The peak representative body representing service station operators in Australia has responded angrily to the ACCC’s December 2017 Quarterly Report on the Australian Petroleum Market, seriously questioning the objectivity of the latest ACCC commentary.
Earlier today, the ACCC issued its report into average petrol prices for the Quarter ending December 2017.
The ACCC noted that petrol price increases over the quarter were the highest in more than two years, due to several factors including higher world oil prices and the lower value of the Australian dollar relative to the US Dollar.
“While these two factors are clear, the ACCC went on to suggest that a third significant factor was a substantial increase in retailer margins – a claim that does not appear to be based on any simple evidence”, said CEO of the Australasian Convenience and Petroleum Marketers Association Mark McKenzie.
The ACCC has attempted to justify its allegation that fuel retailer margins have increased by measuring the difference between the average terminal costs paid for fuel and the average retail cost paid by motorists at the pump (known as the Gross Indicative Retail Difference or GIRD) – stating that the rise in recent years is due to increased profiteering by fuel retailers.
The ACCC went on to suggest that this difference is now the highest it has been since 2002.
“But a key point that has not properly been acknowledged in the report is that fuel retailers must fund both their annual costs and profit from the GIRD”, said Mr McKenzie
“The ACCC appears to be suggesting that fuel retailers – most who are small to medium businesses – should be able to sell fuel at, or very near the cost that they pay for it at the refinery gate”, said Mr McKenzie
“But fuel retailers must pay costs on top of this refinery price”, said Mr McKenzie.
“These costs include the cost of transporting the fuel to their service stations, paying wages to service station staff, paying for the electricity needs to operate their service stations and meeting the rising cost of regulation and compliance”, said Mr McKenzie.
“To suggest that these costs would not reasonably have increased in 15 years – and therefore be a significant part of the upward pressure on average annual fuel prices, is just plain wrong”, said Mr McKenzie.
“It is also wrong to assume that all fuel retailers are paying the same amount to buy their fuel and the ACCC is well aware of this”, said Mr McKenzie.
“To pretend that there is a ‘uniform’ wholesale price is to wilfully misrepresent the facts of the market”, Mr McKenzie continued
“It is very disappointing that a national body charged with producing responsible commentary on our market has not taken the time to properly assess how factors such as the rising costs, including electricity and rising commercial rents, have been placing upward pressure on average retail prices in Australia”, said Mr McKenzie.
In a very dangerous precedent, the ACCC has singled out the market behaviour of a single market participant and suggested that the higher average prices charged by this retailer may have resulted in other retailers colluding to lift prices.
A quick look at the results for this retailer reveals a 17% fall in fuel sales for the second half of 2017”, said Mr McKenzie.
“In short, other retailers did not follow and any suggestion that they did is nonsense”, said Mr McKenzie.
“The ACCC has a responsibility to conduct a proper analysis – as opposed to expressing unfounded opinions – and we will always respond to such analysis in a measured way”, said Mr McKenzie.
“The focus on differences in GIRD, and the incorrect conclusion drawn by the ACCC that that difference is all profit so completely misses the mark that logically responding is difficult”, said Mr McKenzie.
“The fact is, the difference between the price fuel operators buy fuel for and sell for is not all going into the pockets of the operator, there are operational and compliance costs that come out of it, leaving fuel retail operators with only a modest percentage of that GIRD as profit…any implication otherwise is simplistic and incorrect.” concluded Mr McKenzie.
Mark McKenzie (CEO, ACAPMA)
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