages across the five largest cities over time. The level of prices, costs and profits vary significantly between retail operations and not all retail petrol sites will be achieving these gross margins. Some will be achieving higher gross margins, others lower. The ACCC petrol market studies found that profits per retail petrol site can vary considerably between retailers, with some retail sites making substantial profits, while other retail sites make very little.
17 Report on the Australian petroleum market — March 2019
Average GIRDs decreased in all five largest cities in the March quarter 2019. In nominal terms, they were their lowest since the March quarter 2015 in Sydney and Brisbane, since the March quarter 2016 in Melbourne, and since the September quarter 2018 in Adelaide and Perth.
Table 3.1 shows that, in the five largest cities over the year to March 2019, quarterly average GIRDs:
�� decreased in all five largest cities in the March quarter 2019
�� were highest in Brisbane and lowest in Adelaide in the June and September quarters 2018
�� were highest in Perth and lowest in Sydney in the December quarter 2018 and the March quarter 2019
�� varied significantly over the year and across cities, ranging from a high of 15.9 cpl (in Perth in the December quarter 2018) to a low of 6.5 cpl (in Sydney in the March quarter 2019).
When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018 and the March quarter 2019) lags between changes in TGPs and changes in retail prices often have the effect of reducing GIRDs. Conversely, when TGPs decrease by large amounts in a short period (which occurred in the December quarter 2018) these lags often have the effect of increasing GIRDs.
As noted in earlier ACCC quarterly reports, retailers have previously advised the ACCC that the increase in GIRDs in recent years may partly reflect increasing regulatory and compliance costs, especially in NSW.24 Although many of these costs may have been one–off expenses, they may need to be recouped over a number of years. However, the ACCC believes that the higher GIRDs since 2014–15 cannot be fully explained by the increase in these costs.
3.4 Elements of the price change in the quarterThere are three broad components of the retail price of petrol: the international price of refined petrol, taxes (excise and GST) and other costs and margins at the wholesale and retail levels.
Chart 3.3 shows the change in these components across the five largest cities between the December quarter 2018 and the March quarter 2019. The chart also separates the other costs and margins component into two elements: other wholesale costs and margins (which includes international shipping costs and other import costs, and wholesale costs and margins), and retail costs and margins (represented by GIRDs).
24 As noted in the Report on the Australian petroleum market—September quarter 2016 (p. 1), these costs included: clean air regulations; underground petroleum storage systems regulations; the ethanol mandate; FuelCheck; and fuel price board specifications. Retailers also mentioned regulatory costs associated with the Queensland ethanol mandate, other costs associated with capital expenditure to maintain or upgrade sites, and increases in operating costs, freight and litigation at: https://www.accc.gov.au/publications/quarterly-reports-on-the-australian-petroleum-industry/quarterly-report-on-the-australian-petroleum-market-%E2%80%93-september-quarter-2016.
18 Report on the Australian petroleum market — March 2019
Chart 3.3: Changes in the components of average retail petrol prices in the five largest cities: December quarter 2018 to March quarter 2019
0
20
40
60
80
100
120
140
160
180
Dec–18 Mogas 95 Exchange rate Other wholesalecosts and margins
Taxes GIRDs Mar–19
Mogas 95 Other wholesale costs and margins Taxes GIRDs
-11.8 cpl
130.3 cpl142.1 cpl -5.2 cpl -4.4 cpl-0.5 cpl-2.1 cpl+0.4 cpl
-4.8 cpl
52.9
13.9
11.59.4
52.4
9.5
63.8 59.0
cpl
Source: ACCC calculations based on data from FUELtrac, OPIS, RBA and the ATO.
Notes: All prices are in Australian cents per litre.
The taxes component includes fuel excise and wholesale GST. The small amount of retail GST is included in GIRDs rather than in taxes, to be consistent with GIRDs reported elsewhere in this report.
The decrease in the average retail price in the five largest cities by 11.8 cpl in the March quarter 2019 was largely driven by the decrease in Mogas 95 prices and GIRDs.
The AUD–USD exchange rate is a significant determinant of Australia’s retail petrol prices because international refined petrol is bought and sold in US dollars in global markets. Excluding the effect of changes in the AUD-USD exchange rate (which decreased by around USD 0.01 in the quarter), Mogas 95 prices would have decreased by 5.2 cpl in the quarter. However, the decrease in the AUD-USD exchange rate offset the influence of the decrease in Mogas 95 prices by 0.4 cpl in Australian cents per litre terms. The net effect of movements in Mogas 95 prices and the exchange rate was that Mogas 95 prices in Australian cents per litre decreased by 4.8 cpl.
Taxes decreased slightly during the March quarter 2019, due to a decrease in the GST component as retail prices fell. Other wholesale costs and margins decreased by 2.1 cpl in the quarter, and GIRDs decreased by 4.4 cpl. Other wholesale costs and margins usually do not vary much between quarters, and the relatively large change in the March quarter 2019 is likely to have been influenced by the relatively large change in Mogas 95 prices in the December 2018 and March 2019 quarters.
The two largest components of the average retail price—Mogas 95 and taxes—accounted for around 85 per cent of the average price of petrol in the March quarter 2019.
3.5 Retail prices in Brisbane and Perth were higher than the other three largest cities
In the March quarter 2019, prices in both Brisbane and Perth were the highest of the five largest cities. Quarterly average retail petrol prices in Brisbane and Perth were 131.9 cpl, which was 5.6 cpl higher than in Sydney (126.3 cpl), 1.5 cpl higher than in Melbourne (130.4 cpl) and 1.2 cpl higher than in Adelaide (130.7 cpl).
Historically, Brisbane retail prices have generally been the highest among the five largest cities. Chart 3.4 shows quarterly average retail prices in Brisbane and average prices across the other four largest cities (i.e. Sydney, Melbourne, Adelaide and Perth) over the two years to March 2019. Over this period Brisbane retail prices were on average 3.0 cpl higher than the average across the other four largest
19 Report on the Australian petroleum market — March 2019
cities (ranging from a low of 0.9 cpl in the December quarter 2018 to a high of 4.3 cpl in the December quarter 2017).
Chart 3.4: Quarterly average retail prices in Brisbane and the other four largest cities: June quarter 2017 to March quarter 2019
cpl
115
125
135
145
155
Jun
–17
Sep
–17
Dec
–17
Mar
–18
Jun
–18
Sep
–18
Dec
–18
Mar
–19
Brisbane Other four largest cities
Source: ACCC calculations based on FUELtrac data.
In the March quarter 2019, average retail prices in Brisbane were 2.1 cpl higher than the other four largest cities in aggregate (129.8 cpl). This was 1.2 cpl higher than the differential in the December quarter 2018 (0.9 cpl).
The ACCC released its report on the Brisbane petrol market in October 2017.25 It noted that petrol prices in Brisbane had been significantly higher than those in the other four largest cities for the previous eight years. Between 2009–10 and 2016–17, Brisbane motorists paid on average 3.3 cpl more for petrol than motorists in the other four largest cities.
The report found that the main factor influencing the higher prices in Brisbane was higher retail margins on petrol, which contributed to profits in Brisbane being significantly higher than the average across Australia. It also found that retail pricing was less competitive in Brisbane, with retailers setting prices higher at the top and bottom of the price cycle than retailers in Sydney. Furthermore, Brisbane had fewer retail chains that were effective and vigorous price competitors. Brisbane had only four retailers in this category (7-Eleven, Woolworths, Puma Energy and United), while Sydney had seven (Speedway, Metro, Budget, Westside, United, 7-Eleven and Woolworths).
On 3 December 2018, the Queensland Government announced the commencement of its two-year fuel price reporting trial.26 Under the trial, all Queensland fuel retailers are required to report their undiscounted fuel prices to a data aggregator, which collates and checks the data and then provides it to app developers and websites. Fuel retailers must report a change in fuel prices within 30 minutes of a price change at the bowser.
A number of websites and apps make the fuel price information available for use by motorists, including MotorMouth, Petrol Spy, the RACQ’s Fair Fuel Finder, Fuel Price Australia, FuelMap, Fuelify, Pumped, Vroom Fuel Price Compare and ServoTrack.27
25 ACCC, Report on the Brisbane petrol market, October 2017, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-brisbane-petrol-market.
26 The Hon. Dr Anthony Lynham, Minister for Natural Resources, Mines and Energy, Fuel prices on tap from midday today, media statement, 3 December 2018, at: http://statements.qld.gov.au/Statement/2018/12/3/fuel-prices-on-tap-from-midday-today, accessed on 16 May 2019.
27 Queensland Government Department of Natural Resources, Mines and Energy, Information for motorists, at: https://www.dnrme.qld.gov.au/energy/initiatives/fuel-price-reporting-trial/information-for-motorists, accessed on 16 May 2019.
20 Report on the Australian petroleum market — March 2019
3.6 Price cycles in the five largest citiesRetail petrol prices in the five largest cities in Australia move in cycles. These price cycles do not occur in the smaller capital cities or in most regional locations. Price cycles are the result of pricing decisions made by petrol retailers aiming to maximise profits. They only occur at the retail level; wholesale prices do not exhibit similar cyclical movements.
Table 3.2 shows that over the year to March 2019, the number of price cycles in each quarter varied in Sydney, Melbourne, Brisbane and Adelaide. In the March quarter 2019, the number of price cycles in all four eastern capital cities increased from the previous quarter by one price cycle. Brisbane had the fewest price cycles over the year, with 11 price cycles. Perth had the most price cycles, with a regular weekly cycle over the year.
Table 3.2: Number of price cycles per quarter in the five largest cities: June quarter 2018 to March quarter 2019
Quarter Sydney Melbourne Brisbane Adelaide Perth
Jun-18 4 3 3 4 13
Sep-18 4 4 3 5 13
Dec-18 2 2 2 4 13
Mar-19 3 3 3 5 13
Year to Mar–19 13 12 11 18 52
Source: ACCC calculations based on FUELtrac data.
The ACCC released its report on petrol price cycles in Australia in December 2018. The report noted that while motorists find price cycles frustrating, they can use price cycles to their advantage to make substantial savings across the year.28
3.7 Prices in the three smaller capital citiesThe differential between retail petrol prices in the three smaller capital cities (Canberra, Hobart and Darwin) and the five largest cities decreased in the March quarter 2019 to 9.1 cpl, compared with the previous quarter (15.8 cpl).
Chart 3.5 shows that in the year to March 2019, monthly average retail prices:
�� were highest in Hobart in 11 months, and in Canberra in the remaining month
�� in Canberra and Hobart were always higher than in the five largest cities
�� in Darwin were lower than in the five largest cities in February and March 2019, and higher in the preceding 10 months
– February 2019 was the first month since September 2016 when monthly average Darwin prices were below those in the five largest cities.
28 ACCC, Petrol price cycles in Australia, December 2018, at: https://www.accc.gov.au/publications/petrol-industry-reports/petrol- price-cycles-in-australia.
21 Report on the Australian petroleum market — March 2019
Chart 3.5: Monthly average retail petrol prices in Canberra, Hobart, Darwin and the five largest cities: April 2018 to March 2019
cpl
120
130
140
150
160
170
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
Canberra Hobart Darwin Five largest cities
Source: ACCC calculations based on FUELtrac data.
In the March quarter 2019, average retail prices in:
�� Darwin were 130.0 cpl, which was 0.3 cpl lower than in the five largest cities (130.3 cpl)
�� Canberra were 143.1 cpl (12.8 cpl higher)
�� Hobart were 145.0 cpl (14.7 cpl higher).
Factors that may lead to relatively higher prices in Canberra, Hobart and Darwin are similar to those factors influencing prices in regional locations (outlined in section 4.1).
Recent movements in Darwin retail prices are discussed further in appendix B.
3.8 Retail prices of the main petrol gradesChart 3.6 shows that retail prices of the main grades of unleaded petrol—RULP, premium unleaded petrol (PULP) 95, PULP 98, and E10—all moved in a similar manner over the year to March 2019.29
29 E10 prices are for Sydney and Brisbane only. RULP prices in Sydney are used in this section to calculate average RULP prices in the five largest cities.
22 Report on the Australian petroleum market — March 2019
Chart 3.6: Monthly average retail prices of RULP, PULP 95, PULP 98 and E10 in the five largest cities: April 2018 to March 2019
cpl
115
125
135
145
155
165
175
185
Ap
r–18
May
–18
Jun
–18
Jul–
18
Au
g–1
8
Sep
–18
Oct
–18
No
v–18
Dec
–18
Jan
–19
Feb
–19
Mar
–19
RULP PULP 95 PULP 98 E10
Source: ACCC calculations based on FUELtrac data.
