ACCC's New Petrol Price Reports and Reporting Obligations
Thursday 15 January 2015 @ 9.13 a.m. | Legal Research | Trade & Commerce
ACCC Chairman Rod Sims has today (15 January 2015) provided details on its approach and likely areas of study following Minister Bruce Billson’s recent direction to monitor and analyse fuel markets in a more regular and in-depth way.
The ACCC will be producing at least eight reports in 2015, of two types:
- quarterly “macro” reports looking at petrol price movements and what drives them overall; and
- at least four market studies looking at “micro” issues in considerable depth, including analysis of the price drivers of petrol in three regional markets.
Background
As international fuel prices have historically been volatile, the ACCC is hopeful the influence of OPEC will decline further so that international market forces can be the main determinant of petrol prices.
On 17 December 2007, Minister Bowen directed the ACCC, under s 95ZE of the Competition and Consumer Act 2010 (Cth) (the Act), to formally monitor prices, costs and profits relating to the supply of unleaded petrol products in the petroleum industry in Australia.
On 9 December 2014, Minister Billson directed the ACCC to monitor the prices costs and profits relating to the supply of unleaded petroleum products and report at least quarterly for a period of three years. This will enable the ACCC to undertake more timely and targeted monitoring and analysis of particular topics and fuel markets of concern to consumers. It will also enable the ACCC to acquire information under s 95ZK of the Act.
Macro Quarterly Reports
The quarterly reports will cover fuel price movements in all capital cities and around 180 regional locations and will examine issues including: the drivers of petrol prices (ie international refined petrol prices, terminal gate prices and the $AU-$US exchange rate), petrol price cycles, and gross indicative retail differences in the five largest cities.
Mr Sims said:
“The first quarterly report will be released in February [2015]. These quarterly reports could, for example, focus on the lags between international refined petrol price movements and changes in retail petrol prices in both the larger capital cities and in regional locations.”
Between the beginning of July 2014 and early January 2015 the average wholesale price of regular unleaded petrol in the five largest cities (ie Sydney, Melbourne, Brisbane Adelaide and Perth) decreased by around 35 cents per litre (cpl). Over the same period, average retail petrol prices in these cities decreased by around 38 cpl. The larger fall in retail prices may have been influenced by the absence of regular price cycle movements in some of these cities.
Mr Sims said that there seemed to be pricing anomalies in some regional centres:
“Motorists in our larger capital cities have therefore seen the benefit of lower international prices but consumers in a number of regional locations have not. While lags are expected, as older stocks can take longer to run down in regional locations, we would expect the falls to be passed on reasonably quickly … To take an example from each state and territory, when you look at Kalgoorlie, Coffs Harbour, Toowoomba, Port Augusta, Devonport, Benalla, Alice Springs and Canberra, petrol price reductions do not seem to have followed the decrease in international prices as much as consumers would expect.”
Mr Sims emphasised that petrol prices are not regulated in Australia, and retailers are free to set petrol prices at levels that see them competitive in the market and highlights the importance of the ACCC’s new petrol market studies.
Micro Reports
The ACCC will be producing at least four market studies a year, which will include analysis of the drivers of petrol prices in particular regional markets.
The ACCC Chairman said:
“We will look at three regional locations closely this year to understand their level of petrol prices in more detail … The studies will look at the cost of fuel in the nearest port, transport and storage costs, as well as wholesale, distribution, and retail costs to fully explain prices and where money is being made in the petrol price value chain.”
The ACCC will rely on its compulsory information gathering powers under s 95ZK of the Act which were activated with the Ministerial direction, when conducting these micro market studies.
Possible Outcomes
There are a number of possible outcomes from these studies. The ACCC could find cartel or other anti-competitive activity that breaches the Act.
According to the ACCC Chairman:
“Alternatively, we may find behaviour that the community considers inappropriate that is not a breach of the Act. Even if no breaches are found, the ACCC believes such studies can play an important role as they can shine a light on specific markets where prices are relatively high. Such exposure can influence behaviour as consumers can see where the money is being made and seek appropriate change.
Fuel producers can either respond or face a consumer backlash or even a government response if the market is not behaving as a competitive market should. It may be, for example, that barriers to new entry are too high, or that there is a lack of independent market participants.”
The ACCC understands that many regional communities want to be the first target of these market studies. Given the nature of the in-depth studies however, only three can be done in any year. Mr Sims emphasised that each of the studies will have wider implications:
“After the three market studies into particular regional regions we will be able to draw lessons of wider relevance to other regional markets. We may find consumers and local authorities in all regional areas will have a better ability to understand what drives their fuel prices.”
The ACCC’s new petrol direction follows on from its recent action in relation to fuel shopper dockets and petrol price information sharing, which the ACCC alleges can have the effect of raising the general level of petrol prices.
Click here to access the seven-day rolling average petrol price charts.
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Sources:
ACCC's new petrol price reports – ACCC Release MR 2/15
