Fuel report results due

By TOM O’MEARA

The ACCC will institute proceedings in the Federal Court if an investigation into the high price of petrol in Launceston reveals any collusion or anti-competitive conduct.

The Federal Government empowered the Australian Competition and Consumer Commission to seek answers to the unexplainable high prices of petrol in Australia, targeting Launceston, Darwin and Armidale as testing grounds.

ACCC vice chairman Dr Michael Schaper said in Launceston late last year Tasmanians had been faced with dubious petrol prices for far too long.  Launceston in particular experienced high fuel prices, which attracted the attention of the ACCC.

Speaking exclusively to the Tasmanian Business Reporter, Dr Schaper said the detailed report would be released later this month.  While he was unable to share any findings at this stage, Dr Schaper   reiterated the need to know why Launceston petrol prices were increasing so much.

When the Federal Government launched petrol price investigations in December 2014, Launceston prices at 162.6 were some of the highest in Australia and 12c more than five national city averages. The prices continued to skyrocket in Launceston, including in the week of May 8 when it was announced Launceston would be a test city.

While there is no suggestion the Darwin petrol market report released late last year mirrors the Launceston/Tasmanian report, many of the core findings will be based on similar facts.

In Darwin, only four retailers – Puma Energy, Coles, Woolworths and United – set prices for 97 per cent of the petrol sold in the city. The report revealed the high retail prices in Darwin were reflected in high profits.

In 2013-14, the net profit per site based on all fuel and convenience sales in Darwin was $1.2 million. This compared with Adelaide, where average profits per site were between $100,000 and $200,000.

The high profitability of retail sites in Darwin during this time was mainly achieved through the margins on petrol.  The report concluded the two main reasons for high prices and profits in Darwin were a decrease in the number of independent retail sites (a reduction from 10 to three sites) and weak retail competition.

ACCC chairman Rod Sims said the study provided some important insights into the level of competition required to ensure petrol markets work effectively in the interests of motorists.

“Clearly these four major players in the Darwin market, with the pricing behaviours that were observed, were insufficient to achieve such outcomes,” he said.

The Darwin report doesn’t identify any collusion or anti-competitive conduct, but it certainly puts the city under the microscope in the interests of motorists and business, where there is a flow-on effect of direct costs to car and truck fleets, or increased freight charges at all levels of business.

Increasing prices to achieve high profit margins isn’t illegal, but it is valuable information for the ACCC to ascertain where competition is inadequate and motorists are paying more than they should.

It’s no coincidence since the start of the Darwin market, the retail pricing behaviour in Darwin has changed. Darwin’s monthly average price is lower than the five largest cities for the first time since the national monthly averages were introduced in 2000.

Regardless of the findings of the report, the ACCC has already indicated there will be increased concentration on the industry and continued monitoring of merger activity in the market.

 

 

 

 

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