ACCC fuel-industry monitoring extended to wholesale prices

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The ACCC’s monitoring role will be expanded to include an examination of wholesale petrol prices in Australia, following a federal Treasury directive to the organisation issued on December 20.

The scope of the ACCC’s petroleum-industry monitoring and reporting is defined by such directives periodically issued by the federal government.

The previous directive, issued in December 2014, had introduced a requirement for the ACCC to produce quarterly reports on average petrol prices in Australia’s capital cities – in lieu of the previous in-depth annual reports that included an examination of average prices, costs and profits.

The 2014 directive also required the ACCC to undertake a series of Regional Petrol Price Studies to determine whether any adverse competition factors were influencing petrol prices in regional markets.

Since then, the ACCC has issued 12 quarterly reports and five discrete market studies covering the cities of Darwin (2015), Launceston (2016), Armidale, NSW (2016), Cairns (2017) and Brisbane (2017).

An analysis of the key findings of these five studies reveals that the ACCC reached a similar finding for each of the markets that were studied in detail. That is, that the higher average prices in these markets could largely be attributed to weaknesses in the competition dynamic, rather than any illegal behaviour by market participants.

“Given the common findings of these detailed market studies, there was an open question about whether there was any merit in continuing these studies,” ACAPMA CEO Mark McKenzie said.

He says Treasurer Scott Morrison has answered this question with the directive that the ACCC continue the quarterly reports of capital-city prices, but – by omission in the directive – cease work on the detailed market studies

“This is a welcome development by our industry, as [the studies had]placed a significant information burden on our member businesses – many of the small independent operators – for no apparent public-good benefit, as future studies were only likely to reveal the same overall finding about variations in competition intensity,” Mr McKenzie said.

The new directive means that the ACCC’s quarterly petroleum-industry reports on average capital-city petrol prices will continue as usual.

“We see this transparency requirement as being an inevitable consequence of operating in an open market, albeit that we would have liked to see a requirement for greater examination of movements in fuel-retailer costs (especially increased compliance costs) relative to movements in average petrol prices,” Mr McKenzie continued.

“We accept, however, that such a task is very complex and likely to result in an onerous information burden given the diversity in business operating models and high variability in the business impact of different state/territory regulations on individual market participants.”

A notable aspect of the latest directive, he adds, is that the scope of the ACCC’s monitoring role has been expanded to include an examination of “the source of supply and quality of fuel sold in Australia and the breakdown of wholesale fuel prices”.

It is currently unclear whether the expanded analysis of wholesale pricing will be included in the ACCC’s future quarterly reports or be reported separately.

“The practical implementation of this expanded monitoring function, and its consequent impact on the reporting requirements for market participants, is currently uncertain,” Mr McKenzie said.

“We therefore plan to seek clarification from the ACCC on the likely implications on our member businesses [in terms of reporting requirements]as soon as practical – and then relay this information as soon as it becomes available.”

This is an edited version of an article originally circulated by ACAPMA on January 19, 2018.