Petrol retailers should not use the falling oil price to increase profits and should instead pass on the full benefit to struggling motorists, the Australian Competition and Consumer Commission (ACCC) says.

Key points:

  • The ACCC says fuel companies should pass on cheaper prices faster at the pump
  • The NRMA says is is taking too long for prices to fall and “cannot be justified”, while RAC WA says fuel companies are “beefing up their profit margins”
  • The ACCC says less competition and demand could explain regional and remote fuel prices being higher than in metro areas

In its latest petrol industry report, the ACCC says fuel prices have risen in recent years and the industry is in a position where it could deliver some cheaper prices.

“At this time the Australian economy needs all the assistance it can get, and lower world crude oil prices are one of the few positives from current world events,” said ACCC chairperson, Rod Sims.

“In the larger Australian capital cities, petrol retailers took too long to pass on the savings from the rapid drop in international oil prices, and this did not reflect well on them.”

Prices higher in regional areas

Nationals MP Kevin Hogan said he has been complaining about higher petrol prices in the bush for years and has even called for a Royal Commission, which he said was “knocked back by the Libs and ALP”.

He calls petrol prices on the New South Wales North Coast the “8th wonder of the world”.

Fuel price board at a Bendigo station.
Fuel prices in Bendigo are close to the regional average, while at the same time metro prices average 94c a litre. (Image supplied)

Mr Sims said fuel prices were generally higher in regional Australia due to a number of factors, including lower population and demand, meaning there were fewer petrol stations, which often lead to less competition.

There are also higher costs for transport and storage of fuel, and less convenience store sales to support the operation costs of petrol retailers when fuel prices are low.

NRMA spokesman, Peter Khoury, says it is a furphy to say that the freight component of fuel adds a lot to rural fuel prices.

“Freight costs for petrol should only be 1 or 2 cents a litre, and that is being generous to the oil companies,” he said.

“There is a problem with lack of competition in some smaller towns but many of the really high prices above $1.30 just cannot be justified in the current climate.”

“There is at least some evidence that prices are falling in some regions, which is good, but overall it is taking too long for prices to fall.”

Travel restrictions affect remote fuel prices

Price changes in regional centres can lag up to six weeks behind changes in the larger capital cities, because the turnover of stock is generally lower in the country.

In remote areas, where petrol stations have to order in their fuel before the wet season, it will take a while to use up fuel that was bought when prices were about $1.90 a litre.

A petrol pump showing the prices of fuel
Fuel prices remain high at some petrol stations in the Central West, prompting calls for an inquiry. (ABC Central West: Jo Shoebridge)

The reduction in demand for petrol due to current travel restrictions may further exacerbate the lag.

Brian Leadbetter runs a small fuel outlet in Delungra in north-west NSW and is one of those feeling the pinch, but has reduced his prices anyway.

He is selling fuel below a dollar to get people to stop and buy other goods and services from his shop.

“We sell a lot of produce, animal feed, tyres, [and] batteries, which helps to run the business,” Mr Leadbetter said.

His business has dropped significantly due to COVID-19.

“There’s not as many people travelling at the moment, trucks included,” Mr Leadbetter said.

“A lot of people [are] being really careful on what they spend now [and] where they go.”

‘There’s no law against a high price’

Mr Sims is concerned about the lack of competition in some places.

“Where there is competition you tend to see lower prices,” he said.

Fuel comparison for Karratha with prices around $1.40
Fuel prices in Karratha in WA are high, while remote Indigenous communities report prices as high as $1.90. (Supplied)

“But there is no law against someone charging a high price for something.

“What is illegal is if petrol station owners are colluding together and setting a high price between themselves … that is anti-competitive behaviour and if anyone has any evidence of that, the ACCC would like to hear about it.”

RAC Western Australia’s manager of vehicles and fuels, Alex Forrest, said fuel companies should be able to cut margins on fuel immediately.

“Big reductions in the international oil price flowed on to reductions in fuel price at the wholesale level in WA,” he said.

“But much of this was not passed onto motorists at the pumps.

“While many in our community are struggling through one of the toughest times of their lives, fuel companies have been beefing up their profit margins on fuel, in some cases by upwards of 100 per cent.”

Extracted from ABC