In the March quarter 2019, the average differential in the five largest cities between:
�� RULP and PULP 95 prices was 12.8 cpl (a decrease of 0.1 cpl from the previous quarter)
�� RULP and PULP 98 prices was 20.9 cpl (decrease of 0.1 cpl)
�� E10 and RULP prices was 2.8 cpl (a decrease of 0.5 cpl).
Retail prices of the main grades of petrol move in a similar manner because they are all influenced by international refined petrol benchmark prices (which, in turn, predominantly move in line with changes in the international price of crude oil).
However, the price differentials between the various types of petrol vary over time. For example, while retailers will generally set the price of PULP at a fixed premium to RULP, premiums are adjusted from time to time in response to factors such as changes in international benchmark price differentials and local supply and demand conditions.
3.9 Petrol prices in Australia compared with other OECD countries
Compared with other developed countries Australia’s retail petrol prices are relatively low. However, a degree of caution needs to be exercised when comparing international petrol prices, because fuel quality standards differ among countries, as does the availability and use of fuel types.
Chart 3.7 shows average retail PULP 95 prices—both including and excluding taxes—among 34 countries in the Organisation for Economic Co-operation and Development (OECD) in the December quarter 2018 (the latest data available). It shows that of these countries, Australia had the fourth-lowest retail PULP 95 prices.
23 Report on the Australian petroleum market — March 2019
Chart 3.7: Average retail PULP 95 prices and taxes in OECD countries: Australian cents per litre, December quarter 2018
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280
United States
Canada
Mexico
Australia
Turkey
Chile
Poland
Hungary
Luxembourg
Lithuania
Czech Republic
Latvia
Spain
Austria
Slovenia
Estonia
Slovak Republic
New Zealand
United Kingdom
Korea
Switzerland
Belgium
Sweden
Ireland
France
Portugal
Finland
Germany
Israel
Denmark
Greece
Netherlands
Italy
Norway
Australian cpl Price less tax Tax component Average price less tax
Source: Department of the Environment and Energy, Australian Petroleum Statistics, issue 271, February 2019.
Note: All international prices shown are for PULP 95 RON, except for New Zealand (96 RON).
The main reason for the lower retail petrol prices in Australia is the relatively low rate of taxation on fuel. In the December quarter 2018 taxes made up around 35 per cent of retail PULP 95 prices in Australia. This is much lower than in many OECD countries: the average tax component on PULP 95 prices in the OECD was around 53 per cent in the December quarter 2018. Excluding taxes, PULP 95 prices in Australia were equal sixth-highest of the OECD countries.
Chart 3.8 shows average retail RULP prices—both including and excluding taxes—among 10 OECD countries in the December quarter 2018. In the majority of OECD countries other than Australia, RULP is not sold in significant quantities. The chart shows that Australia had the fourth-lowest retail RULP prices among these countries. Excluding taxes, RULP prices in Australia were the third lowest of these OECD countries.
24 Report on the Australian petroleum market — March 2019
Chart 3.8: Average retail RULP prices and taxes in OECD countries: Australian cents per litre, December quarter 2018
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280
Australian cpl Price less tax Tax component Average price less tax
United States
Canada
Mexico
Australia
Chile
Japan
Korea
New Zealand
Austria
Denmark
Source: Department of the Environment and Energy, Australian Petroleum Statistics, issue 271, February 2019.
25 Report on the Australian petroleum market — March 2019
4. Retail petrol price movements in regional locations
The ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. These locations are identified in appendix A.
4.1 Influences on regional petrol pricesMovements in retail petrol prices in regional locations are largely driven by changes in international refined petrol prices and the AUD–USD exchange rate, as they are in the five largest cities.
However, prices are generally higher in regional locations. A number of factors may contribute to these higher prices, including: a lower level of local competition; lower volumes of fuel sold; distance/location factors; and lower convenience store sales. The influence of these factors varies significantly from location to location. This means that there may be substantial differences in prices between specific regional locations.
4.2 Regional petrol prices in aggregateIn the March quarter 2019, the differential between average prices in regional locations in aggregate (regional prices) and prices in the five largest cities was 7.0 cpl. This was 4.4 cpl lower than in the December quarter 2018 (11.4 cpl).
Chart 4.1 shows that monthly average regional prices decreased by 7.5 cpl to 135.6 cpl in January 2019, down from 143.1 cpl in December 2018. They remained unchanged in February 2019 and increased by 4.8 cpl in March 2019, to finish the quarter at 140.4 cpl. Between December 2018 and March 2019 prices in regional locations decreased by 2.7 cpl. In contrast, over the same period, prices in the five largest cities increased by 8.2 cpl.
Chart 4.1: Monthly average retail petrol prices in regional locations in aggregate and the five largest cities: April 2018 to March 2019
120
125
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165
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–18
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v–18
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–18
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–19
Feb
–19
Mar
–19
cpl
All regional locations Five largest cities
Source: ACCC calculations based on FUELtrac data.
The monthly average differential between regional prices and prices in the five largest cities varied substantially between April 2018 and March 2019, ranging from a high of 17.0 cpl in November 2018 to a low of 3.0 cpl in September 2018. During the March quarter 2019, the monthly average differential ranged between 3.1 cpl (in March) and 12.2 cpl (in January).
26 Report on the Australian petroleum market — March 2019
In March 2019, average prices in 123 locations (representing around 66 per cent of monitored locations) were higher than the average price in the five largest cities.
While retail petrol prices in regional locations generally follow movements in the international price of refined petrol, they often do not respond as quickly—either up or down—as prices in the five largest cities. For example, average petrol prices in the five largest cities increased significantly in February 2019 in line with international refined petrol prices, whereas average petrol prices in regional locations remained stable.
Further information on petrol price movements in the March quarter 2019 in all locations monitored by the ACCC is presented in appendix A.
4.3 Prices in each of the states and territoriesCharts 4.2 to 4.8 show seven-day rolling average retail petrol prices in regional locations in each state and the NT, along with those of the relevant capital city, from 1 April 2018 to 31 March 2019. These charts also show the average differential between prices in regional locations in the state/territory and the respective capital city in the months of December 2018 and March 2019, and the calendar year 2018.
In March 2019, monthly average regional prices were higher than average capital city prices in NSW, Queensland, SA, WA, the NT and Tasmania. The monthly average regional price in Victoria was lower than the average price in Melbourne.
Charts 4.2 to 4.8 show that price comparisons between capital cities and regional locations are significantly influenced by price cycles in a number of the capital cities over the short term. An example is the price differential between Melbourne and Victorian regional locations in March 2019.
27 Report on the Australian petroleum market — March 2019
Chart 4.2: Seven-day rolling average petrol prices in NSW regional locations and Sydney: 1 April 2018 to 31 March 2019
cpl
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110
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140
150
160
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180 A
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–18
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–19
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–19
NSW regional locations Sydney
2018 avg: 9.8 cpl
Dec avg: 16.8 cpl Mar avg: 5.8 cpl
Source: ACCC calculations based on FUELtrac data.
Note: E10 prices are used for Sydney and RULP prices are used for all NSW regional locations.
Chart 4.3: Seven-day rolling average petrol prices in Victorian regional locations and Melbourne: 1 April 2018 to 31 March 2019
cpl
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110
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140
150
160
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180
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–18
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–19
Victorian regional locations Melbourne
2018 avg: 2.8 cpl
Dec avg: 7.6 cpl Mar avg: -1.0 cpl
Source: ACCC calculations based on FUELtrac data.
28 Report on the Australian petroleum market — March 2019
Chart 4.4: Seven-day rolling average petrol prices in Queensland regional locations and Brisbane: 1 April 2018 to 31 March 2019
cpl
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180 A
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–18
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Mar
–19
Queensland regional locations Brisbane
2018 avg: 4.5 cpl
Dec avg: 8.7 cpl Mar avg: 0.5 cpl
Source: ACCC calculations based on FUELtrac data.
Chart 4.5: Seven-day rolling average petrol prices in SA regional locations and Adelaide: 1 April 2018 to 31 March 2019
cpl
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SA regional locations Adelaide
2018 avg: 5.3 cpl
Dec avg: 11.1 cpl Mar avg: 0.5 cpl
Source: ACCC calculations based on FUELtrac data.
29 Report on the Australian petroleum market — March 2019
Chart 4.6: Seven-day rolling average petrol prices in WA regional locations and Perth: 1 April 2018 to 31 March 2019
cpl
100
110
120
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140
150
160
170
180 A
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Dec
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Feb
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Mar
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WA regional locations Perth
2018 avg: 9.6 cpl
Dec avg: 20.6 cpl Mar avg: 9.6 cpl
Source: ACCC calculations based on FUELtrac data.
Chart 4.7: Seven-day rolling average petrol prices in Tasmanian regional locations and Hobart: 1 April 2018 to 31 March 2019
cpl
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110
120
130
140
150
160
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180
Ap
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Feb
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Tasmanian regional locations Hobart
2018 avg: -1.4 cpl
Dec avg: -8.1 cpl Mar avg: 1.0 cpl
Source: ACCC calculations based on FUELtrac data.
30 Report on the Australian petroleum market — March 2019
Chart 4.8: Seven-day rolling average petrol prices in NT regional locations and Darwin: 1 April 2018 to 31 March 2019
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180 A
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NT regional locations Darwin
2018 avg: 7.0 cpl
Dec avg: 17.3 cpl Mar avg: 18.8 cpl
Source: ACCC calculations based on FUELtrac data.
Chart 4.9 shows seven-day rolling average retail petrol prices in Canberra from 1 April 2018 to 31 March 2019. There are no prices available for locations in the ACT other than Canberra.
Chart 4.9: Seven-day rolling average petrol prices in Canberra: 1 April 2018 to 31 March 2019
cpl
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110
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130
140
150
160
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180
Ap
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–18
Jan
–19
Feb
–19
Mar
–19
Source: ACCC calculations based on FUELtrac data.
31 Report on the Australian petroleum market — March 2019
5. International price movementsThe main influences on movements in retail petrol prices in Australia are the international price of refined petrol (which, in turn, is influenced by the international price of crude oil) and the AUD–USD exchange rate.
5.1 Crude oil and refined petrolCrude oil prices are an important influence on movements in refined petrol prices around the world. There are a number of international benchmarks used for pricing crude oil, including Brent, West Texas Intermediate (WTI), Tapis and Dubai. The most widely used benchmark on global markets is Brent crude oil.
The relevant international benchmark price for petrol in Australia is the price of refined petrol in the Asia-Pacific region. For RULP it is Singapore Mogas 95 Unleaded (Mogas 95). This benchmark is used for pricing petrol in Australia due to Australia’s proximity to Singapore, which is one of the world’s most important trading and refining centres.
5.1.1 Price movements over the last two yearsChart 5.1 shows movements in Brent crude oil and Mogas 95 prices in the two years to March 2019.
Chart 5.1: Weekly average Brent crude oil and Mogas 95 prices: April 2017 to March 2019
USD
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Brent crude oil Mogas 95
Source: ACCC calculations based on data from Platts and OPIS.
Weekly average Brent crude oil prices trended downwards between April 2017 and the end of June 2017, to a low of around USD 45 per barrel. Weekly average Brent crude oil prices then trended upwards throughout the second-half of 2017 and for the first nine months of 2018, to around USD 84 per barrel at the start of October 2018 (an increase of around 80 per cent). Weekly average prices then decreased sharply, reaching a low of around USD 52 per barrel at the end of December 2018. In the March quarter 2019, weekly average Brent crude oil prices steadily increased, to around USD 67 per barrel in mid-to late-March.
Mogas 95 prices moved in a similar manner to Brent crude oil prices over the two-year period. Weekly average Mogas 95 prices peaked at around USD 94 per barrel at the beginning of October 2018. This was their highest level since late-October 2014. Weekly average prices then decreased to around USD 55 per barrel at the end of December 2018. This was their lowest level since early-
32 Report on the Australian petroleum market — March 2019
August 2016. In the March quarter 2019, weekly average Mogas 95 prices steadily increased, to around USD 76 per barrel in late-March.
Quarterly average Brent crude oil and Mogas 95 prices both decreased in the March quarter 2019:
�� quarterly average Brent crude oil prices were around USD 63 per barrel (a decrease of USD 6 per barrel from the previous quarter)
�� quarterly average Mogas 95 prices were USD 67 per barrel (also a decrease of USD 6 per barrel).
