Fuel groups have rejected accusations of price gouging, following a damning report from the ACT’s competition watchdog that revealed Canberra’s servos were making nearly twice the net profit of their regional counterparts.
Officials from Viva Energy, 7-Eleven and the Australian Institute of Petroleum instead blamed higher overheads, greater transport costs and the sparsity of stations for the ACT’s higher fuel prices, which have averaged around 8.9c a litre more than in Sydney and 2.3c a litre extra than surrounding towns over the past six years.
Viva Energy’s Edwina Pribyl and Jennifer Gray give evidence at the ACT fuel inquiry. Picture: Jamila Toderas
Using its legal powers to obtain commercially confidential data, the Independent Competition and Regulatory Commission found weak competition was fuelling higher profit margins. It found service stations in Canberra turned over $800,000 net profit in 2017-18, compared with $360,000 in the surrounding region.
Chief Minister Andrew Barr labelled it “gouging” and said maximum retail margins should be on the table if servos did not curb predatory pricing practices.
But petrol groups say such an intervention would be unprecedented and didn’t take into account the extra cost of doing business in the ACT.
Viva Energy’s general manager of reseller markets Jennifer Gray said compared with similar sites in Wollongong, Newcastle and Sydney, Canberra’s leases were 7 per cent more expensive.
“That is the straight lease cost, it wouldn’t include your land tax or rates, power all those sorts of operating costs. That’s a straight underlying lease cost that we see,” she said.
7-Eleven Australia’s general manager of corporate affairs Clayton Ford said its lease costs in the ACT were 12 per cent higher than regional NSW and 20 per cent above metro Sydney.
“We’re a growing business we’re pleased to say and we are over the last couple of years and looking forward we’ve been opening roughly 30 sites nationally per year but since entering the ACT market in 2011 … we’ve only opened one new site in late 2014,” Mr Ford said.
“That just goes to show … we find it difficult to make the numbers stack up when you take into account some of those costs.”
Mr Ford said 7-Eleven had knocked back several opportunities in the ACT in the past year because it could not justify the investment. He said a formal intervention in the market would be “potentially problematic” and could have unintended consequences.
He also said the government needed to do more to encourage competition in the market through other mechanisms instead of capping margins.
Viva Energy’s government relations general manager Edwina Pribyl said leaving an open and competitive market “would always be preferable”.
She acknowledged Coles pricing had “started to escalate” under its old agreement but said customers could expect a “more consistent offering” as part of its new deal.
Australian Institute of Petroleum chief executive Paul Barrett said he’d spent 20 years helping to dismantle Commonwealth and state regulation around petrol so he couldn’t support a retail margin cap.
Extracted from Canberra Times