Debate about petrol prices in Australia is a long held national pastime. And let’s face it, the theatrics of the debate have often been entertaining if not more than a little repetitive.
Generally, politicians and motoring associations throw around allegations about petrol price gouging and anti-competitive behaviour and then our industry is forced to respond – knowing full well that much of this critical commentary is motivated by opportunism during periods of high fuel prices to gain publicity for individuals and organisations.
Historically, this discussion has continued because of a lack of public information about petrol prices and a general distrust of our industry.
But all that changed more than 10 years ago – at least in terms of public information.
In 2007, the Australian Government directed the ACCC to monitor the Australian petroleum industry.
This Directive included the provision of extensive discovery powers that provided the ACCC with the ability to compulsorily require financial information from fuel market participants operating in all Australian capital cities and more than 190 regional markets.
In the 10 years since these powers were provided, the ACCC has produced many comprehensive study reports exposing the financial and market operation of the petroleum industry in Australia. These studies, all of which are readily available today on the ACCC website, include:
- A report on a national Inquiry into the price of unleaded petrol (2007)
- Seven in-depth annual Petroleum Industry Monitoring Reports (2008 to 2014)
- Five detailed studies of regional petroleum markets (2015 to 2017)
- Two in-depth market studies on retail and wholesale market operations (2017-2018)
- 15 Quarterly reports for the period commencing 1 October 2014 to 30 June 2018)
- Details of a special investigation into petrol prices in advance of holiday periods (2008)
In addition, the ACCC now publicly tracks and reports on movements in the petrol price cycles in Australia’s five capital cities and this information is available to everyone via the ACCC website (https://www.accc.gov.au/consumers/petrol-diesel-lpg/petrol-price-cycles).
But the production and public provision of fuel price information has not been solely limited to the independent analysis of the Australian Competition and Consumer Commission.
The fuel industry itself has responded to calls for increased transparency with the production of fuel price information services like MotorMouth, Gas Buddy, Petrol Spy and Compare the Market.
In recent years, various State Governments have also introduced (or are in the process of introducing) laws requiring the compulsory reporting of ‘real-time’ fuel prices by all service stations.
“While you might reasonably have expected that the increased information made available over the past 10 years would lessen the intensity of the national petrol price debate, the reverse has occurred”, said ACAPMA CEO Mark McKenzie
It appears that in the wake of ACCC analysis of average petrol prices (the only valid way to discuss petrol prices given almost daily changes in capital city fuel prices) motoring associations and other commentators have adapted their criticism to solely focus on petrol prices at the high points of capital city petrol price cycles – neatly ignoring the fact that these high price periods are generally counter balanced by low priced periods of the cycle resulting in reasonable average prices.
“Interestingly, some of these motoring associations are mounting criticisms from positions of apparent conflicts of interest due to them having entered into alliances and marketing arrangements with specific retail fuel market participants (e.g. NRMA with Caltex, RACQ with PUMA and RACT with United Petroleum)”, said Mark
“As a result, the national debate has become more about point scoring than substantive debate, with fuel industry critics selectively using ‘facts’ or ‘bits of facts’ to lift their profiles on an issue that they know will always draw a headline”, continued Mark
And it appears that the ACCC is not immune to this practice either.
This week the ACCC released an in-depth report into Retail and Petrol Market Shares in Australia (see https://www.accc.gov.au/publications/petrol-industry-reports/retail-wholesale-petrol-market-shares-in-australia).
This latest report (released on Tuesday) reinforced many of the things that industry has been saying for more than 30 years. Specifically, that the retail fuel market in Australian is openly and highly competitive.
Immediately following release of the report (i.e. Tuesday night), a high-profile story about the factors driving increased fuel prices in Australia was aired on the ABC’s 730 Report (see www.abc.net.au/7.30/motorists-urged-to-shop-around-for-petrol/10304516).
The story highlighted a consensus between the ACCC, ACAPMA and the NRMA that the factors driving the current increases were global and beyond the control of market participants.
And so, you would think the current debate would rest on that consensus – at least for a while.
Well not so!
“The ACCC Commissioner went on to make mention of a highly contestable finding – at least in our view – that higher fuel retailer profit margins were also contributing to higher fuel prices”, said ACAPMA CEO Mark McKenzie.
