Joanna Crothers & Xavier La Canna, 23 November 2015

Australia’s competition watchdog has taken aim at the Northern Territory Government’s fuel supply arrangements and highlighted a 10-cents-per-litre gap in Darwin prices compared with other cities during a two-year period.

The Australian Competition and Consumer Commission (ACCC) today released its 60-page report into Darwin’s petrol prices, and the organisation outlined a range of steps that could be taken to improve transparency and promote competition in the local fuel market.

It took aim at the NT Government’s fuel supply arrangements, which are exclusively with Puma Energy, the largest player in the local petrol market.

“The fact that the Northern Territory Government has a fuel arrangement with the largest player in the petrol market may be a contributing factor to the consolidation in the retail market,” the ACCC said.

“When the current contract expires in 2017 the Northern Territory Government may wish to consider the implications on the fuel market of government fuel card arrangements.”

Under those arrangements, NT Government staff and fleet managers are urged to fill up at a Puma-owned fuel station, so they can get a discount of six cents per litre, the report quoted a news report as saying.

In response NT Chief Minister Adam Giles said the Government would look at how it tendered out its work going forward.

Mr Giles said only 3 per cent of the Darwin fuel sold went to government motor vehicles.

“One of the things we’ve developed ourselves is the fuel price disclosure bill,” he said.

Between 2012/13 and 2013/14 regular unleaded petrol prices in Darwin were around 10 cents per litre higher than they had been during the previous decade.

“Given that petrol retail site profits in Darwin were already significant, it seems that motorists were paying around 10 cents per litre more than they should have been in a competitive market,” ACCC chairman Rod Sims said in a statement.

Mr Sims said that added a collective $9 million per year to the fuel bill of motorists in Darwin.

Compared to 2009/10, in 2013/14 net fuel profits doubled at Darwin service stations.

The higher prices resulted in a windfall for service station owners, with each site making about $1.2 million in net profit, including fuel and convenience sales.

“This compares with Adelaide where average profits per site for most of the same companies in 2013-14 were between $100,000 to $200,000,” the ACCC said.

“The high profitability of retail sites in Darwin during this time was mainly achieved through high margins on petrol sold.”

Two main contributors for high prices, ACCC says

The ACCC report said that between 2007 and 2015 the number of fuel retailers in Darwin dropped from 10 to just three, and just four retailers set prices for 97 per cent of the petrol sold in the city.

“There were essentially two main reasons for the high prices and profits in Darwin,” Mr Sims said.

“These were the decrease in the number of independent retail sites, and weak retail competition.”

As well as changing the NT Government’s fuel supply arrangements it said outlined five other measures it said could be taken to increase transparency and promote competition in Darwin’s petrol market.

These were: regular publication of the differences between wholesale prices and retail prices; providing current retail prices to motorists to allow them to shop around; regular reporting on market concentration; promotion of new entrants into the market; and continued monitoring by the ACCC.

Labor would adopt all the recommendations from the consumer watchdog on how to keep petrol prices low, NT Opposition Leader Michael Gunner said.

“It’s critical that we have transparency in the Northern Territory around petrol pricing, and it’s critical that we lock in the lower prices,” Mr Gunner said.

He said Labor would implement the changes if it wins the election next year.

“I think the ACCC road map provides that … and it would be a very bad thing for a government to not take the advice of the ACCC and lock in those lower petrol prices for Territorians,” he said.

Extracted in full from ABC News.

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