Historically, government agencies and economic groups have monitored and reported on petrol-price movements, given that these prices have provided a ‘lead indicator’ of national household and consumer sentiment.
But one really must wonder whether national average fuel prices remain a significant indicator of economic conditions, given dramatic improvements in the fuel efficiency of cars and the substantial – and unmentioned – increases in other capital-city motoring costs, such as road tolls.
The relevance of continued national debate is even more questionable when one considers some of the media reports about petrol prices over the past month.
In early November, CommSec released a report stating that average household expenditure on fuel accounted for just 3.5 percent (or $50) of weekly household expenditure during 2015/16 – the lowest in real terms for more than 30 years.
This was soon followed by media reports that the oil price had increased by almost 40 percent since the end of June 2017 and that, as a result, petrol prices in Australia would soon “surge to two-year highs”.
Towards the end of the month, the Australian Competition and Consumer Commission (ACCC) released its Quarterly Report on the Australian Petroleum Market for the September 2017 quarter. The ACCC noted that average capital-city petrol prices had fallen by about 2.7¢ a litre over the quarter – on top of a fall of 3.9¢ a litre in the previous quarter and that fuel-retailer margins appeared to have declined slightly over the same period.
“Record low price”, “high price”, “low price” – are you dizzy yet? And all this commentary in just a one-month period.
It goes without saying that petrol- industry bashing is a national pastime in Australia – and nothing will change this anytime soon. This industry is a soft political target and, as one federal politician told me soon after I took the reins
at ACAPMA, no politician ever lost any votes by attacking the Australian fuel industry.
Many seem to think the problems in our industry are due to a small number of big companies operating in an oligopolistic market and secretly conspiring on prices.
But the fact is that that much of the industry (more than 65 percent) consists of small businesses – many operating as franchisees of larger known brands – which make independent decisions on the petrol prices they charge at their sites.
These small businesses are working hard to remain competitive and, together with the company-owned operations, employ about 45,000 people in Australia.
Our industry is also a significant tax collector, with about 53¢ a litre from all petrol sold being passed directly to the Australian government for the funding of hospitals, schools and roads.
An interesting point to note here is that federal tax collections (excise and GST) do not change markedly with movements in fuel price – a fact often lost on those who criticise our industry when retail fuel prices fail to fall as fast as the oil price.
Under the current cost structures and exchange rates, a 10 percent change in oil prices means a probable one percent change in average petrol prices at the pump.
This means that the almost 40 percent increase in world oil prices (since the end of June this year) will probably result in a four percent increase in average petrol prices in the December quarter – or around 5¢ a litre.
For an average 40-litre fill-up, this means a net weekly increase of $2 – or around half the cost of a decent cup of coffee.
Such a cost increase is minimal – should it occur – particularly when compared with increases in the cost of other household essentials, such as electricity, telecommunications and private health insurance, in recent years.
So why do so many people in Australia – and the politicians who represent them – continue to bleat on about petrol prices when the facts really suggest that petrol prices are becoming less significant in the overall political landscape?
For me, the volatility of petrol prices is the issue that irks most Australians about our industry.
They simply don’t believe that fuel retailers sell fuel at (or below) cost during the low point of the fuel cycle and then recoup these losses during the top of the cycle, which, even for many smaller retailers, is the reality.
Much of the media discussion ACAPMA gets involved in is about the price-discounting cycle – the mechanism that is perhaps the best indicator of an openly competitive fuel- retail market.
No one has control of the petrol cycle; it’s a market dynamic, and giving the community certainty around petrol prices is simply not possible.
So, the community will continue to be suspicious of fuel retailers, regardless
of whether the national petrol-price debate is premised on an increasingly insignificant household cost.
The solution, as identified in the latest ACCC quarterly report, is for price-sensitive motorists to monitor the petrol-price cycle via the ACCC website and then use fuel-price apps to seek out the cheapest fuel in their area during the high points in the price cycle.
We are one of the very few markets where, if consumers wish to seek out cheaper product prices, they have a range of tools at their disposal that can make that possible.
In the meantime, our industry will continue to respond to the pendulum-like national debate about petrol prices in an environment where the price of petrol is becoming increasingly insignificant to the national economy.
May the ‘fun’ continue.
Extracted from Convenience World.