The increases in crude oil prices in the first nine-months of 2018 were largely influenced by agreements made by the OPEC cartel, and some other crude oil producing countries (including Russia), since late-2016 to cut production. This was compounded by concerns about international crude oil supplies arising from US sanctions against Iran, the political and economic crisis in Venezuela and a decrease in US crude oil inventories.30
The sharp fall in crude oil prices from early-October 2018 was due to concerns over a global trade war (with worries that it would reduce economic activity and subsequently demand for crude oil) and increasing US shale oil production.31 Increasing crude oil prices since early-2019 have been due to increasing compliance with production cuts among OPEC countries and Russia.32
The difference between the price of refined petrol and the price of crude oil is referred to as the refiner margin. In the March quarter 2019, the average refiner margin decreased to USD 3.9 per barrel, a decrease of USD 0.4 per barrel from the previous quarter (USD 4.3 per barrel). This was the lowest quarterly average refiner margin since the December quarter 2008. The decrease in the refiner margin over the past two quarters was influenced by increased supply of refined petrol (from China and South Korea) and concerns about an economic slowdown in the Asian region.33
5.1.2 Crude oil prices in the long termAs with many commodities, crude oil prices fluctuate greatly. In the short term, market sentiment about economic conditions and geo-political events can drive rapid movements in crude oil prices. Over the medium to longer term, prices are driven by supply and demand factors, with periods of high or low prices lasting several years.
Extended periods of high crude oil prices provide an incentive for producers to invest in exploration and expansion. This leads to an increase in supply, which in turn puts downward pressure on prices. Conversely, when crude oil prices are low, producers tend not to invest, which puts upward pressure on prices, as growth in demand is not met by supply.
Chart 5.2 shows that, over the 40 years to March 2019, WTI crude oil prices in real terms were on average around USD 62 per barrel. Over the last 10 years, prices were historically high, with the average around USD 80 per barrel. In the March quarter 2019, real WTI crude oil prices were on average around USD 55 per barrel, which was around USD 5 per barrel lower than the December quarter 2018 and around USD 7 per barrel lower than the 40-year average. This was also their lowest level since the September quarter 2017.
30 Reuters, Oil prices rise amid risk of supply disruptions, 17 April 2018, at: https://www.reuters.com/article/global-oil/oil-prices-riseamid-risk-of supply-disruptions-idUSL3N1RU19C, and Reuters, Crude rises to highest since July on sanction concerns, 30 August 2018, at: https://uk.reuters.com/article/uk-global-oil/oil-rises-on-iran-sanctions-lower-us-fuel-inventories-idUKKCN1LF0PF, accessed on 16 May 2019.
31 Reuters, A slippery trade: oil slump proves bears right, 24 November 2018, at: https://www.reuters.com/article/us-marketsoilmajors-bears-graphic/a-slippery-trade-oil-slump-proves-bears-right-idUSKCN1NS1IU, accessed on 16 May 2019.
32 Reuters, OPEC cuts oil supply steeply but sees growing 2019 headwinds, 12 February 2019, at: https://www.reuters.com/article/us-oil-opec-report/opec-cuts-oil-supply-steeply-but-sees-growing-2019-headwinds-idUSKCN1Q11GA, accessed on 16 May 2019.
33 Reuters, UPDATE 1-Asian gasoline refining margins crash to loss-making 7-year lows, 5 December 2018, at: https://www.reuters.com/article/gasoline-asia/update-1-asian-gasoline-refining-margins-crash-to-loss-making-7-year-lows-idUSL4N1YA2PV, accessed on 16 May 2019.
33 Report on the Australian petroleum market — March 2019
Chart 5.2: Monthly average real WTI crude oil prices: April 1979 to March 2019
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WTI 40-year average 10-year average
Source: ACCC calculations based on data used with permission from The Wall Street Journal, WSJ.com, Copyright 2015 Dow Jones & Company, Inc. All rights reserved, Reuters and U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for all urban consumers, 10 April 2019, at: http://www.dlt.ri.gov/Lmi/pdf/cpi.pdf, accessed on 16 May 2019.
Note: Real prices are shown in March quarter 2019 dollars.
5.2 AUD-USD exchange rateThe AUD–USD exchange rate is a significant determinant of Australia’s retail petrol prices because international refined petrol is bought and sold in US dollars in global markets.
Chart 5.3 shows that in the two years to March 2019, the daily AUD–USD exchange rate fluctuated between a low of USD 0.69 and a high of USD 0.81. The average AUD–USD exchange rate during the two-year period was USD 0.75.
34 Report on the Australian petroleum market — March 2019
Chart 5.3: Daily AUD–USD exchange rates: 1 April 2017 to 31 March 2019
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Oct
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USD
0.68
0.70
0.72
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0.82
Source: RBA data.
Note: Exchange rates are the daily RBA 4.00 pm closing rates. See: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.
In the March quarter 2019, the average AUD–USD exchange rate was USD 0.71, which was around USD 0.01 lower than the December quarter 2018. Had the AUD–USD exchange rate remained at the two-year high of USD 0.81, which occurred in September 2017, average retail petrol prices in the March quarter 2019 in Australia would have been 8.0 cpl lower (everything else being equal).
35 Report on the Australian petroleum market — March 2019
6. Diesel and automotive LPG prices
6.1 Diesel price movementsQuarterly average retail diesel prices in the five largest cities decreased substantially in the March quarter 2019, from 158.1 cpl in the December quarter 2018 to 143.6 cpl (a decrease of 14.5 cpl).
The appropriate international benchmark price for diesel is the price of Singapore Gasoil with 10 parts per million sulphur content (Gasoil 10 ppm). International demand for diesel is different from that for petrol, in part because of diesel’s off-road, industrial and electricity generation uses. However, both petrol and diesel are refined from crude oil and their prices tend to broadly follow similar movements over the long term.
Chart 6.1 shows that seven-day rolling average retail diesel prices in the five largest cities broadly tracked Gasoil 10 ppm prices over the year to 31 March 2019.
Chart 6.1: Seven-day rolling average retail diesel prices in the five largest cities and Gasoil 10 ppm prices: 1 April 2018 to 31 March 2019
45
55
65
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85
95
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125
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Ap
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cpl
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Retail prices (LHS) Gasoil 10 ppm (lagged 11 days) (RHS)
Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and RBA.
Note: Gasoil 10 ppm prices are lagged by 11 days as there is generally around a one- to two-week lag between changes in international prices and changes in retail prices in the five largest cities.
Seven-day rolling average retail diesel prices were 142.0 cpl at the beginning of the March quarter 2019. They decreased to 137.5 cpl in mid-January 2019, before steadily increasing to 149.5 cpl at the end of the quarter. Gasoil 10 ppm prices in Australian cents per litre were 61.1 cpl at the beginning of the quarter. They decreased to 57.7 cpl in mid-January 2019, and increased to 72.0 cpl at the end of the quarter.
Quarterly average Gasoil 10 ppm prices in the March quarter 2019 in Australian cents per litre were 68.3 cpl, a decrease of 4.6 cpl from the December quarter 2018 (72.9 cpl).
Unlike petrol prices, diesel prices in the five largest cities do not move in cycles. Diesel prices may not have price cycles because a large proportion of sales are to commercial users who purchase diesel on a contractual basis. According to the Australian Institute of Petroleum, only around 25 per cent of the
36 Report on the Australian petroleum market — March 2019
diesel used in Australia is sold through retail outlets, and much of that is sold to account customers with very little sold to private customers.34
6.2 Automotive LPG price movementsQuarterly average retail automotive LPG prices in the five largest cities in the March quarter 2019 were 81.5 cpl, a decrease of 6.9 cpl from the December quarter 2018 (88.4 cpl).
The appropriate international benchmarks for automotive LPG are the Saudi Aramco Contract Prices for propane and butane (Saudi CP). These prices only change once a month, at the start of each month. International LPG prices loosely move in line with international refined petrol and diesel prices.
Seven-day rolling average retail automotive LPG prices at the beginning of the March quarter 2019 in Australian cents per litre were 83.0 cpl. They subsequently decreased to a low of 80.5 cpl in mid-February (see chart 6.2). Prices then remained around this level and ended the quarter marginally higher at 81.0 cpl. Over the same period the Saudi CP benchmarks increased by 6.4 cpl to 38.7 cpl in March 2019.
The chart shows that average retail automotive LPG prices were not as responsive, both down and up, to movements in Saudi CP benchmark prices in the last year.
Chart 6.2: Seven-day rolling average retail automotive LPG prices in the five largest cities and monthly Saudi CP benchmarks: 1 April 2018 to 31 March 2019
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Retail prices (LHS) Saudi CP (RHS)
Source: ACCC calculations based on data from FUELtrac, RBA, Gas Energy Australia and Reuters.
As the Saudi CP benchmarks only change at the start of each month, the relationship between movements in the international benchmark prices and retail prices for automotive LPG is different from petrol and diesel. Furthermore, international LPG prices are influenced by non-transport factors, such as demand for heating, particularly in the Northern Hemisphere.
Like diesel prices, retail automotive LPG prices tend to be less volatile than petrol prices and do not move in cycles. Automotive LPG usage in Australia is significantly less than petrol and diesel usage, and there are fewer retailers of automotive LPG, particularly outside Victoria (where around half of Australia’s automotive LPG is sold).
34 Australian Institute of Petroleum, Facts about diesel prices & the Australian fuel market, 13 May 2019, p. 3, at: https://aip.com.au/sites/default/files/download-files/2019-05/Facts%20about%20Diesel%20Prices%20and%20the%20Australian%20Fuel%20Market_0.pdf, accessed on 16 May 2019.
37 Report on the Australian petroleum market — March 2019
Appendix A: Petrol price data for monitored locationsThe ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. Monthly average retail petrol prices for December 2018 and March 2019, and the change between the two, are shown in table A1.35 The table also shows the differential between average petrol prices in the five largest cities and each regional location in the month of March 2019 and calendar year 2018.36
Table A1: Monthly average petrol prices in December 2018 and March 2019, and city–country differentials in the month of March 2019 and 2018—cpl
LocationDecember 2018
monthly avgMarch 2019
monthly avgChange December
2018 to March 2019Differential March 2019
Differential 2018
Sydney 127.8 134.1 6.3
Melbourne 131.2 137.2 6.0
Brisbane 133.5 140.2 6.7
Adelaide 123.2 137.5 14.3
Perth 129.8 137.4 7.6
Five largest cities 129.1 137.3 8.2
Hobart 158.1 143.9 -14.2 6.6 13.2
Canberra 150.4 143.0 -7.4 5.7 10.6
Darwin 142.8 134.4 -8.4 -2.9 9.8
New South Wales
Albury 132.5 131.8 -0.7 -5.5 4.5
Armidale 149.6 139.5 -10.1 2.2 9.0
Ballina 151.5 142.3 -9.2 5.0 8.9
Batemans Bay 147.2 139.8 -7.4 2.5 7.8
Bathurst 136.5 131.7 -4.8 -5.6 5.5
Bega 150.1 143.6 -6.5 6.3 8.1
Broken Hill 153.6 143.8 -9.8 6.5 9.3
Bulahdelah 153.0 136.8 -16.2 -0.5 7.5
Buronga 144.9 139.3 -5.6 2.0 n/a
Casino 145.8 136.9 -8.9 -0.4 7.4
Central Coast 131.3 138.2 6.9 0.9 3.2
Coffs Harbour 148.8 139.7 -9.1 2.4 9.2
Cooma 138.3 142.0 3.7 4.7 7.4
Coonabarabran 152.9 137.0 -15.9 -0.3 7.3
Cootamundra 133.0 138.8 5.8 1.5 2.7
Cowra 144.6 139.2 -5.4 1.9 5.4
Deniliquin 150.8 145.1 -5.7 7.8 8.6
Dubbo 147.0 134.8 -12.2 -2.5 8.5
Forbes 152.1 145.9 -6.2 8.6 7.9
Forster 152.0 146.7 -5.3 9.4 9.2
35 For a price to be included in the table there had to be a price observation on at least 75 per cent of days in the month/year. Eight locations—Blackall, Charleville, Cloncurry, Coober Pedy, Normanton, Oberon, Tennant Creek and Weipa— did not have sufficient data for December 2018 and/or March 2019. E10 prices instead of RULP prices are reported in Sydney, Bulahdelah, Coonabarabran, Cowra, Gilgandra, Gunnedah, Lithgow, Ulladulla, Wellington and West Wyalong.
