The ACCC has said that while petrol prices remain low, margins are at record highs as the competition watchdog looks to target major petrol retailers.
In the June quarter of 2020, the average price of petrol fell to its lowest level in more than 21 years – adjusted for inflation – as the COVID-19 pandemic hit oil prices in a dramatic fashion.
The consumer watchdog has taken aim at retailers in its latest petrol monitoring report that showed an average price across major cities like Sydney, Melbourne, Brisbane, Adelaide and Perth of $1.09 was down 28.8 cents-per-litre than the previous March quarter of 2020.
A record drop in demand for crude oil caused the price of Mogas 95 – the Asia-Pacific benchmark for refined petrol – to drop by 22.3 cents-per-litre, which saw the average retail price of petrol in Australia to drop dramatically.
“Due to much lower Mogas 95 prices, the June quarter 2020 was the first time in four years that taxes which includes excise and the GST, made up a larger proportion of the total retail price of petrol than the refined petrol itself,” writes the ACCC.
Chair of the ACCC, Rod Sims noted that “Mogas prices are influenced by global crude oil prices, and as well as concerns about the COVID-19 pandemic it was the breakdown in talks between the OPEC cartel and other major oil producing nations in March 2020 that caused oil prices to collapse.”
“Lower crude oil prices are one of the few positives from current world events and drivers in Australia have enjoyed lower petrol prices on the back of it,” Sims said. Yet the commission remains critical of the record-high profit margins they’ve seen on petrol sold in Australia.
The ACCC notes in its report that “gross retail margins in the five largest cities remained high in the June quarter, and annual average gross retail margins in 2019-20 increase to the highest level since the ACCC began calculating them in 2002.”
According to the report, gross indicative retail differences – GIRDs – are the best indicator of a retailer’s profit margin on petroleum products, and across the same set of five major cities, the average GIRD was 14.7 cents-per-litre; 2.7 cents-per-litre higher than last year’s average.
Brisbane recorded the highest cent-per-litre profit margin of 16.8, with Perth recording the lowest at 12.3 cents-per-litre.
“Many Australian motorists benefited from lower petrol prices over the first half of this year, but we have some concerns about the higher gross margins that petrol retailers seem to be holding onto,” chair of the ACCC, Rod Sims said.
“There are some fixed costs involved in petrol retailing and it’s likely that businesses have increased gross retail margins, to some degree, to offset lower sales volumes.”
“While less petrol being sold during COVID-19 restrictions may be a contributing factor to the record high gross retail margins, we’re not convinced that this fully explains the levels we’re seeing,” he said.
“Owning and operating a car is a major expense at the best of times, let alone during the current economic crisis, and Australian drivers want to see lower global oil prices passed on to them in a timely manner,” Sims concluded.
The ACCC noted that in the June quarter of 2020, sales volumes of petroleum products were down more than 27% compared to the 2019 June quarter.
Chairman Rod Sims said he welcomes news from the state governments of South Australia and Tasmania, who have announced plans to introduce fuel price transparency schemes. The addition of South Australia and Tasmania means that just Victoria and the ACT are yet to introduce similar price transparency schemes.
“The ACCC has long supported fuel price transparency schemes, as real-time price information helps motorists find the best deals on offer. We want consumers buying from petrol stations with the cheapest fuel as it rewards the price-competitive retailers,” Sims said.
“Fuel price transparency schemes are particularly relevant to motorists in the larger capital cities as the petrol cycles see prices fluctuate day-to-day,” the ACCC’s chair concluded.