ACCC study says rise in domestic petrol prices in tandem with international rise

The Australian Competition and Consumer Commission’s (ACCC) 2012 report on prices, costs and profits of unleaded petrol in Australia, stated that international prices are the main influences on domestic petrol prices. Global prices reached record levels in 2011-2012 despite weak global economic conditions, which were not enough to offset the effects of unrest in the Middle East. Further, continued depletion of low cost conventional crude oil supplies kept crude oil prices at their highest annual levels ever, ACCC Commissioner Joe Dimasi said.
ACCC monitoring shows that retail petrol prices across the five largest cities increased to an average of 143 cents per liter (cpl), in tandem with the relevant international benchmark price (Singapore Mogas 95). This happened despite the high Australian Dollar, which provides some degree of protection from higher international prices. Yet, even with the recent increases, petrol prices in Australia remain among the lowest in the Organization for Economic Co-operation and Development (OECD).
The report noted that the average retail price (excluding taxes and subsidies) has risen by around 120% over the last 10 years, while that of Singapore Mogas 95 has risen by around 122%. According to the monitoring report, the international price of petrol plus taxes account for 88% of the retail petrol price; local wholesalers and retailers account for the balance of 12% of the final price. Profits in the Australian downstream petroleum industry on all products in 2011-12 were around 0.5 cpl, lower by 81% than the previous 12 months. The retail sector earned an average of 1.5 cpl on all fuel products; the figure increased to 2.4 cpl when earnings of convenience stores are included.
The refining sector in Australia is vulnerable to overseas competition, which is reflected in the losses incurred in refining in 2011-12. The total supply sector loss of 1.54 cpl on all products includes refining and imports. Three refinery closures during the decade due to competition from imports left five refineries operating in Australia.
The ACCC took note of various consumer concerns: price cycles in major metropolitan markets; the relatively higher prices in regional centers; the sharp rises during a price cycle (although some consumers take advantage of the low price in the cycle to purchase petrol).
Being sensitive to consumers’ concerns, the ACCC monitors prices in around 180 different regional locations to ensure as much market competitiveness as possible. The commission is conducting two investigations pertaining to the petrol industry: one is on the information sharing arrangements in the retail sector which could tend to lessen retail price competition; the other is shopper docket discount schemes which could, in the long run be detrimental to consumers. (December 6, 2012)