Pat McGrath, 15 February 2016

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Oil companies are not passing on enough of the international slump in prices and petrol prices could be lower, according to Australia’s consumer watchdog.


LEIGH SALES, PRESENTER: If you’ve spent any time on the road this summer, you’ll probably have noticed that the price of petrol has fallen. It’s due to the collapse in the global oil price, but Australia’s consumer watchdog says prices here are still too high and that oil companies aren’t passing on enough of the international price slump to local motorists. Pat McGrath reports.

PAT MCGRATH, REPORTER: It’s a Monday morning ritual for motorists around the country: fill up the tank and get on the road.

MOTORIST: Normally I would come in and pay for a full tank, but today I couldn’t do that. I’ve only filled up half a tank, so, it is difficult.

MOTORIST II: It feels to me like it’s a monopoly almost between a lot of global corporations that just, yeah, can dictate the prices.

PAT MCGRATH: Global oil prices have crashed over the past three years from well above US$100 a barrel to about US$30, yet the cost of petrol at the bowser has been slow to follow.

SHANE OLIVER, CHIEF ECONOMIST, AMP: We’re averaging around $1.13 a litre, whereas my calculations based on where the Asian oil price is at the moment adjusted for the level of the Australian dollar tells me we should be around 90 to 93 cents.

PAT MCGRATH: That’s over 20 per cent higher than it should be. Now, Australia’s consumer watchdog is demanding answers from fuel retailers.

ROD SIMS, ACCC CHAIRMAN: I think motorists should be reasonably angry. Firstly, I’ve written out to the chief executives of the – all the retailers asking them to explain why they think petrol prices haven’t fully reflected the reduction in crude oil prices. Why are margins as high as they are? Do they think there’s been a change in market behaviour?

PAT MCGRATH: Across Australia, drivers are feeling the pinch.

DAVID SINGH, HIRE CAR DRIVER: One minute you’ll have BP showing 99 cents and down the road you’ve got Shell showing $1.20.

PAT MCGRATH: Fuel is David Singh’s biggest business expense, so he’s welcomed the ACCC’s attention on oil companies, but he isn’t convinced it will result in cheaper petrol.

DAVID SINGH: I hardly ever see any sort of penalties handed out to major producers, so, you know, I doubt anything’s going to happen. It’s usually all talk. I hope they do something, but it seems to me the ACCC is a toothless tiger.

PAT MCGRATH: The ACCC says oil companies are making the biggest profit margins the regulator’s ever seen since it began monitoring petrol prices 14 years ago.

ROD SIMS: They’re about five cents higher than what you’d expect to be, so we’d like that margin to come down.

MARK MCKENZIE, CEO, ACAPMA: Our concern here is that the ACCC is oversimplifying this with the use of averages.

PAT MCGRATH: The group representing many of Australia’s petrol stations has rejected the ACCC’s findings.

MARK MCKENZIE: When you look more closely, we have two cities, that is effectively Sydney and Brisbane, where the prices and the margins or the difference has gone down, one in Perth where it’s actually stayed the same and two in Melbourne and Adelaide where it’s actually gone up.

PAT MCGRATH: Mark McKenzie says it can take months for cheaper oil to flow through to consumers.

MARK MCKENZIE: Our key message is: you do not put oil in your car. Effectively, that’s the raw product that we then need to refine and transport and retail. And increasingly, as that cost of that raw product diminishes, then the other costs stay fixed and therefore it’s not going to move down as fast.

PAT MCGRATH: If petrol isn’t as cheap as it should be, there are also consequences for Australia’s economy.

SHANE OLIVER: We are going through difficult economic times. The fall in the oil price is one big positive. It should be injecting a lot of extra capacity into the spending power of the average Australian family.

PAT MCGRATH: Now, the ACCC’s considering its next move if the petrol industry’s responses to its questions aren’t up to scratch.

ROD SIMS: We’ll take this a step at a time, but what we certainly will do is keep monitoring and keep putting pressure on.

LEIGH SALES: Pat McGrath reporting.

Extracted in full from ABC News.