Chief Minister Andrew Barr is threatening to intervene in the price of petrol, after the Independent Competition and Regulatory Commission found Canberra’s servos are making nearly double the profit of those in nearby regional towns.
Petrol is also about 1.7c a litre higher on average in Canberra than in the surrounding region; up to 80 per cent of the cost difference is attributed to higher retail margins.
The findings are contained in the ICRC’s draft report into the ACT’s fuel prices, published on Wednesday.
The commission used its legal powers to obtain commercially confidential data from petrol retailers.
It found the annual average net profit per site in Canberra was about $750,000 in 2016-17 compared with about $400,000 for Australia as a whole.
In 2017-18, the average net profit per site was about $800,000 in Canberra compared with about $360,000 in regional towns like Batemans Bay, Goulburn, and Wagga Wagga.
But Canberra servos also appeared to be turning higher profits than those in Sydney.
In 2014-15 – the latest year for which data is available for costs and margins on petrol retailers in Sydney – the average net profit per site was about $600,000 in Canberra compared with nearly $500,000 in Sydney.
During that time, the average retail petrol price in Canberra was about 7c a litre higher than in Sydney, due to higher transport costs (around 1.3c a litre), retail operating costs (4c a litre) and a higher net retail margin (1c a litre).
Senior commissioner Joe Dimasi said the relatively higher profit margins in Canberra likely reflected weaker competition in Canberra.
“This is due to Canberra having 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,” Mr Dimasi said.
Coles, Shell, Caltex, Woolworths and BP run 44 of the 58 petrol stations in Canberra. These plus 7-Eleven account for more than 90 per cent of the fuel market.
We can muck around with all the different monitoring schemes we want but in the end if we want to get fuel prices lower then we need to look at retail margins. – Andrew Barr
Mr Dimasi also said the higher fuel costs likely reflected the “relatively poor visibility” of petrol stations in Canberra, which made it difficult for consumers to compare competing retailers’ prices.
There is one petrol station per 6280 people in the ACT, lower than Sydney where there is one fuel station per 6100 people.
There are also more service stations per capita for the nearby regional areas, where there is an average one site per 1425 residents.
But the higher petrol costs are also being driven to a lesser degree by higher wholesale petrol costs.
Canberra’s higher wholesale petrol costs likely reflected uncompetitive supply contracts of petrol retailers in Canberra with a high market share, particularly the former agreement between Coles Express and Viva Energy, the commission found.
Its investigation has been running in parallel with an ACT Legislative Assembly inquiry into the issue.
But Mr Barr told the inquiry the “substantive issue” in the Canberra market was retail profit margins.
He said the larger players were “gouging Canberra motorists” and many retailers in the ACT market had “behaved appallingly”.
“It’s as straightforward as that. We can muck around with all the different monitoring schemes we want but in the end if we want to get fuel prices lower then we need to look at retail margins and we need to highlight for the community who’s doing the gouging,” Mr Barr said.
“On available information there’s one group who have about 25 per cent of the market in the ACT who have been exhibiting very different behaviour to many others and they have been ripping fof Canberra motorists.”
However Mr Barr said he was not ruling out the introduction of a fuel monitoring scheme and any reports that he was were an “overextension” by media outlets.
But he believed a “combination of solutions” would be required to bring fuel prices down including potentially setting maximum retail margins.
“If we don’t get behavioural change from the retailers then that has to be on the table,” Mr Barr said.
Extracted from Canberra Times