36 The source for all prices in this appendix is ACCC calculations based on FUELtrac data.
38 Report on the Australian petroleum market — March 2019
LocationDecember 2018
monthly avgMarch 2019
monthly avgChange December
2018 to March 2019Differential March 2019
Differential 2018
Gilgandra 148.3 135.4 -12.9 -1.9 5.9
Glen Innes 147.6 135.6 -12.0 -1.7 7.8
Goulburn 143.2 135.4 -7.8 -1.9 2.0
Grafton 143.7 140.0 -3.7 2.7 6.4
Griffith 147.7 139.7 -8.0 2.4 6.6
Gundagai 157.9 150.8 -7.1 13.5 11.5
Gunnedah 136.9 130.3 -6.6 -7.0 3.4
Hay 148.5 142.4 -6.1 5.1 6.3
Inverell 134.8 135.6 0.8 -1.7 6.0
Jerilderie 149.7 144.9 -4.8 7.6 8.6
Kempsey 143.9 133.5 -10.4 -3.8 6.7
Leeton 139.4 137.5 -1.9 0.2 3.3
Lismore 149.1 138.8 -10.3 1.5 5.1
Lithgow 120.8 127.2 6.4 -10.1 -2.6
Merimbula 136.2 138.4 2.2 1.1 4.4
Mittagong 136.4 142.0 5.6 4.7 9.4
Moama 147.4 142.5 -4.9 5.2 5.6
Moree 147.4 141.6 -5.8 4.3 7.5
Moruya 136.4 135.6 -0.8 -1.7 7.5
Moss Vale 151.0 142.0 -9.0 4.7 12.1
Mudgee 151.4 146.2 -5.2 8.9 10.6
Murwillumbah 136.1 147.5 11.4 10.2 10.4
Muswellbrook 126.4 131.3 4.9 -6.0 6.0
Narrabri 138.8 140.5 1.7 3.2 7.3
Newcastle 133.9 135.6 1.7 -1.7 4.4
Nowra 137.9 137.3 -0.6 0.0 3.2
Nyngan 146.8 138.1 -8.7 0.8 6.0
Orange 141.9 133.1 -8.8 -4.2 5.6
Parkes 152.0 140.9 -11.1 3.6 9.2
Port Macquarie 153.1 147.6 -5.5 10.3 9.7
Queanbeyan 144.5 142.0 -2.5 4.7 7.0
Singleton 137.3 140.3 3.0 3.0 9.4
Tamworth 141.8 135.2 -6.6 -2.1 7.6
Taree 148.3 138.0 -10.3 0.7 8.5
Temora 146.3 142.9 -3.4 5.6 5.0
Tumut 144.6 142.3 -2.3 5.0 6.2
Tweed Heads South 143.9 139.5 -4.4 2.2 4.1
Ulladulla 140.0 133.8 -6.2 -3.5 5.1
Wagga Wagga 132.7 137.6 4.9 0.3 3.1
Wauchope 150.7 145.9 -4.8 8.6 9.2
Wellington 144.1 130.3 -13.8 -7.0 5.6
West Wyalong 145.0 140.6 -4.4 3.3 6.8
Wollongong 138.1 139.9 1.8 2.6 4.9
Woolgoolga 154.7 145.0 -9.7 7.7 10.0
Yass 148.7 141.4 -7.3 4.1 7.8
39 Report on the Australian petroleum market — March 2019
LocationDecember 2018
monthly avgMarch 2019
monthly avgChange December
2018 to March 2019Differential March 2019
Differential 2018
Northern Territory
Alice Springs 160.7 155.9 -4.8 18.6 18.0
Katherine 159.6 145.3 -14.3 8.0 12.0
Queensland
Atherton 146.7 139.0 -7.7 1.7 7.6
Ayr 142.2 141.0 -1.2 3.7 6.6
Biloela 149.7 142.5 -7.2 5.2 10.3
Blackwater 159.8 159.9 0.1 22.6 10.2
Bowen 139.6 138.3 -1.3 1.0 6.9
Bundaberg 130.4 133.5 3.1 -3.8 1.3
Caboolture 135.7 140.6 4.9 3.3 2.4
Cairns 142.7 137.6 -5.1 0.3 7.1
Charters Towers 144.7 140.5 -4.2 3.2 7.2
Childers 131.0 137.9 6.9 0.6 2.9
Cunnamulla 147.5 139.5 -8.0 2.2 8.6
Dalby 144.6 136.4 -8.2 -0.9 6.5
Emerald 152.2 151.5 -0.7 14.2 10.3
Gladstone 134.3 133.8 -0.5 -3.5 4.4
Gold Coast 132.9 136.5 3.6 -0.8 0.6
Goondiwindi 159.2 144.9 -14.3 7.6 10.6
Gympie 126.8 136.3 9.5 -1.0 -0.3
Hervey Bay 133.3 138.3 5.0 1.0 7.4
Ingham 152.3 142.7 -9.6 5.4 8.5
Innisfail 153.4 145.9 -7.5 8.6 9.2
Ipswich 131.3 139.2 7.9 1.9 2.2
Kingaroy 127.9 131.6 3.7 -5.7 4.5
Longreach 160.0 158.3 -1.7 21.0 13.5
Mackay 138.0 137.4 -0.6 0.1 7.4
Mareeba 148.0 140.9 -7.1 3.6 8.0
Maryborough 128.3 133.2 4.9 -4.1 1.6
Miles 127.1 130.2 3.1 -7.1 0.1
Moranbah 150.4 139.1 -11.3 1.8 6.7
Mt Isa 156.7 156.9 0.2 19.6 14.3
Rockhampton 141.4 143.7 2.3 6.4 8.5
Roma 144.3 128.2 -16.1 -9.1 6.8
Sunshine Coast 135.1 137.9 2.8 0.6 3.8
Toowoomba 125.5 132.0 6.5 -5.3 2.6
Townsville 137.5 137.1 -0.4 -0.2 6.5
Tully 156.0 144.8 -11.2 7.5 8.5
Warwick 135.6 135.1 -0.5 -2.2 5.2
Whitsunday 147.4 136.8 -10.6 -0.5 7.2
Yeppoon 142.0 139.9 -2.1 2.6 8.2
South Australia
Bordertown 133.8 137.7 3.9 0.4 2.0
Ceduna 149.9 143.0 -6.9 5.7 6.9
40 Report on the Australian petroleum market — March 2019
LocationDecember 2018
monthly avgMarch 2019
monthly avgChange December
2018 to March 2019Differential March 2019
Differential 2018
Clare 123.1 136.8 13.7 -0.5 -0.1
Gawler 124.2 138.7 14.5 1.4 0.5
Kadina 124.7 134.6 9.9 -2.7 0.5
Keith 138.0 139.4 1.4 2.1 3.7
Loxton 137.6 136.2 -1.4 -1.1 0.5
Mt Gambier 132.6 137.1 4.5 -0.2 3.9
Murray Bridge 128.4 135.8 7.4 -1.5 1.1
Naracoorte 135.2 137.2 2.0 -0.1 3.0
Port Augusta 145.7 134.7 -11.0 -2.6 7.9
Port Lincoln 135.4 140.3 4.9 3.0 5.1
Port Pirie 127.7 136.8 9.1 -0.5 0.6
Renmark 129.8 137.7 7.9 0.4 3.5
Tailem Bend 137.6 137.4 -0.2 0.1 2.8
Victor Harbour 129.5 138.7 9.2 1.4 3.9
Whyalla 138.1 138.6 0.5 1.3 6.6
Tasmania
Burnie 144.5 142.6 -1.9 5.3 10.7
Campbell Town 150.3 145.4 -4.9 8.1 11.9
Devonport 151.4 145.0 -6.4 7.7 11.1
Huonville 154.5 142.7 -11.8 5.4 13.2
Launceston 153.1 147.7 -5.4 10.4 14.3
New Norfolk 152.6 148.8 -3.8 11.5 13.6
Queenstown 144.1 148.4 4.3 11.1 11.8
Smithton 142.5 143.9 1.4 6.6 9.5
Sorell 156.3 142.9 -13.4 5.6 12.0
Ulverstone 150.2 143.0 -7.2 5.7 11.3
Wynyard 148.9 144.6 -4.3 7.3 10.5
Victoria
Ararat 153.0 139.6 -13.4 2.3 6.7
Bairnsdale 138.2 131.7 -6.5 -5.6 0.6
Ballarat 130.7 130.4 -0.3 -6.9 2.5
Benalla 141.8 135.2 -6.6 -2.1 4.7
Bendigo 135.6 129.5 -6.1 -7.8 2.5
Cobram 142.0 139.4 -2.6 2.1 4.5
Colac 134.4 129.6 -4.8 -7.7 3.4
Corryong 137.3 143.6 6.3 6.3 6.3
Echuca 148.5 141.9 -6.6 4.6 6.0
Euroa 132.1 136.8 4.7 -0.5 4.6
Geelong 132.4 138.0 5.6 0.7 1.7
Hamilton 141.7 134.6 -7.1 -2.7 5.4
Horsham 153.1 139.4 -13.7 2.1 6.5
Koo Wee Rup 132.1 137.5 5.4 0.2 2.8
Kyabram 142.0 138.3 -3.7 1.0 4.9
Lakes Entrance 145.6 137.1 -8.5 -0.2 5.3
Leongatha 134.7 140.5 5.8 3.2 4.2
41 Report on the Australian petroleum market — March 2019
LocationDecember 2018
monthly avgMarch 2019
monthly avgChange December
2018 to March 2019Differential March 2019
Differential 2018
Mansfield 148.9 144.9 -4.0 7.6 7.3
Mildura 145.6 138.9 -6.7 1.6 5.1
Moe 135.9 131.5 -4.4 -5.8 3.6
Morwell 138.1 129.0 -9.1 -8.3 0.5
Portland 129.1 137.2 8.1 -0.1 4.5
Sale 143.2 133.9 -9.3 -3.4 5.7
Seymour 129.1 132.4 3.3 -4.9 1.5
Shepparton 129.9 136.2 6.3 -1.1 0.0
Swan Hill 147.2 139.9 -7.3 2.6 5.0
Traralgon 137.9 131.7 -6.2 -5.6 4.4
Wallan 132.9 137.5 4.6 0.2 1.0
Wangaratta 129.3 130.5 1.2 -6.8 2.7
Warrnambool 143.5 132.9 -10.6 -4.4 5.3
Wodonga 134.8 135.6 0.8 -1.7 3.6
Wonthaggi 134.4 139.3 4.9 2.0 3.9
Yarrawonga 147.4 139.8 -7.6 2.5 7.0
Western Australia
Albany 144.1 139.0 -5.1 1.7 7.0
Boulder 153.4 148.8 -4.6 11.5 12.0
Bridgetown 146.6 142.6 -4.0 5.3 6.4
Broome 175.6 166.0 -9.6 28.7 27.5
Bunbury 138.6 138.3 -0.3 1.0 6.6
Busselton 140.8 138.6 -2.2 1.3 5.0
Carnarvon 158.0 150.8 -7.2 13.5 13.8
Collie 147.3 141.8 -5.5 4.5 9.4
Dongara 149.2 142.4 -6.8 5.1 4.7
Esperance 153.6 149.6 -4.0 12.3 10.3
Eucla 157.4 158.0 0.6 20.7 22.4
Geraldton 150.2 145.2 -5.0 7.9 8.2
Kalgoorlie 153.2 148.6 -4.6 11.3 12.6
Karratha 165.8 162.5 -3.3 25.2 19.9
Manjimup 138.9 138.4 -0.5 1.1 5.3
Mount Barker 144.0 138.5 -5.5 1.2 3.6
Port Hedland 165.4 161.6 -3.8 24.3 17.2
Waroona 125.3 134.8 9.5 -2.5 -0.3
42 Report on the Australian petroleum market — March 2019
Appendix B: Update on regional market studiesUnder the previous monitoring Direction, the ACCC undertook regional petrol market studies in Darwin, Launceston, Armidale and Cairns. The ACCC continues to monitor prices and GIRDs in those locations.
DarwinThe ACCC’s report on the Darwin petrol market was released in November 2015.37 It found that the increase in retail petrol margins in Darwin in 2012–13 and 2013–14 had imposed a significant cost on motorists. The report noted that higher prices and profits in Darwin were the result of weak retail competition.
Darwin petrol prices decreased significantly in the March quarter 2019Chart B1 shows quarterly average retail petrol prices in Darwin and the five largest cities from the June quarter 2016 to the March quarter 2019.
Chart B1: Quarterly average retail petrol prices in Darwin and the five largest cities: June quarter 2016 to March quarter 2019
100
110
120
130
140
150
160
170
Jun–
16
Sep
–16
Dec
–16
Mar
–17
Jun–
17
Sep
–17
Dec
–17
Mar
–18
Jun–
18
Sep
–18
Dec
–18
Mar
–19
cpl
Darwin Five largest cities
Source: ACCC calculations based on FUELtrac data
In the March quarter 2019, average retail petrol prices in Darwin were 130.0 cpl, a decrease of 23.1 cpl from the December quarter 2018 (153.1 cpl).
The market study noted that the average differential between prices in Darwin and the five largest cities in 2012–13 and 2013–14 was over 19.0 cpl. Since then it has decreased significantly.
In the March quarter 2019, the quarterly average price in Darwin was 0.3 cpl lower than the five largest cities, a decrease of 11.3 cpl in the differential between the two from the December quarter 2018 (11.0 cpl). In 2018, the annual average differential was 9.8 cpl.
