Perry Williams, 18 January 2016

Competition tsar Rod Sims has vowed to crack down on inflated petrol prices, warning retailers need to trim up to 7¢ a litre at the pump, given the fall in the price of oil to a fresh 12-year low.

The price for regular unleaded petrol in Australia averaged $1.20 a litre last week, unchanged from early January, despite a 23 per cent fall in the price of Brent oil to $US27.70 a barrel since the turn of the year.

Crude oil prices have now dropped by more than half since the end of June, while petrol prices have fallen about 15 per cent.

Mr Sims, the chairman of the Australian Competition and Consumer Commission, said he expected petrol retailers to cut prices in the next few weeks to reflect the cheaper price of crude.

“We have been concerned for a couple of months that the margins petrol companies are making are excessive,” Mr Sims told Fairfax Media. “They are probably 6¢ or 7¢ higher than they should be and we’ll be looking to see that those retail margins are actually coming down. We think prices have some way to drop still.”

The competition regulator said in December margins on retailing petrol and diesel have climbed and were the highest in the September quarter since at least 2002.

Gouging claims

The findings led to claims of “price-gouging” by petrol retailers, subsequently rejected by the industry through the Australasian Convenience and Petroleum Marketers Association.

Mr Sims said it would be seeking urgent talks with companies if prices fail to ease by early February.

“There is always a bit of a lag to get cheaper petrol through your bowser, but we are going to expect to get more pass through to the consumer. We’ll be reviewing this in early February to see just what does change in terms of price.”

Mr Sims said while the ACCC could track retail movements on the ground in Australia, other external factors also played a big part in the pump price.

Domestic retailers have little control over refining margins which are set in Singapore, or the falling Australian dollar which at US69.02¢ on Monday, meant the drop in global crude prices had not been reflected at the petrol pump.

The Australian Institute of Petroleum said once all wholesaling and retailing costs were taken into account, the average profits made over the last decade by oil companies in Australia sat at under 2¢ per litre of fuel sold.

Strong competition

AIP chief executive Paul Barrett said he was confident strong competition existed in the Australian petrol market.

“The ACCC has continually assessed that the market is competitive and the AIP pricing report provides a transparent pricing tool for people to utilise,” Mr Barrett said. “We also advise that people should shop around.”

Last week it emerged the crude oil rout was delivering windfall profits for Australia’s four remaining oil refineries with BP, ExxonMobil, Caltex and new local player Viva Energy posting some of the strongest profit margins on refining for years.

Caltex last month foreshadowed a record full-year profit.

Extracted in full from the Sydney Morning Herald.