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ACCC details structure of new in-depth petrol price reports

New reporting arrangements will include macro and micro studies to provide greater analysis of petrol prices.

 

Australia’s competition regulator will release at least eight reports this year delving into petrol price movements and the driving forces behind them.

The Australian Competition and Consumer Commission (ACCC) today detailed the structure of its new approach toward petrol price monitoring.

ACCC chairman Rod Sims says macro reports will be released quarterly looking at petrol price movements and what drives them overall, while at least four market studies will be undertaken looking at micro issues in-depth, such as analysing the price drivers of petrol in regional markets.

“The first quarterly report will be released in February. 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,” Sims says.

For the micro reports, Sims says the ACCC will look at three regional locations 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,” he says.

Sims says the ACCC will determine the three locations after analysing data on retail, wholesale and benchmark prices for around 180 regional locations across the country. The ACCC has limited its scope to three markets per year due to the in-depth work required to produce the reports.

“We are looking at factors such as price differentials between regional markets and larger cities, differentials between towns of similar size and the variability of prices in regional markets over the past three years to assist us in determining the first target markets,” he says.

“We expect to identify the three regional locations to be studied in the coming months, with the first to be announced in March. The reports will be delivered progressively throughout the year.”

The ACCC says that in July 2014 the average retail price of petrol across regional Australia was 5.7 cents per litre higher than prices in the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth). By December 2014, the difference had increased to 17.6 cents per litre.

Conversely, the average wholesale price of regular unleaded petrol in the five largest cities fell by around 35 cents per litre between the beginning of July 2014 and early January 2015.

“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,” Sims says.

The ACCC says it studies may find evidence of cartel or anti-competitive activity in breach of Australia’s competition law.

“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,” Sims says.

“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.”

The launch of the new macro and micro reports is in response to a government directive to the ACCC to monitor and analyse fuel markets more regularly and in-depth.

Previously, the ACCC produced its fuel monitoring reports once a year.

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