37 ACCC, Report on the Darwin petrol market, 23 November 2015, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-darwin-petrol-market.
43 Report on the Australian petroleum market — March 2019
Darwin petrol prices were above a long-term competitive cost-based price, but the difference decreasedThe ACCC’s Darwin report noted that motorists were paying around 10 cpl more than they should have been in a competitive market. This was based on a comparison of GIRDs in Darwin with those in the larger capital cities.
Chart B2 shows Darwin petrol prices on a rolling annual average basis from 1 January 2015 to 31 March 2019. Each daily price in the chart is the average of that day’s price and prices on the previous 364 days. Analysis of prices over the long term enables short-term influences (such as lags in regional price movements) to be smoothed out.
The chart also shows estimated Darwin prices calculated on a long-term cost basis. This calculation reflects the fact that costs (such as freight and operating costs per litre) are higher in Darwin, and assumes that retail margins in Darwin should be broadly similar to long-term average retail margins in the five largest cities. This long-term competitive cost-based price provides a benchmark against which to compare current price levels. It is not static and will change as its underlying elements change over time. If retail prices are constantly above this benchmark price for a sustained period this may be indicative of a less-competitive market, in which retailers are earning higher margins at the expense of consumers.
Chart B2: Rolling annual average retail prices and a long-term competitive cost-based price in Darwin, and the difference: 1 January 2015 to 31 March 2019
–10
0
10
20
30
40
50
60
70
100
110
120
130
140
150
160
170
180
ACCC announces Darwin market study 10 March 2015
ACCC report released 23 November 2015
cpl
cpl
Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)
Jan–1
5
Ap
r–15
Jul–
15
Oct–
15
Jan–1
6
Ap
r–16
Jul–
16
Oct–
16
Jan–1
7
Ap
r–17
Jul–
17
Oct–
17
Jan–1
8
Ap
r–18
Jul–
18
Oct–
18
Jan–1
9
Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Darwin market study.
The chart indicates that rolling annual average petrol prices in Darwin remained above a rolling long-term competitive cost-based price in the March quarter 2019, although the difference between the two decreased significantly during the quarter.
In the March quarter 2019, average quarterly petrol prices in Darwin reflected a competitive cost-based price.
Darwin GIRDs decreased significantly in the March quarter 2019Chart B3 shows quarterly average GIRDs in Darwin and the five largest cities over a three-year period from the June quarter 2016 to the March quarter 2019. GIRDs in Darwin have decreased in recent years since the peak of 30.6 cpl in the September quarter 2014.
44 Report on the Australian petroleum market — March 2019
In the March quarter 2019, Darwin GIRDs were 5.0 cpl, a decrease of 15.0 cpl from the December quarter 2018 (20.0 cpl). Darwin GIRDs in the March quarter 2019 were 4.5 cpl lower than the five largest cities (9.5 cpl) and were at their lowest level since the June quarter 2016. Annual average GIRDs in Darwin were 17.3 cpl in 2018.
Chart B3: Quarterly average petrol GIRDs in Darwin and the five largest cities: June quarter 2016 to March quarter 2019
0
5
10
15
20
25
30
cpl
Darwin Five largest cities
Jun–
16
Sep
–16
Dec
–16
Mar
–17
Jun–
17
Sep
–17
Dec
–17
Mar
–18
Jun–
18
Sep
–18
Dec
–18
Mar
–19
Source: ACCC calculations based on data from FUELtrac, AIP, BP, Caltex, Mobil, Viva Energy and FuelWatch.
Darwin retail prices since the introduction of MyFuel NTThe MyFuel NT scheme commenced on 1 November 2017. It is a territory-wide real-time mandatory retail fuel price reporting scheme, which gives consumers access (via website or mobile app) to live price data from every fuel retailer in the NT. MyFuel NT is similar to the FuelCheck scheme in NSW.
Chart B4 shows daily average petrol prices and TGPs (lagged by five days) in Darwin over the period 1 September 2017 to 31 March 2019.
Retail prices increased significantly prior to the introduction of MyFuel NT, following an increase in TGPs. However, the increase in retail prices (around 11.0 cpl) was larger than the increase in TGPs (around 8.0 cpl) and occurred immediately. Retail prices increased in mid-November 2017 by around 5.0 cpl, and again in early-December 2017 by a further 4.0 cpl to around 149.0 cpl.
At the beginning of the March quarter 2019, retail prices in Darwin were 132.6 cpl. They decreased to around 127.0 cpl by mid-January, where they remained until mid-March 2019. They subsequently increased by around 12.5 cpl to 139.5 cpl in late-March 2019. TGPs were 118.9 cpl at the beginning of the March quarter 2019. They decreased to a low of 115.6 cpl in the second week of January. They subsequently increased by 19.8 cpl to 135.4 cpl at the end of the quarter.
45 Report on the Australian petroleum market — March 2019
Chart B4: Daily average retail petrol prices and TGPs in Darwin: 1 September 2017 to 31 March 2019cp
l
Retail price TGP (lagged 5 days)
MyFuel NT introduced 1 November 2017
105
115
125
135
145
155
165
175 S
ep
–17
Oct–
17
Nov–1
7
Dec–1
7
Jan–1
8
Feb
–18
Mar–
18
Ap
r–18
May
–18
Jun–1
8
Jul–
18
Aug
–18
Sep
–18
Oct–
18
Nov–1
8
Dec–1
8
Jan–1
9
Feb
–19
Mar–
19
Source: ACCC calculations based on data from FUELtrac and AIP.
Motorists can use the MyFuel NT scheme to identify the highest and lowest priced retail sites in Darwin. For example, on 13 May 2019 it showed that there was a range of 4.5 cpl between the highest priced retail sites in Darwin (144.9 cpl at four Coles Express retail sites) and the lowest (140.4 cpl at FuelXpress Winnellie).
LauncestonThe ACCC report on the Launceston petrol market was released in July 2016.38 It found that between 2012–13 and the first half of 2015–16, Launceston motorists paid on average around 12 cpl more for petrol than motorists in the five largest cities. The report noted that if the Launceston market was more competitive, motorists could expect savings of 4–5 cpl on a sustainable basis. The three main factors causing higher prices in Launceston were higher transport costs, higher wholesale operating costs and margins, and higher retail operating costs and margins.
Launceston petrol prices decreased significantly in the March quarter 2019In the March quarter 2019, average retail petrol prices in Launceston were 146.4 cpl, a decrease of 15.5 cpl from the December quarter 2018 (161.9 cpl) (see chart B5). The average differential between prices in Launceston and the five largest cities was 16.1 cpl, a decrease of 3.7 cpl from the December quarter 2018 (19.8 cpl). In 2018, the annual average differential was 14.3 cpl.
38 ACCC, Report on the Launceston petrol market, 20 July 2016, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-launceston-petrol-market.
46 Report on the Australian petroleum market — March 2019
Chart B5: Quarterly average retail petrol prices in Launceston and the five largest cities: June quarter 2016 to March quarter 2019
cpl
100
110
120
130
140
150
170
160
Launceston Five largest cities
Jun–1
6
Sep
–16
Dec–1
6
Mar–
17
Jun–1
7
Sep
–17
Dec–1
7
Mar–
18
Jun–1
8
Sep
–18
Dec–1
8
Mar–
19
Source: ACCC calculations based on FUELtrac data.
Launceston petrol prices remained substantially above a long-term competitive cost-based price Chart B6 shows Launceston petrol prices on a rolling annual average basis and estimated Launceston prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 March 2019. These prices have been calculated on the same basis as outlined for Darwin. The chart shows that the differential between rolling annual average petrol prices in Launceston and a rolling long-term competitive cost-based price decreased slightly during the March quarter 2019, but remains significantly high. This may reflect the absence of vigorous and effective competition in Launceston.
47 Report on the Australian petroleum market — March 2019
Chart B6: Rolling annual average retail prices and a long-term competitive cost-based price in Launceston, and the difference: 1 January 2015 to 31 March 2019
–10
0
10
20
30
40
50
60
70
100
110
120
130
140
150
160
170
180
ACCC announces Launceston market study 10 May 2015
ACCC report released 20 July 2016
cpl
cpl
Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)
Jan
–15
Ap
r–15
Jul–
15
Oct
–15
Jan
–16
Ap
r–16
Jul–
16
Oct
–16
Jan
–17
Ap
r–17
Jul–
17
Oct
–17
Jan
–18
Ap
r–18
Jul–
18
Oct
–18
Jan
–19
Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Launceston market study.
Motorists in Launceston can use available fuel price websites and apps, such as MotorMouth and GasBuddy, to identify the highest and lowest priced retail sites in Launceston. For example, on 13 May 2019, using the GasBuddy app, there was a 10.1 cpl range between the highest priced retail sites in Launceston (161.9 cpl at one BP retail site) and the lowest (151.8 cpl at one United retail site and one BP retail site).
Launceston GIRDs decreased significantly in the March quarter 2019Chart B7 shows quarterly average GIRDs in Launceston and the five largest cities over the three-year period from the June quarter 2016 to the March quarter 2019.
In the March quarter 2019, Launceston GIRDs were 19.8 cpl, a decrease of 8.5 cpl from the December quarter 2018 (28.3 cpl). Launceston GIRDs in the March quarter 2019 were 10.3 cpl higher than in the five largest cities (9.5 cpl). Annual average GIRDs in Launceston were 21.2 cpl in 2018.
48 Report on the Australian petroleum market — March 2019
Chart B7: Quarterly average petrol GIRDs in Launceston and the five largest cities: June quarter 2016 to March quarter 2019
0
5
10
15
20
25
30
cpl
Launceston Five largest cities
Jun–1
6
Sep
–16
Dec–1
6
Mar–
17
Jun–1
7
Sep
–17
Dec–1
7
Mar–
18
Jun–1
8
Sep
–18
Dec–1
8
Mar–
19
Source: ACCC calculations based on data from FUELtrac, AIP, BP, Caltex, Mobil, Viva Energy and FuelWatch.
Note: Hobart TGPs are used as a proxy for TGPs in Launceston.
Armidale The ACCC report on the Armidale petrol market was released in November 2016.39 It found that relatively weak retail competition in Armidale, reflected by a lack of price discounting, contributed to E10 prices in Armidale being on average 8.0 cpl higher than RULP prices in the five largest cities between 2012–13 and 2014–15.
Armidale petrol prices decreased significantly in the March quarter 2019Chart B8 shows quarterly average retail petrol prices in Armidale and the five largest cities from the June quarter 2016 to the March quarter 2019.
In the March quarter 2019, average retail petrol prices in Armidale were 137.7 cpl, a decrease of 17.7 cpl from the December quarter 2018 (155.4 cpl). The average differential between prices in Armidale and the five largest cities was 7.4 cpl in the March quarter 2019, a decrease of 5.9 cpl from the December quarter 2018 (13.3 cpl). In 2018, the annual average differential was 7.0 cpl.
39 ACCC, Report on the Armidale petrol market, 21 November 2016, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-armidale-petrol-market. References to petrol prices in Armidale in this appendix are to E10 prices. Armidale prices in attachment A are RULP prices.
49 Report on the Australian petroleum market — March 2019
Chart B8: Quarterly average retail petrol prices in Armidale and the five largest cities: June quarter 2016 to March quarter 2019
cpl
100
110
120
130
140
150
170
160
Armidale Five largest cities
Jun–1
6
Sep
–16
Dec–1
6
Mar–
17
Jun–1
7
Sep
–17
Dec–1
7
Mar–
18
Jun–1
8
Sep
–18
Dec–1
8
Mar–
19
Source: ACCC calculations based on FUELtrac data.
Armidale petrol prices were above a long-term competitive cost-based priceChart B9 shows Armidale petrol prices on a rolling annual average basis and estimated Armidale prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 March 2019. These prices have been calculated on the same basis as outlined for Darwin. The chart indicates that in the March quarter 2019, rolling annual average petrol prices in Armidale were above a rolling long-term competitive cost-based price.
50 Report on the Australian petroleum market — March 2019
Chart B9: Rolling annual average retail prices and a long-term competitive cost-based price in Armidale, and the difference: 1 January 2015 to 31 March 2019
–10
0
10
20
30
40
50
60
70
100
110
120
130
140
150
160
170
180
ACCC announces Armidale market study 3 August 2015
ACCC report released 21 November 2016
cpl
cpl
Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)
Jan–1
5
Ap
r–15
Jul–
15
Oct–
15
Jan–1
6
Ap
r–16
Jul–
16
Oct–
16
Jan–1
7
Ap
r–17
Jul–
17
Oct–
17
Jan–1
8
Ap
r–18
Jul–
18
Oct–
18
Jan–1
9
Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Armidale market study.
