Petrol price discounting cycles ended in three capital cities over the past week resulting in increases in average petrol prices in Adelaide, Melbourne and Brisbane. In the case of Adelaide, where the new petrol price cycle appears to have peaked, average petrol prices increased by 27.6cpl over 7 days (the price cycle rise is still to play out in both Melbourne and Brisbane).
Given that the international finished fuel product benchmark price (i.e. MOPS95) – which forms the foundations of the buy price for service stations – has increased by 46% since January 2019, the peaks in the next round of fuel price cycles are likely to be higher than the preceding cycles.
In the case of Adelaide, where the new price cycle peaked at 165.3cpl on 8 May 2019 – 4.7cpl higher than the previous peak of 160.6cpl (on 16 April 2019). The difference in peak prices can be explained by rises in the MOPS95 international price during the intervening period (allowing for normal price lags between international prices and domestic prices).
“If you actually understand the nature of the interplay between movement in international fuel price benchmarks and the local market petrol price cycles, the explanation for the recent changes in petrol prices in some of Australia’s capital cities is straightforward”, said ACAPMA CEO Mark McKenzie
Changes in fuel price cycles inevitably bring fuel price commentary in the media, as politicians and motoring organisations justifiably seek explanations from the industry about the cause of fuel price rises.
“The fuel price commentary in Adelaide and Melbourne has been quite reasoned, with media agencies seeking to understand why the price peaks in the new cycles were higher than the preceding cycles”, said Mark.
“The discussion in Brisbane in recent days, however, has been hysterical with outlandish claims being made by the RACQ alleging price ‘gouging’ by fuel retailers and ‘record-breaking’ margins”, continued Mark
The RACQ pounced on the fact that one retailer (yes one !) had moved prices up and then used this observation to suggest that this individual retailer’s price of 167.9cpl will be the new average price in the entire Brisbane market – constituting a new ‘record’ margin between the price service stations pay for fuel and the price that they sell it for.
Whether the 167.9cpl becomes the true average or not will depend upon what happens over coming days but the point is that the price levied by one participant does not constitute a ‘market average’ price.
If this price does end up being the true average, then the movement in Brisbane prices will largely mirror the price movement recently observed in the Adelaide market – and is therefore largely explained by the steady rise in wholesale prices in international markets that has occurred in recent months.
The central criticism here is that the pricing of one market retailer does not constitute a market average as implied by the RACQ.
“The average fuel price in Brisbane yesterday (9 May 2019) was not 167.9cpl – it was 141.7cpl”, sad Mark
This price is readily available to anyone who took the time to visit the Informed Sources Website which can be freely accessed by all – a fact that seems to have escaped the attention of the RACQ.
The average of 141.7cpl represents a Gross Indicative Retail Difference (i.e. the difference between the service station fuel buy price and fuel sell price) of around 6.5cpl – after allowing for lags between buy prices and actual sell prices – and is hardly a ‘record breaking price margin’ as alleged by RACQ.
“Given that the cost of retailing fuel averages between 8cpl and 11cpl, last week’s fuel retailers gross profit margins were estimated to be a loss of between 2.5 and 5.5cpl – which is not unusual at the bottom end of the fuel price cycle”, said Mark.
Once again, this fact could have been easily sourced by examining the weekly fuel price information that is freely available on the Australian Institute of Petroleum’s website – a fact that also appears to have escaped the ‘luminaries’ at the RACQ.
It is fair to say that the RACQ appears to be playing a mischievous game by staying quiet during the low-price period of petrol price cycles and then making outrageous generalisations about average petrol prices using prices at the high-point of the petrol price cycles.
“Such selective commentary is a ‘neat trick’ to gain publicity, but it is deeply flawed if the intent is to provide the community with informed commentary about petrol prices”, said Mark.
Sadly, the flawed RACQ commentary appears to have caught the attention of the State’s politicians who have called for the ACCC to again look at market behaviours in the Brisbane petrol market – less than 18 months after the last investigation into the Brisbane market was produced by the ACCC.
“For our part, our industry has nothing to hide in respect of petrol prices which is why our industry produces all the data needed for interested stakeholders to understand what is happening with petrol prices”, said Mark
“Perhaps the RACQ might do well to acquaint themselves with that information and advance commentary on fuel prices that is actually based on fact”, concluded Mark