Petrol prices low, but margins high

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The Australian Competition and Consumer Commission’s (ACCC) June quarter 2017 report on the Australian petroleum industry shows low petrol prices, but high retail margins.

According to the ACCC, petrol prices were at the lowest level since 2001-2002. But despite the low prices, retail margins are at their highest since 2002.

Yearly average retail petrol prices in the five largest cities were 122.6¢ per litre in 2016-17, slightly higher than in 2015-16 in nominal terms.

“While motorists are enjoying the cheapest petrol since 2002, we believe prices should have been even lower, given the continuing high gross retail margins,” ACCC Chairman Rod Sims said.

Average gross retail margins in the five largest cities in the June quarter fell by 0.6¢ per litre from the previous quarter to 11.7¢ per litre. On a yearly average basis, however, gross retail margins in real terms remain the highest since the ACCC began monitoring them in 2002 (see chart 2).

In 2016-17, gross retail margins in Melbourne (12.3¢ per litre) and Perth (12¢ per litre) were also the highest in real terms since 2002.

The increase in gross margins since 2014-15 may partly reflect regulatory and compliance costs, especially in NSW. However, the ACCC believes that these increasing costs do not fully explain the sharp increase in margins.

“Prices at the pump in 2016-17 are reflecting the relatively low international price of refined petrol, which fortunately is a result of the OPEC cartel failing to successfully restrict the supply of crude oil,” Mr Sims said.

“Of the price paid at the bowser, 42 per cent is the international price of refined petrol. Another 42 per cent is taxes, ie, GST and excise.

“Competition is driven by the willingness of motorists to shop around for the best price. For example, in Cairns, Queensland, motorists who shop around can find petrol that is consistently about 10¢ per litre lower than the average.

“The ACCC will continue to monitor fuel prices in all these regional towns in its quarterly petrol reports.’

Retail prices in Brisbane were the highest of the five largest cities in the quarter. The average retail petrol price in Brisbane was 3.3¢ per litre higher than the average across the other four largest cities.

“The ACCC is currently examining the high retail prices, margins and profits in Brisbane, and a report is scheduled to be released in the next few weeks,” Mr Sims said.