Motorists in Armidale can use the FuelCheck website and app to identify the highest and lowest priced retail sites in Armidale. For example, on 13 May 2019, the FuelCheck website showed that there was a 3.0 cpl range between the highest priced RULP retail site in Armidale (148.9 cpl at Caltex Armidale) and the lowest (145.9 cpl at Lowes Armidale). There was a 2.0 cpl range between the highest priced E10 retail sites (146.9 cpl at three Caltex retail sites, one Woolworths retail site and one Coles Express retail site) and the lowest (144.9 cpl at Lowes Armidale).
Armidale GIRDs decreased significantly in the March quarter 2019Chart B10 shows quarterly average GIRDs in Armidale and the five largest cities over a three-year period from the June quarter 2016 to the March quarter 2019.
In the March quarter 2019, average GIRDs in Armidale were 18.0 cpl, a decrease of 10.4 cpl from the December quarter 2018 (28.4 cpl). Armidale GIRDs in the March quarter 2019 were 8.5 cpl higher than in the five largest cities (9.5 cpl). Annual average GIRDs in Armidale were 20.6 cpl in 2018.
51 Report on the Australian petroleum market — March 2019
Chart B10: Quarterly average petrol GIRDs in Armidale and the five largest cities: June quarter 2016 to March quarter 2019
0
5
10
15
20
25
30
cpl
Armidale Five largest cities
Jun-1
6
Sep
-16
Dec-1
6
Mar-
17
Jun-1
7
Sep
-17
Dec-1
7
Mar-
18
Jun-1
8
Sep
-18
Dec-1
8
Mar-
19
Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch data.
Note: Sydney and Brisbane E10 TGPs from monitored companies are used as a proxy for Armidale TGPs.
CairnsThe ACCC report on the Cairns petrol market was released in May 2017.40 It found that between 2012–13 and the first half of 2016–17, the average differential between prices in Cairns and the five largest cities was around 11.0 cpl. It concluded that a lack of vigorous and effective retail price competition in Cairns contributed to the increase in retail margins and profits in recent years.
Cairns petrol prices decreased significantly in the March quarter 2019Chart B11 shows quarterly average retail petrol prices in Cairns and the five largest cities from the June quarter 2016 to the March quarter 2019.
In the March quarter 2019, the average retail petrol price in Cairns was 130.7 cpl, a decrease of 26.0 cpl from the December quarter 2018 (156.7 cpl). The average differential between prices in Cairns and the five largest cities was 0.4 cpl in the March quarter 2019, a decrease of 14.2 cpl from the December quarter 2018 (14.6 cpl). In 2018, the annual average differential was 7.1 cpl.
40 ACCC, Report on the Cairns petrol market, 29 May 2017, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-cairns-petrol-market.
52 Report on the Australian petroleum market — March 2019
Chart B11: Quarterly average retail petrol prices in Cairns and the five largest cities: June quarter 2016 to March quarter 2019
cp
l
100
110
120
130
140
150
170
160
Cairns Five largest cities
Jun–1
6
Sep
–16
Dec
–16
Mar
–17
Jun–1
7
Sep
–17
Dec
–17
Mar
–18
Jun–1
8
Sep
–18
Dec
–18
Mar
–19
Source: ACCC calculations based on FUELtrac data.
Cairns petrol prices were above a long-term competitive cost-based price Chart B12 shows Cairns petrol prices on a rolling annual average basis and estimated Cairns prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 March 2019. These prices have been calculated on the same basis as outlined for Darwin.
The chart indicates that rolling annual average petrol prices in Cairns were above a rolling long-term competitive cost-based price.
The difference between petrol prices in Cairns and the long-term competitive cost-based price was significantly lower in 2018 and the first quarter of 2019 than in 2017. This may have been due to more vigorous competition following the increasing presence of United in the Cairns area since the March quarter 2018. In the March quarter 2019, average quarterly petrol prices in Cairns reflected a competitive cost-based price.
53 Report on the Australian petroleum market — March 2019
Chart B12: Rolling annual average retail prices and a long-term competitive cost-based price in Cairns, and the difference: 1 January 2015 to 31 March 2019
–10
0
10
20
30
40
50
60
70
100
110
120
130
140
150
160
170
180
ACCC announces Cairns market study
19 April 2016
ACCC report released 30 May 2017
cpl
cpl
Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)
Jan–1
5
Ap
r–15
Jul–
15
Oct–
15
Jan–1
6
Ap
r–16
Jul–
16
Oct–
16
Jan–1
7
Ap
r–17
Jul–
17
Oct–
17
Jan–1
8
Ap
r–18
Jul–
18
Oct–
18
Jan–1
9
Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Cairns market study.
Cairns GIRDs decreased significantly in the March quarter 2019Chart B13 shows quarterly average GIRDs in Cairns and the five largest cities over the three-year period from the June quarter 2016 to the March quarter 2019.
In the March quarter 2019, average GIRDs in Cairns were 6.1 cpl, a decrease of 18.7 cpl from the December quarter 2018 (24.8 cpl). Cairns GIRDs in the March quarter 2019 were 3.4 cpl lower than in the five largest cities (9.5 cpl), and were the lowest since the ACCC began collecting Cairns data (in the September quarter 2009). Annual average GIRDs in Cairns were 15.8 cpl in 2018.
54 Report on the Australian petroleum market — March 2019
Chart B13: Quarterly average petrol GIRDs in Cairns and the five largest cities: June quarter 2016 to March quarter 2019
0
5
10
15
20
25
30
cpl
Cairns Five largest cities
Jun-1
6
Sep
-16
Dec-1
6
Mar-
17
Jun-1
7
Sep
-17
Dec-1
7
Mar-
18
Jun-1
8
Sep
-18
Dec-1
8
Mar-
19
Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch.
Cairns retail prices since the introduction of the Queensland fuel price reporting trialThe Queensland fuel price reporting trial commenced on 3 December 2018. The two-year trial requires all Queensland fuel retailers to report their undiscounted fuel prices to a data aggregator, and gives consumers access to the price data via apps and websites.
Chart B14 shows daily average petrol prices and TGPs (lagged by five days) in Cairns over the period 1 April 2018 to 31 March 2019.
Retail prices in Cairns started to decrease prior to the introduction of the Queensland fuel price reporting trial. They reached a high of 167.1 cpl in mid-November 2018, and subsequently decreased by 37.2 cpl to 129.9 cpl at the end of December 2018. This followed similar movements in TGPs, which reached a high of 150.8 cpl in mid-October 2018 and subsequently decreased by 32.8 cpl to a low of 118.0 cpl in mid-December 2018.
At the beginning of the March quarter 2019, retail prices in Cairns were 130.4 cpl. They decreased by 5.5 cpl to 124.9 cpl in early-February, and subsequently increased by 21.7 cpl to end the quarter at 146.6 cpl. TGPs were 118.0 cpl at the beginning of the March quarter 2019. They decreased by 2.6 cpl in early-January to a low of 115.4 cpl, and subsequently increased by 19.5 cpl to end the quarter at 134.9 cpl.
55 Report on the Australian petroleum market — March 2019
Chart B14: Daily average retail petrol prices and TGPs in Cairns: 1 April 2018 to 31 March 2019cp
l
Retail price TGP (lagged 5 days)
Queensland fuel price reportingintroduced 3 December 2018
105
115
125
135
145
155
165
175 A
pr-
18
May
-18
Jun-1
8
Jul-
18
Aug
-18
Sep
-18
Oct-
18
Nov-1
8
Dec-1
8
Jan-1
9
Feb
-19
Mar-
19
Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil and Viva Energy.
Motorists in Cairns are able to access site-specific petrol price data made available by websites and app providers under the Queensland fuel price reporting trial to identify the highest and lowest priced retail sites in Cairns. For example, on 13 May 2019, using the MotorMouth website, there was a 9.4 cpl range between the highest priced retail sites in Cairns (156.9 cpl at Stratford Driveway Discount Fuels) and the lowest (147.5 cpl at White Rock General Store).
56 Report on the Australian petroleum market — March 2019
Appendix C: ACCC submission to the ACT Legislative Assembly petrol inquiry
23 Marcus Clarke Street
Canberra ACT 2601
GPO Box 3131
Canberra ACT 2601
tel: (02) 6243 1111
www.accc.gov.au
EXECUTIVE OFFICE
March 2019
Mr Andrew Snedden The Committee Secretary Select Committee on Fuel Pricing Legislative Assembly for the ACT GPO Box 1020 Canberra ACT 2601 Sent by email: [email protected]
Dear Mr Snedden,
Inquiry into fuel pricing in the ACT
The ACCC thanks the ACT Legislative Assembly’s Select Committee on Fuel Pricing for the opportunity to comment on fuel prices in the ACT, and welcomes this review.
The main role of the ACCC is to enforce the Competition and Consumer Act 2010 (the Act) across the Australian economy, including the fuel industry. Wholesale and retail petrol prices in Australia are determined by market forces. The ACCC does not set prices in petrol markets and does not have the powers to do so. In the absence of conduct that is in breach of the Act, high petrol prices are not illegal.
Since December 2007, the ACCC has had Ministerial Directions, under Part VIIA of the Act, to monitor prices, costs and profits relating to the supply of unleaded petroleum products in the petroleum industry in Australia.
The ACCC’s reporting on petrol prices has evolved over time. From 2008 to 2014, the ACCC prepared annual petrol monitoring reports. In December 2014, the ACCC was issued with a three-year petrol monitoring Direction, under which the ACCC produced quarterly monitoring reports and regional market studies. The quarterly monitoring reports focus on price movements in the capital cities (including Canberra) and over 190 regional locations across Australia. Regional market studies were undertaken for Darwin, Launceston, Armidale and Cairns, and a short study was undertaken for Brisbane. Under the current Direction, issued in December 2017, the ACCC continues to produce quarterly petrol monitoring reports, and also produces petrol industry reports, which focus on issues of concern to consumers. All of these reports are available on the ACCC website.
The ACCC’s petrol monitoring role is to assist consumers navigate this complex industry. Through its petrol monitoring reports, industry reports and other information channels, the ACCC promotes transparency in the Australian petroleum industry and improved public awareness of the factors that determine retail petrol prices.
Determinants of fuel prices
The ACCC’s analysis of the petrol industry over many years has indicated that the overall level of retail petrol prices in Australia is primarily determined by movements in international
refined petrol prices and the AUD-USD exchange rate. However, the short-term movement of retail petrol prices is a result of the pricing policies of petrol retailers.
Petrol prices are generally higher in regional locations and the smaller capital cities (including Canberra) than in the large capital cities for a number of reasons. These include:
a lower level of local competition, often reflecting the lower number of retail sites
lower volumes of fuel sold
distance and location factors
lower convenience store sales.
These factors were elaborated on in the ACCC’s 2014 annual petrol monitoring report (on pages 74-5), which are reproduced at Attachment A.
The influence of these factors varies significantly from location to location. This means that at any point in time there may be substantial differences in prices between locations.
When analysing petrol prices in Canberra it is important to note at the outset that comparisons need to be made over a period of time, such as monthly or quarterly. This is because there are substantial fluctuations in prices that can make short-term comparisons misleading.
Unlike the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth), petrol prices in Canberra do not currently follow a ‘price cycle’ (although they have been known to in the past). When the prices in the five largest cities are low, this can result in substantial differences in price (around 30 cents per litre) between the average daily petrol price in Canberra and the five largest cities. At other times, the price difference can be small.
Last year the ACCC released a report on petrol price cycles in Australia. The report noted that some general features of locations with regular petrol price cycles include: a large number of petrol retail sites within a location, lower market concentration (i.e. there are a number of different petrol retailers), and a large number of independent petrol retailers. This combination of factors typically occurs in high population areas, such as the five largest cities.
Retail petrol prices in Canberra and other locations
The table presented at Attachment B shows annual average and recent monthly average regular unleaded petrol prices in Canberra, Hobart and Cairns as well as average prices across the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth). The table also shows changes in prices from period to period.
Over the last three financial years, annual average petrol prices in Canberra were between 5.2 and 7.1 cents per litre (cpl) higher than prices in the five largest cities. Hobart prices were consistently higher than those in Canberra. Prices in Cairns were higher still in the first two years however, in 2017-18, they were lower than prices in both Canberra and Hobart.
Recent petrol price movements have reflected a broadly similar trend across locations, although the extent and timing of price movements has been different.
While prices in the smaller capital cities and regional locations generally follow movements in the international price of refined petrol, they often do not respond as quickly—either up or down—as prices in the five largest cities. The effect of this lag is exacerbated when prices increase or decrease quickly, as occurred in late 2018.
