A legislated maximum retail margin could be one of the solutions to stop price ‘gouging’ at the bowser as investigations continue into petrol prices in the ACT.
The option was mentioned by ACT Chief Minister Andrew Barr while speaking at the Select Committee on Fuel Pricing on 8 May.
“If we do not get behavioural change from the retailers then that has to be on the table,” Mr Barr said. “If you want a more serious intervention, beyond the popgun that is freezing the prices for 24 hours at their already high levels or trying to introduce more competition, you would need to go down that path.”
Mr Barr said it is the “largest players who are gouging Canberra motorists” and if the ACT is to get fuel prices lower, “we need to look at retail margins”.
The suggestion comes as the ACT Independent Competition and Regulatory Commission (ICRC) released their draft report, also on 8 May, outlining draft findings of its investigation into ACT petrol prices.
Over the past six years, petrol prices in Canberra averaged 142 cents per litre, which was around 8.9 cents per litre higher than in Sydney and 2.3 cents per litre higher than in the towns surrounding Canberra.
The average price difference between Canberra and surrounding towns widened in the last six months of 2018 to 9.9 cents per litre but narrowed somewhat over 2019. In March, petrol prices in Canberra were, on average, 3 cents per litre higher than those in the surrounding towns.
The report notes, however, that recent changes to the retail petrol market, such as Viva Energy starting to set petrol prices at Coles Express sites, may change the average price of petrol in Canberra relative to other areas in the future.
The Commission found a number of reasons for the higher average petrol prices in Canberra including: delivery costs of fuel are higher, retail operating costs appear to be higher, and profit margins of retailers are higher in Canberra than in Sydney and the towns around Canberra.
“The relatively higher profit margins in Canberra likely reflect weaker competition in Canberra,” Senior Commissioner Joe Dimasi said. “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. It also likely reflects the relatively poor visibility of petrol stations in Canberra, which makes it difficult for consumers to compare competing retailers’ prices.”
According to the Commission’s report, in 2017-18 the average net profit per site was around $800,000 in Canberra compared to around $360,000 in the regional comparison locations.
In 2014-15, the average net profit per site was around $600,000 in Canberra compared to a little below $500,000 in Sydney.
The draft report is open for comment at icrc.act.gov.au until 5pm Thursday 6 June. The final report will be provided to the ACT Treasurer by 28 June.