Chris Zappone
October 19, 2012
The Age
A recent spike in petrol prices in Sydney and Melbourne cannot be explained by market fundamentals and is likely a case of industry greed, petrol price analysts say.
The average national price of petrol has risen consistently over the past 12 weeks, reaching $1.47 a litre last week – up from $1.37 in August – according to the Australian Institute of Petroleum.
More recently the price of unleaded reached $1.56 a litre in Melbourne and $1.50 a litre in Sydney, according to petrol-price tracking site MotorMouth.
“We’ve seen in the past two or three days an increase of around 20¢ a litre,” said Australian Automobile Association executive director Andrew McKellar. “That’s not justified by the fundamentals of what’s happening in terms of either international refined product prices or exchange rates.
“Our concern is that there is no real justification for the spike we’re seeing in petrol price. It’s a clear example of refiners and retailers pushing up their margins at the expense of consumers.”
Typically, if the price of Tapis crude remains steady but the Australian dollar strengthens, the wholesale price of petrol should fall, analysts said.
CommSec chief economist Craig James said the wholesale price of petrol had fallen from $128 a barrel to $119 in the past eight days, as the US dollar-priced Tapis crude, which is used in Australian petrol, remained steady while the Australian dollar strengthened from $US1.01 to $US1.04.
Over the longer term, the price of Tapis crude oil has eased from a high of $US124 a barrel on August 23 to $US116 overnight, amid expectations for slower growth in Asia.
The price had dropped as low as $US111 in late September. Oil price changes typically take two weeks to flow through to domestic petrol prices.
“This is something the government has to investigate,” said Mr James. “The price of petrol rising 20¢ in one night clearly isn’t justified by market forces.”
The Australian Institute of Petroleum was not available for comment.
Mr James said that historically the oil marketing industry has struggled to explain these sorts of divergences from the marketing fundamentals.
The Australian Competition and Consumer Commission launched a formal investigation into price information sharing among petrol retailers in May, over concerns the exchange of price data between businesses lessens “price competition in petrol retailing to the detriment of consumers”.
The Competition and Consumer Act bars contracts, arrangements or understandings “that have the purpose, effect or likely effect of substantially lessening competition”.
Mr McKellar said the Automobile Association awaits “the outcome of that investigation with interest”.
However, if the ACCC inquiry doesn’t succeed in delivering clear results, “then we’ve got to potentially look at the extension of price signalling legislation currently applied to banks, seeing it extended to the petrol market as well”.
The government banned price signalling among the banks in June, in an effort to increase competition between the big four in loans offered to customers.
“I don’t think we should accept there is nothing we can do about it,” said Mr McKellar.
Mr James said that with the fundamentals pointing to cheaper petrol, the spike in metropolitan areas probably wouldn’t last.
“The good news is that $1.60 not going to be sustainable,” said Mr James. “But ultimately, prices of $1.35 aren’t going to be common either.”
Subscribe to our free mailing list and always be the first to receive the latest news and updates.