Over the six months to January 2019 petrol prices in the five largest cities decreased by 20.4 cpl, while in Canberra and Hobart prices decreased by 9.1 cpl and 8.3 cpl respectively. In Cairns, however, prices decreased by over 25 cpl.
The significant price reduction in Cairns may be due to relatively strong price competition in the retail petrol market, influenced by the increasing presence of United in the Cairns area since the March quarter 2018. In addition, over the last three months, motorists in Cairns have been able to access site-specific petrol prices from fuel price websites and apps, following the introduction on 3 December 2018 of the Queensland fuel price reporting trial.
Composition of the retail petrol market in Canberra
The ACCC has noted in the past that the main reason for higher petrol prices in Canberra is that the level of retail price competition in the Canberra petrol market is relatively weak.
The Canberra retail petrol market has a high degree of market concentration. At the beginning of March 2019, according to the Informed Sources Netwatch database, there were 58 retail sites in Canberra. Five retail brands (Coles Express, Woolworths, Caltex, BP and 7-Eleven) accounted for around 92 per cent of retail sites. In contrast, in Sydney these five retail brands accounted for around 70 per cent of the total number of retail sites.
The two supermarket chains (Coles Express and Woolworths) alone accounted for around 43 per cent of retail sites in Canberra, compared with only around 20 per cent in Sydney. There were 15 Coles Express retail sites in Canberra. It is the biggest retailer in the market, with around 26 per cent of the total number of retail sites. The ACCC’s report on average petrol prices by major retailer in 2017, released in May 2018, found that Coles Express was on average the highest priced major retailer in each of the five largest cities. With Viva Energy taking over price setting at Coles Express retail sites from early-March 2019, there is an expectation that Coles Express prices will be lower. The ACCC will be monitoring prices at Coles Express retail sites in coming months.
In contrast, there were only 14 independently branded retail sites in Canberra (nine 7-Eleven, two United, one Costco, one Metro Fuel and one Hall Village Motors). These accounted for only around 24 per cent of retail sites in Canberra.
A conclusion from the ACCC’s regional market studies was the importance of a number of competitive price setters. The ACCC’s report on average petrol prices by major retailer in 2017 found that the large and medium-sized independent chains are, in general, offering competitive prices.
Canberra has two national independent chains (7-Eleven and United) operating retail sites, but only 7-Eleven has a significant present in the market, with around 16 per cent of retail sites. The presence of only one significant independent chain in Canberra may be a contributing factor to the higher retail petrol prices in Canberra.
Fuel retailer operating structures
There are currently around 7500 retail fuel sites in Australia and these operate under a range of business models. The variety of business models and ownership structures mean that there are different pricing strategies among retail sites, as well as different capital structures and cost bases.
For example, some retailers may consider that they have a ‘premium brand’, an attractive retail site, a good location and a superior convenience store, and set their retail prices higher to reflect these features. Other retailers may consider that they need to set prices below those of many of their local competitors to attract customers to their retail site. Some may
offer competitive prices to attract consumers into their convenience store where margins are often higher than on sales of fuel.
Some retailers may offer discounts to qualifying customers. Examples of these include shopper docket discount arrangements of the supermarket chains, discount arrangements between some major retailers and state motoring organisations, and discounts associated with fuel cards. These offers may also influence a retailer’s pricing strategy.
These differences need to be borne in mind when considering the average prices of the major retailers, and any regulatory or legislative changes that will influence the retail fuel market.
Fuel price transparency
The ACCC’s regional petrol market studies identified the importance of fuel price transparency in promoting competition and assisting motorists. Real-time price information can help consumers find the lowest prices, encourages them to buy where petrol is cheapest, and rewards price-competitive retailers.
In September 2017, I gave a speech to the Asia Pacific Fuel Industry Forum in Melbourne on the topic of ‘fuel price transparency and retail industry competition’. A copy of the speech is at Attachment C.
A range of fuel-price websites and apps are currently available to assist motorists to identify petrol prices at individual retail sites. Some of the websites and apps available around Australia include:
state and territory government schemes (such as those in WA, NSW and the NT)
motoring organisations’ websites and apps (such as the NRMA and RACQ)
commercial services (such as the MotorMouth and Petrol Spy websites and apps, and the GasBuddy app)
retailer apps (such as 7-Eleven and Woolworths).
Some of the websites and apps provided by commercial services and retailers include data on petrol prices in the ACT.
While there is a range of fuel price websites and apps available to motorists, some are more comprehensive and timely than others, and not all of them include prices for the lowest-priced retail sites. The government schemes are the most comprehensive and up-to-date. In jurisdictions without comprehensive government schemes, commercial services are often not complete and do not include all of the cheaper retail sites.
It is a decision for state and territory governments as to whether fuel price transparency is provided by the private sector, or whether government has a role to play in ensuring consumers have access to fuel pricing information. However, the ACCC views fuel price transparency for consumers as a positive development for an industry where comprehensive fuel prices were previously only seen by the major retailers.
Should you wish to discuss this matter further, please contact Matthew Schroder, General Manager, Infrastructure and Transport – Access and Pricing Branch, on 03 9290 6924.
Yours sincerely,
Rod Sims Chair
Attachment A
Extract from ‘Monitoring of the Australian Petroleum industry: Report of the ACCC into the prices, costs and profits of unleaded petrol in Australia - December 2014’
7.2.1 A lower level of local competition In general, the degree of competition in a market will be greater the larger the number of sellers. Therefore, everything else being equal, the higher the number of retail sites in a location, the greater the level of competition. Smaller populations in regional locations generally have fewer vehicles, and therefore less retail sites, compared with the larger cities. Often this results in less competition in regional locations. In small country towns with a small number of retail sites there may be little incentive to reduce prices. This is because competitors will also quickly reduce their prices and the net result is the same volume of petrol sold at each retail site but with a lower margin. While the number of retail sites may be a general indicator of the degree of competition, there are other factors which influence how competitive a market is and may lead to different prices occurring in regional locations with a similar number of retail sites. These include: the composition of the market (such as the number of independent and supermarket sites), the nature of the business operation (whether it is primarily a petrol retailer or there are other businesses associated with it, like a mechanical workshop), and the different pricing strategies of market participants.
7.2.2 Lower volumes of petrol sold The volume of petrol sold at any particular retail site can significantly influence the price. Generally, the greater the volume of petrol sold the lower the price. Certain costs of running a retail site (such as rent and maintenance) remain unchanged irrespective of the volume of petrol sold. However, retail sites in regional locations generally sell lower volumes of petrol than retail sites in larger cities because they have fewer customers. Retail sites with higher volume sales can spread their fixed costs over this greater volume, which reduces the unit cost of supplying their petrol compared with retail sites with lower volumes of sales.
7.2.3 Distance/location factors It generally costs more to deliver fuel to regional locations than it does to the largest capital cities. In regional locations, fuel needs to be moved further from the fuel terminals, leading to higher freight costs. Additional storage costs may also be necessary if the fuel is stored in a local storage facility before being supplied to retail sites. Regional locations which are situated along a major highway may have lower prices due to increased competition. This is because they may sell higher volumes due to the passing traffic on the highway, and may also have lower delivery and storage costs.
7.2.4 Lower convenience store sales The margin on convenience store sales is usually significantly higher than on fuel sales. In the five largest cities convenience store sales generally make a greater contribution to the overall returns of a retail site than they do in regional locations. These retail sites can remain profitable on much lower margins on fuel sales. As a result, upward pressure is put on retail petrol prices in retail sites with lower convenience store sales, such as in regional locations.
7.2.5 Lags in price movements in regional locations Price movements in regional locations generally lag behind movements in the five largest cities. This is due in part to a lower volume of sales in these locations, and hence slower replenishment of fuel stocks by wholesalers and retailers. Consequently, prices in regional locations often take more time to reflect changes in international prices than those in the five largest cities. Furthermore, retail prices in some regional locations are ‘sticky’, i.e. they are less responsive—both upwards and downwards—to movements in international prices. Chart 7.1 shows monthly average petrol prices in the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth), regional locations in aggregate, and the monthly average price of refined petrol price in Singapore (Mogas 95) in Australian cents per litre in the period July 2013 to June 2014. Chart 7.1 Monthly average retail petrol prices in the five largest cities and regional
locations in aggregate, and Mogas 95 prices in Australian cents per litre: July 2013 to June 2014
Source: ACCC calculations based on Informed Sources, Platts and RBA data.
An example of the lag and sticky prices occurred in the period October 2013 to March 2014:
monthly average Mogas 95 prices troughed in October 2013 and increased by 8.3 cpl over the four months to February 2014
monthly average retail prices across the five largest cities troughed in November 2013 and increased by 9.9 cpl to March 2014
monthly average retail prices across regional locations also troughed in November 2013 but increased by only 3.9 cpl to March 2014.
Attachment B Annual and monthly average regular unleaded petrol prices - cpl
2015-16 2016-17 2017-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Net change
(Aug 18 to Jan 19)
Five largest cities 121.7 122.6 134.5 143.8 152.2 157.9 139.3 129.1 123.4 -20.4
0.9 11.9 8.4 5.7 -18.6 -10.2 -5.7
Canberra 126.9 129.4 141.6 153.2 157.0 164.5 161.7 150.4 144.1
-9.1 2.5 12.2 3.8 7.5 -2.8 -11.3 -6.3
Hobart 130.2 134.0 145.1 158.3 160.0 164.6 162.4 158.1 150.0 -8.3
3.8 11.1 1.7 4.6 -2.2 -4.3 -8.1
Cairns 132.6 135.7 140.4 153.2 156.7 164.3 163.4 142.7 127.3
-25.9 3.1 4.7 3.5 7.6 -0.9 -20.7 -15.4
Annual average price differential to five largest cities - cpl
2015-16 2016-17 2017-18
Canberra 5.2 6.8 7.1
Hobart 8.5 11.4 10.6
Cairns 10.9 13.1 5.9
Source: ACCC calculations based on data from FUELtrac.
Attachment C
Asia Pacific Fuel Industry Forum
Fuel price transparency and retail industry competition
ACCC Chairman Rod Sims
13 September 2017, Melbourne
Check against delivery
Good morning ladies and gentlemen.
When it comes to consumer issues, petrol prices are among the most pressing concerns for consumers and, as a result, for the ACCC and governments.
Pressing and aggravating.
Many consumers appear to be convinced that petrol prices are a rip-off. Indeed, I meet many journalists who are of the same view.
The wild fluctuations in prices that occur in the larger cities as a result of the petrol price cycles only reinforce this view. Consumers can see that international petrol prices have not risen; but fuel prices have.
In regional areas, large variations in the price of petrol between one town and another also leave some consumers understandably frustrated in the belief that they are getting a raw deal on petrol.
These perceptions have been around for many years and remain today.
This is why the current focus of the ACCC is to highlight to consumers the ability of technology to help them find where the cheapest petrol prices are, to encourage them to buy where petrol is cheapest, and to reward retailers which have the lowest prices.
This takes us from a long-standing arrangement whereby only the major retailers had access to comprehensive information about petrol prices, to consumers now being empowered to make purchasing decisions through a range of fuel price apps and websites.
We believe this will, in turn, help drive more competitive markets in petrol retailing.
Today I will take you through some history on the ACCC’s role in petrol and how we arrived at where we are today.
1. The ACCC’s role in petrol
The ACCC has had a role in petrol ever since our establishment in 1995. Some of the key activities in the early years of the ACCC include:
one of the first reports released by the ACCC was the report of the inquiry into the Petroleum Products Declaration in 1996
up until August 1998 the ACCC used to regulate wholesale petrol prices
following the introduction of the GST in July 2000 the ACCC was responsible for monitoring the Fuel Sales Grant Scheme
in 2001 the ACCC prepared a report looking into the options for limiting petrol price cycles
in 2004 the ACCC assessed the supermarket ventures into petrol and their shopper docket schemes, and
in the early-2000s the ACCC took several price fixing cases in regional Victoria to court, with some wins and some losses.
As petrol prices increased over the 2000s, so did community concerns.
In February 2003 the average regular unleaded petrol price in the five largest cities (that is, Sydney, Melbourne, Brisbane Adelaide and Perth), which the ACCC has historically used as one of the benchmarks to monitor petrol price movements, reached $1 per litre.
In April 2008 it reached 150 cents per litre (cpl).
In July 2008 prices peaked at around 167 cpl.
Concern that movements in retail petrol prices in Australia may not be reflecting movements in international refined petrol prices led to the ACCC’s petrol inquiry in 2007.
Following the release of the report of that inquiry, in December 2007, the Australian Government issued a direction under Part VIIA of the Competition and Consumer Act 2010 for the ACCC to monitor the prices, costs and profits relating to the supply of unleaded petroleum products in the petroleum industry in Australia.
