While there is no doubt Andrew Barr’s threat to use the Fair Trading Act to impose a maximum price for petrol will be welcomed by many in what is, after all, an election year, it remains to be seen if it is justified or even practicable.
Such action would need to be based on solid evidence that price-gouging or profiteering was actually taking place.
Such evidence has, as yet, not been made public. Mr Barr appears to be relying on the fact that while E10 prices in many other, but not all, parts of the country are now under a dollar a litre, that isn’t the case here.
According to the Petrol Price Watch website, only three ACT sites, in Mitchell, Majura Park and Fyshwick, were selling E10 for less than a dollar a litre on Wednesday afternoon.
The median price was in the $1.12 to $1.15 cents a litre range. Earlier in the day the median price was hovering just under the $1.10 a litre mark.
According to globalpetrolprices.com, Canberra’s average E10 price dropped from $1.62 on January 20 to $1.05 on April 27; a significant of fall of 57 cents a litre, or 35 per cent.
This is on a par with the fall in bowser prices seen elsewhere, driven by the collapse of the global oil market.
Canberra’s downward price curve has been almost identical to those of Hobart and Darwin, two other jurisdictions that face issues with sale volumes not unlike our own.
Two separate inquiries last year found no hard evidence local fuel retailers were colluding to rip off Canberra motorists.
“It is easy to look at the pump prices and say ‘we’re being fleeced’. The reality is more complex.”
According to the ACT Legislative Assembly’s Inquiry into ACT Fuel Pricing: “The Canberra fuel market is unusually different to other capital city markets. There is no price cycle, and factors such as the number and siting of service stations, inconsistent real-time price monitoring information and limited access to discount operators have resulted in a market consistently more expensive than other capitals”.
An inquiry conducted by the Independent Competition and Regulatory Commission came to a similar conclusion.
Senior commissioner Joe Dimasi said Canberra had “a more concentrated retail petrol market, with a higher proportion of retailers with business models offering a premium product, and a lower number of independent retailers with a business strategy to aggressively discount”.
There just wasn’t enough competition in the local market to drive the levels of discounting seen in Melbourne and Sydney.
This reflected lower fuel sale volumes and the fact stations are scattered across the suburbs. They rarely directly compete with each other. If a consumer is unhappy with the price at one station, they usually have to drive a considerable distance to find another.
While the Chief Minister is probably acting with the best of intentions, it seems this threat doesn’t appear to have been thought through as well as it might have been.
It certainly doesn’t take into account the significant downward movement in prices that has occurred in recent months, the higher costs faced by operators in the ACT – some of which are government generated – or the fact fuel sales have fallen dramatically as a result of travel bans and people working from home.
While it is easy to look at the pump prices and say “we’re being fleeced”, the reality is actually more nuanced and complex.
It would make more sense for the government to work with the retailers, possibly by trying to reduce their costs, than to threaten them during this challenging time.
If there was a quick fix to this issue, it would have been found by now.
Extracted from The Canberra Times