“We firmly believe that the statement is wrong given the ACCC has not considered the impact of significant increases in local business costs on the widening of the gap between wholesale buy price and the retail sell price in recent years”, said Mark
“There isn’t a business in the country that is not paying more in business costs this year (i.e. rent, electricity prices, wages, regulatory compliance costs) than they were paying on average over the last 10 years – which is the apparent rationale for the ACCC’s criticism”, said Mark.
Despite ACAPMA raising this deficiency of analysis with the ACCC for more than two years, the Commission has failed to assess the merits of this argument, claiming that the significant differences in retail business models in the Australian market make such an analysis incredibly difficult.
And they are right – but that does not make the ACCC claim any less contentious.
In fact, common sense suggests that the ACCC analysis is innately wrong!
“I can’t think of any retail industry in the country where retail costs today have not increased to the point of having widened the gap between product buy price and product sell price in recent years”, said Mark
“For some reason, there seems to be a belief that fuel retailers are magically immune from these increases and therefore the gap between wholesale and retail prices should remain unchanged over the years”, continued Mark.
But there is an additional factor suggesting the ACCC analysis is flawed – one that is peculiar to the past 10 year operation of the retail fuel market in Australia.
The difference in the long-term average fuel wholesale and fuel retail prices in Australia (i.e. 10 year average) was distorted by deep industry price discounting in the face of high value shopper dockets prior to 2012 – a development that was corrected by the ACCC in 2012, but only after 6 years of destructive market impact.
“We therefore argue that the comparison of the difference between average wholesale and average retail prices over the past year with a distorted (i.e. lower) 10-year benchmark to justify claims of higher profit taking is patently flawed”, said Mark
Regardless, when combined with the upward movement in the petrol price cycles this week, the ACCC statements appear to have been responsible for the emergence of a ‘nasty and illogical’ discussion promoting boycotts of service station operators late this week.
Elements of this discussion include a Facebook Page being operated by a Queensland woman that is promoting a boycott of service stations on 26 October 2018.
The boycott proposal was picked up by media outlets around the country and included a well-respected broadcaster at 3AW (Melbourne) suggesting that Victorian motorists should refuse to purchase convenience items at service stations in a form of perverse payback for supposed profit taking.
“The direction that the debate has taken in the last half of this week is absolutely astonishing, but is perhaps understandable given the continuous disingenuous commentary of a range of different stakeholders selectively using date to make outlandish and baseless criticisms of our industry”, said Mark
“We believe that most of these stakeholders know they are using selective facts, but are deliberately choosing to do so because the nature of petro-politics in Australia is such that critics of petrol prices are always ‘right’ and any contradictory comment from the industry is ‘not trustworthy’”, said Mark.
“In other words we are a ‘soft target’ and the facts about petrol prices don’t really matter”, continued Mark
As a result, a fruitless national debate is continuing to intensify despite the massive amount of information available in the public space confirming that Australia’s fuel retail market is operating as it should.
And if you look through the Facebook page promoting the fuel strike, you will notice that contributors are actually attacking each other about both the worth and merits of the proposed strike. The Page also includes comments from service station staff who appear to be worried about the potential impact on their employment and there are suggestions by individual contributors that motorists should steal fuel!
“The simple reality here is that a 44% increase in world oil prices and a 10% decline in the value of the Australian Dollar over the past 12 months – coupled with increases in fuel retail costs and a steadily increasing rate of fuel excise – are causing fuel prices to be the highest they have been in the last 4 years”, said Mark.
“The events of this week really make you ask ‘how on earth did we get to here?, added Mark
“That is, the point where members of the community are attacking each other on social media in relation to stated differences of opinions about factors affecting petrol prices” said Mark.
“This development is prompting industry concern about the possibility of the current anger in social media spilling into intimidation or physical actions against staff at service stations – and this is where the long pattern of irresponsible commentary is now becoming a public safety risk”, said Mark
“People are obviously free to vent their anger in the form of boycotts of our businesses if that is their wish. But no one has the right to intimidate or endanger our employees – or promote theft of fuel – as is currently appearing in social media commentary this week”, said Mark
“Within the context of these serious emerging issues, perhaps it is time for critics of our industry to really consider whether their selective and opportunistic commentary on petrol prices is responsible and accurate”, added Mark.
“In the meantime. we urge member businesses to make sure that their staff are aware of how to deal with any physical aggression in the workplace should this latest debate result in increased incidences of customer hostility”, concluded Mark