Over the following seven years the ACCC released comprehensive annual monitoring reports which were widely respected though not widely read by consumers.
In December 2014 there was a change in the focus in the Ministerial Direction – from our longer, annual reports to shorter, more consumer-focused quarterly reports.
We also started our detailed market studies into competition in regional petrol markets, as many regional locations have by far the least competitive petrol markets in Australia.
These studies were backed by compulsory information gathering powers under the Competition and Consumer Act.
To date, we have released four of these reports – covering Darwin, Launceston, Armidale and Cairns – and we are now reviewing the lessons learned and how we might apply those lessons to our monitoring of regional locations.
But our monitoring work is only one part of our involvement in the petrol industry.
Looking back over the last 10 years, activity in the petrol industry has involved a number of areas of ACCC responsibility.
For example, in terms of our enforcement role:
In 2013 we investigated the competitive effect of ‘excessive’ shopper docket discounts.
o This led to an undertaking with the major supermarkets that prevented discounts in excess of 4 cpl, and also prevented their supermarket businesses cross-subsidising their fuel businesses to cover the cost of these discounts.
o We were concerned that offers by the major supermarkets of fuel discounts of 8 cpl or more could have longer-term effects on the structure of retail fuel markets. When the discounts were 8 cpl or more we also saw an increase in the underlying price of petrol; some people received high discounts, but around 80% of the population paid more for petrol.
o We were particularly concerned about the impact of excessive shopper docket discounts on the viability of some independent retailers who play an important role in driving prices down in retail petrol markets.
We also investigated price information sharing by the major retailers, through the Informed Sources Oil Price Watch service, which resulted in an undertaking to share this information with consumers. I will return to this issue later.
We also keep a close eye on merger activity in the sector as there have been several significant transactions over the last 10 years:
in 2010 7-Eleven acquired much of Mobil’s retail network following our decision to oppose a bid by Caltex
in 2013 Peregrine acquired BP’s retail network in South Australia
this year, Caltex acquired MileMaker’s retail sites in Victoria, and
we currently have before us the proposed BP acquisition of Woolworths’ retail sites (which I will also address later on).
2. Historically site-specific fuel price data was only available to the major retailers
The 2007 petrol inquiry enhanced our understanding of the Informed Sources fuel price monitoring service, and its influence on retail price setting.
Through the Informed Sources service, major petrol retailers had the ability to exchange fuel price data across all their sites on a near real-time basis. But this information was only available on a near real-time basis to the subscribers to the Informed Sources service – the major petrol retailers.
We were concerned that this contributed to an imbalance in pricing transparency between petrol retailers and Australian consumers, and circumstances where retailers could use this pricing information to make decisions about their own prices but consumers could not identify the cheaper sites or compare prices.
We were also concerned about the frequency of the information exchange between the petrol retailers.
Each subscriber to the Informed Sources service is required to provide the price of fuel at each of their service stations, usually updated electronically every 15 minutes, and receives the prices provided by other subscribers in return.
The Informed Sources service seems to be unique to Australia.
If it did operate this way in other jurisdictions, it could well be illegal under competition law, particularly where there are prohibitions against ‘concerted practices’.
A concerted practice is a form of coordination where competitors substitute cooperation with each other for the uncertainties of competition.
In August 2014, following a complex investigation, the ACCC took court action against Informed Sources and several petrol retailers that subscribed to the service (BP, Caltex, Coles Express, Woolworths and 7-Eleven).
We alleged that by facilitating the exchange of price information, the Informed Sources service enabled petrol retailers to communicate with each other about their prices. By doing so, the Informed Sources service had the effect or likely effect of substantially lessening competition.
While it had national application, we focussed on the market for the sale of petrol in Melbourne.
Our case was that the fuel price information service allowed subscribers not only to receive their competitors’ prices, but also to know that their own prices were being communicated to those competitors on a regular basis.
This enabled retailers to propose what some called a ‘restoration price’, where they significantly increased the price at some of their sites and could quickly see if their competitors would follow it by increasing their own prices.
We considered that the fuel price information service allowed this behaviour to occur with greater certainty and reduced commercial risk.
The ACCC believed that the service increased the cost and reduced the benefit of petrol retailers engaging in competitive rivalry. We were particularly concerned that it likely led to consumers paying higher prices for petrol.
In December 2015, the ACCC resolved these proceedings with undertakings from Informed Sources and the petrol retailers (BP, Caltex, Woolworths, and 7-Eleven).
Coles Express agreed to withdraw from the Informed Sources service altogether.
The undertakings from petrol retailers provide for greater transparency of fuel price information and reduce the potential for any adverse effect on competition.
The undertakings from Informed Sources ensure that it will make the same fuel price information available to consumers as it does to its subscribers.
This information has been available to consumers since May 2016, including through a mobile phone app. It assists consumers to make better decisions about when and where to buy petrol, including by identifying the best time to buy and the sites with the lowest prices.
The information also encourages price discounters by bringing their lower prices to the attention of consumers.
3. Some international evidence shows petrol price transparency helps retailers more than consumers
In recent years we have seen a move towards fuel price transparency in other jurisdictions around the world. Two examples that have been the subject of recent discussion are government schemes in Chile and Germany.
The Chilean scheme commenced in February 2012 when the government legislated that retail sites post their prices on a government website and keep prices updated as they changed.
The website was introduced in March 2012, first covering the capital, Santiago, and the whole country by July 2012.
The German scheme, the German Market Transparency Unit for Fuel, commenced in 2013, hosted by the German competition authority (the Bundeskartellamt).
It requires German petrol stations to report price changes for petrol in real time to the Market Transparency Unit. The Unit does not itself operate a consumer information service. Consumer information services must have approval to receive the price data.
A recent paper to the OECD Competition Committee discussed the impact of these two schemes.
The paper warned that when there is an increase in transparency in concentrated markets with homogeneous goods, the risk of tacit collusion may also increase.
However, I believe that the starting point is really important here.
In Germany for example, retailers were not able to see each other’s prices in any comprehensive way. They relied on driving around noting down the prices of their competitors.
This is a very different starting point from what we saw in Australia, where for many years the major retailers were able to see each other’s prices on a near real-time basis, but consumers could not.
The paper to the OECD notes that in Germany, there has been an increase in prices since the introduction of their fuel price transparency scheme in 2013.
However, the key reason for the increase was because the information was also available to the retailers, who could use it to respond more effectively to their competitors’ prices.
In Chile, the paper found that margins increased following the introduction of the fuel price transparency scheme.
However, areas of the country where the fuel price website was used least by consumers were the same areas where retail margins increased the most. In areas where consumers took greater advantage of the fuel website margins increased only slightly or fell.
We believe that in Australia, where large retailers had been able to see each other’s fuel prices for many years, giving that information to consumers empowers them to search for lower prices, rewards lower priced retailers and drives competition in the market.
Ultimately, we believe that consumers are better off and markets perform better if consumers are well informed.
4. Fuel price data is becoming widely available to consumers
Since we reached the undertaking with Informed Sources and the major retailers in December 2015, fuel price apps and websites have become a fast-growing segment of the fuel market.
In recent years we have seen the introduction of apps and websites such as MotorMouth and GasBuddy, as well as those released by the fuel retailers, like Woolworths and 7-Eleven.
Some apps – such as GasBuddy and Petrol Spy – are crowdsourced. Others – such as MotorMouth – primarily rely on data from major retailers.
And then, in some states, there are government systems.
For example, the WA FuelWatch scheme – with the 24 hour rule – has been around for 16 years.
NSW introduced a state-wide scheme in August 2016 called FuelCheck that covers all sites in the state.
The Northern Territory has announced that it will introduce a similar scheme to NSW later this year, while Tasmania has helped facilitate a partnership between the RACT and GasBuddy.
So there is a lot happening in this area at the moment, and in our recent public reports and communications we are really emphasising the benefits of these websites and apps.
These benefits not only accrue to those consumers who use a website or an app to search for cheaper petrol, but also to retailers who discount.
Based on experience, we believe this will help drive competition in the petrol market, leading to more competitive prices across the board.
We think this information is especially important today when there appears to be increasing confusion about fuel prices due to the changing nature of the price cycle over recent years.
Gone are the days of so called ‘cheap Tuesdays’, when there were regular weekly price cycles in most of the larger capital cities and consumers could at least know when the cheapest day to fill up was.
These days, only Perth has a regular cycle, and there we should talk about ‘cheap Mondays’.
Consumers understandably find it very confusing to know when to fill up in the other four major cities.
The ACCC website, and some others, provide information about when to buy in these cities, and have done so for some time, but until recently a missing piece of the puzzle for consumers has been knowing where to buy.
Fuel price transparency apps and websites allow consumers to work out where to buy when you might see very large differences in prices between sites.
During the decreasing phase of the cycle, prices can vary across sites in a major city by up to 10–15 cpl.
When prices start to increase, the variation can be as high as 25–30 cpl.
Motorists can use the ACCC or other websites that give price cycle advice to work out when to buy, and can use the various websites or apps to work out where to buy.
By doing this, motorists filling up a vehicle with a 60 litre tank could save themselves in the region of $10–15 per tank of petrol.
The ACCC has not endorsed one type of system of fuel price transparency, or made a judgement on whether it should be privately run or government run.
But while we believe that having many website and app providers can be a good thing, the timeliness and completeness of the price data is very important.
It is important that not only the major players are covered by these websites and apps, but also that smaller independents are also included, as they often provide competitive tension that is so important in these markets. This was an issue we found in our regional market studies, which I will talk about in a moment.
In our quarterly reports we have reported on the increased take-up of fuel price apps and websites in recent years. And while we would like to see more consumers using them, the early results have been encouraging.
5. Regional market studies
As I mentioned before, the ACCC has now released four regional market studies, covering the Darwin, Launceston, Armidale and Cairns markets.
While there were some differences that made each location unique, there were several common themes across all these studies.
One was that the profits that were being made in these locations were high, far higher in most cases than the Australian average.
For example, retail prices were so high in Darwin that in 2013-14 the average site in Darwin was making around $1.2 million in profit. Between 2009-10 and 2013-14 net profit per site in Darwin more than doubled.
And in Cairns we found that retailers were making very high profits of around half a million dollars on average in 2015-16, which was around 38 per cent higher than the Australian average.
Market structure was also important: who were the major players in the market, and were there enough retailers pricing competitively?
More importantly, were those retailers a large enough presence in the market to make a positive impact on competition? In all four locations the answer to that was ‘no’.
The importance of price transparency in improving competition in these markets was also a common theme.
We found that while fuel prices for many sites are available to consumers via apps and websites in these locations, many lower-priced smaller independents are not always covered by the current apps and websites.
We believe this to be the case in many regional locations across Australia.
In Cairns, for example, we found that while the majority of the market, including all the major retailers, were usually around the same price, there were two small independents that were consistently around 10 cpl cheaper than the market.
While the major apps and websites would show the prices of the major players in the Cairns market, these two small independents were usually missing from the apps or had prices listed that were out of date.
6. High Margins
You may have noticed in our recent quarterly reports that we’ve been reporting on margins being the highest they’ve ever been in real terms.
We do understand and have reported that the petroleum industry has been facing increased compliance costs in recent years, especially in NSW.
Examples of these include the NSW vapour recovery legislation and the ethanol mandate there, and now in Queensland. We have expressed our view regarding the ethanol mandates many times in our reports.
These costs as well as others are a legitimate reason why margins have increased in recent years.
The ACCC fully acknowledges that businesses need to make a profit.
However, based on data that was sent to us by many of the major companies last year, it is our belief that the increase in margins in recent years is well in excess of these costs.
Based on our calculations, each extra cent per litre on the price of petrol costs consumers across Australia a total of around $180 million a year.
In this time of higher margins, the ACCC will be doing more and more to push transparency, so it is clear to consumers which companies are charging more and which companies are discounting.
7. BP’s acquisition of Woolworths retail fuel network
Finally, an update on our merger review of BP’s proposed acquisition of the Woolworths retail fuel network.
This is a very large and very complex task.
There are two aspects of the analysis that make it difficult:
the complexity of the data, and using that data to try to understand price competition in various markets
analysing price competition at the local market level, especially when it involves hundreds of sites and overlapping local markets.
In August 2017 we released a statement of issues where we noted our concern that the transaction may substantially lessen competition by removing a strong competitor in Woolworths, which has a different pricing strategy to BP, and which has historically had lower prices.
We are progressing with our analysis, and propose to have a final decision by 26 October.
Conclusion
Ladies and gentlemen, Australian consumers have long been sensitive to movements in petrol prices. Especially when price movements can be large and inexplicable.
Informed consumers through the mechanisms I have outlined today are an essential step in developing the more competitive market they want and they deserve.
Thank you for your time.