On Wednesday (2 March 2016), the Queensland Government conducted the Queensland Fuel Price Summit.

The Summit was called in response to fuel price data produced by the Australian Competition and Consumer Commission (ACCC) that showed petrol prices in Brisbane have been consistently higher than most other capital city markets over recent years.

The summit was chaired by the Hon. Mark Bailey MP (Minister for Main Roads, Road Safety and Ports and Minister for Energy, Water Supply and Biofuels) who explained that the Queensland Government wanted to first understand the reasons for the difference in average petrol prices and then discuss what could be done to lower these prices into the future.

A variety of presentations were then made by the ACCC, Queensland Treasury, and the RACQ.

Each of these presentations pointed to the fact that petrol prices in Brisbane have been consistently 3cpl higher (or 2% higher) than those prices charged in other comparable capital cities.

Following these presentations, ACAPMA was afforded an opportunity to provide a presentation on some of the possible reasons for this variance (Click here to access ACAPMA’s presentation).

ACAPMA’s presentation was followed by a broader conversation that involved contributions from other industry stakeholders, including the Australian Institute of Petroleum (AIP) and major fuel retailers.

“ACAPMA’s key message to the Queensland Government was that fuel prices vary as a result of differences in both the structure and intensity of competition in the retail fuel market – a market which, of itself, is not one homogenous market but rather consists of a large number of smaller markets that operate independently of each other”, said ACAPMA CEO Mark McKenzie.

“We pointed to the fact that the intensity of retail market competition varies (a) between capital cities, (b) between metropolitan regions within these capital cities, and (c) between and within the local areas that make up these metropolitan regions”, said Mark.

ACAPMA also explained that the Australian retail fuel market comprised a large number of retail businesses that varied in size of operation, business models and cost structures.

“I think one of the central challenges for our industry is that the wider community has a very strong financial interest in the product we sell – but very few actually understand how our industry operates – and that is an issue we must address in the future”, said Mark.

There seems to be a widespread view that because most retail businesses are buying petrol at a similar wholesale price, that they should be selling at the same retail price –regardless of the variance in the operating costs borne by the large number of businesses that comprise the retail fuel market in Australia.

“Such a conclusion is nonsensical and, in fact, questions about the openness of competition would really need to be asked if all fuel retailers were charging the same price across all markets given these differences”, said Mark.

While the summit noted the explanations put forward by industry for retail price variance, there was a stated desire for the Queensland community to be assured that the market was operating competitively.

This in turn led to suggestions by non-industry stakeholders that there was a need for the ACCC to conduct an independent investigation of fuel prices in Queensland – a call that was echoed by Minister Bailey in his public statements immediately following the summit.

“I want the ACCC to now launch a study into the Queensland market as soon as possible. I initially requested this when I wrote to ACCC Chairman Rod Sims earlier this year, and after today’s meeting I’m convinced this is the next step”, Minister Bailey said
Despite such investigations creating a reporting burden for fuel retailers, the Minister’s call was not opposed by industry representatives.

The ACCC has conducted similar investigations around the country for many years and these studies provide an opportunity for the community to be reassured by an ‘independent umpire’ that the retail fuel market is operating as it should.

The latter part of the meeting included a discussion about the possible need for the Queensland Government to introduce new regulations governing the use of fuel price boards, in order to reduce the risk of motorists becoming confused by the display of discounted fuel prices – prices that are wholly dependent on grocery dockets or a minimum spend in the retailer’s convenience store.

Industry stakeholders urged the Queensland Government to exercise care on this issue given that the industry’s experience in one state (i.e. NSW) had resulted in the introduction of onerous price board regulations that came at a significant regulatory cost to industry.

“It is ironic that the NSW State Government and the NRMA pushed a fuel price board solution that increased capital and operating costs for fuel retailers – placing upward pressure on fuel prices in that State- when lower cost solutions had been proven effective in other Australian States (i.e. South Australia), said Mark.

“The summit was clear that we need to ensure motorists have accurate point of sale information, but that any new requirements for service stations are not onerous on operators which could then drive petrol prices up”, Minister Bailey said after the meeting.

“All in all, the summit provided all parties with a fair hearing and the Minister reaffirmed his intent to do all that was reasonably possible to promote greater levels of fuel price discounting within the Queensland market” said Mark.

ACAPMA will continue to work cooperatively with Minister Bailey and the Queensland Government on this issue over coming months.