Launceston motorists could pay up to 4 cents a litre less for petrol if there was greater competition in the city’s retail petrol market, an investigation by the consumer watchdog has found.

Key points

  • Launceston petrol 12 cents a litre higher than cities interstate
  • Higher transport and operating costs account for two-thirds of difference
  • Lack of competition meant petrol about 4 cents a litre higher than it could be

The Australian Competition and Consumer Commission (ACCC) found drivers in the northern Tasmanian city paid on average 12 cents a litre more than motorists in Australia’s five largest cities between 2012 and 2016.

Higher transport and operating costs accounted for about two thirds of that price difference, but petrol retailers had on average higher profit margins in Launceston over the past 10 years.

ACCC chairman Rod Sims said that was due to weak price competition between Launceston retailers, with little aggressive discounting.

“There just wasn’t enough competitive rivalry in Launceston, there hasn’t been over recent years, and so consumers are paying around four cents a litre more than they really should be,” he said.

“The petrol companies were making higher margins at the expense of Launceston consumers.”

The report found the independent chain United competed strongly on price but because of its small market share had little impact on its competitors’ prices.

While two thirds of service stations in Launceston were independently owned or part of independent chains, more than half the petrol sold in the city was from Coles and Woolworths.

The supermarkets had the highest profit margins as their high sales volumes gave them a lower operating cost per litre of petrol, and allowed them to negotiate discounts on wholesale prices.

Independently owned service stations on average sold less petrol, had higher operating costs and lower profit margins.

The report did not uncover any illegal or anti-competitive practices.

Graph showing differences in petrol prices in Launceston‘Competition the best way to create lower prices’

The ACCC report concluded greater discounting competition and price transparency was needed to drive down petrol prices in Tasmania.

It pointed to the petrol discount deal between the RACT and United, which was launched in March 2016.

The report found this coincided with a narrowing of the price difference between Launceston and the five largest cities, as supermarkets responded by increasing their own shopper docket discounts.

Mr Sims said in March and April petrol prices decreased by 2 cents per litre in Launceston while in the mainland capital cities prices rose by 6 cents per litre.

“That’s just a good illustration of if you can combine someone who’s offering slightly lower prices with a guaranteed volume impact from so doing, that’s when you’re going to get the impact on the market that we’re seeing right now,” he said.

“The downward pressure on retail petrol prices, particularly due to this discounting agreement, is a clear indicator that competition is the best way to create lower prices for motorists.”

The report recommended providing more real-time information to consumers, including current retail prices, indicative margins, and price comparisons with other cities.

Mr Sims said more real-time price data was being made available over the internet as a result of an undertaking the ACCC secured from the company Informed Sources, which collates and publishes petrol price data.

“Launceston consumers can use those apps and reward the discounters and that will see lower prices and hopefully take that 4 cents permanently out of the market,” he said.

Extracted in full from ABC.