As we pause to reflect on the year that has been, it is hard to think of another year where there has been as much change in the Australian Fuel Industry as occurred during 2018.
In fact, you must go back almost 15 years – to the time when Australia’s two largest supermarkets entered the fuel retail industry – to find a year that is comparable in terms of the dramatic nature of key market moves and the intensity of public debate about petrol prices.
The year opened with the Australian Competition and Consumer Commission (ACCC) opposing the sale of Woolworths’ fuel business to BP Australia for a cool $1.785B. The decision followed a year-long investigation by the ACCC and, following public statements by both parties that they planned to reconsider their position, meant that the significant market uncertainty of 2017 would at least carry into the first half of 2018.
January 2018 saw the average retail price for unleaded at 134cpl and associated petrol TGP at 122cpl – the highest January average for more than 2 years – due to a steadily increasing world oil price and unfavourable movements in the exchange rate for the Australian Dollar.
In a somewhat surprising move, March 2018 saw Wesfarmers announce its’ intention to spin off the Coles Group (including the fuel and liquor business) into a separate ASX listed business by the end of the 2019 Financial Year.
The Wesfarmers’ announcement was shortly followed by Viva Energy’s announcement that it intended to float its business.
Valued at almost $5B, the Viva Energy float was not just a major move within the Australian Fuel industry but also constituted the largest public float in Australia since Medibank Private in 2014.
As Viva Energy’s new ASX listed entity commenced trading at the end of June 2018 – making it the second ASX listed fuel marketer alongside Caltex – Woolworths and BP Australia announced that they had abandoned their transaction.
Shortly after, Woolworths announced that it had entered into a new supply deal that would see Caltex maintain supply arrangements should Woolworths ever decide to put its service station business back on the market.
The steadily increasing fuel price generated significant media attention again in the middle of the year, as the national average petrol retail price climbed to 152cpl (and the national average petrol TGP to 134cpl).
The issue became the focus of increased political attention with the petrol price issue being opportunistically promoted by candidates vying for election to the Federal parliament in what became known as the Super Saturday By Elections of 28 July 2018 – including calls started for a Royal Commission into the Australian Supermarket and Fuel Industries on the back of growing community concern about the rising cost of living.
Political debate about petrol prices intensified during August as Queensland LNP candidates began manoeuvring for a change in leadership of the Liberal National Government in Canberra – only to be later silenced with the ascendancy of new Prime Minister Scott Morrison over the challenger, Queensland Liberal MP Mr Peter Dutton.
Fuel prices peaked in October 2018 (national average petrol retail price of 166cpl and national average petrol TGP at 149cpl) and community debate about petrol prices reached an all-time high – prompting renewed calls for a Royal Commission into petrol prices and a social media initiative calling for a national boycott of service stations during the last weekend of October 2018.
November 2018 saw a turn in average fuel prices together with two further market moves – both involving the supermarket retailers.
First, Woolworths announced its intention to sell its fuel retail business to British retail conglomerate Euro Garages in a move that will likely reshape the face of petrol and convenience businesses in Australia during 2019 and beyond (if approved).
Shortly after, Wesfarmers finalised the demerger of the Coles Group and the new company was listed on the Australian Stock exchange.
The start of December marked the end of a long price discounting cycle in several Australian Capital City markets, aided by sharp falls in the oil price and wholesale price in fuel.
The dramatic decline in average petrol retail prices provided a break from the intense, and largely unjustified, public criticism of the fuel retail industry in Australia given that the rises were almost entirely driven by international factors that were well beyond the control of the Australian Fuel Retailing Industry.
As the Australian population prepares for the Christmas Break, the national average retail price for petrol had fallen to 139cpl and the national average petrol TGP to 115cpl – prices that were equivalent to those charged in January 2017.
And so, we look forward to 2019 – a year where the architecture of the Australian petrol convenience market will be substantially different to 12 months ago and fuel prices will likely return to near where they were two years ago.
ACAPMA takes this opportunity to wish our members and partners all the very best for a safe and prosperous Christmas trading season. We look forward to continuing to work with all industry stakeholders to champion the reasonable interests of the Australia fuel retail and fuel wholesale industry in the year ahead.