We are still paying too much for petrol in the current circumstances

Contributed by Jim Hayes

Petrol prices at the bowser are still not falling in line with the plummeting global price, and it was only a few weeks ago, that the industry was shamed into pulling them down.

At a time when the Coronavirus is disrupting just about everyone’s life and bringing hardship, the industry came across as callous and greedy. People started to talk about price gouging and the need to pull together and share the burden fairly.

That it’s till going on is a scandal.

It is too easy to just blame the local service station. The reality is much bigger than this. Service stations are locked into partnerships with big oil companies, and the local level operators are only small players in the game, with limited power over price.

In its latest petrol industry report ofthe Competition and Consumer Commission (ACCC), service station operators are blamed for the still too high prices. Higher prices in the country are blamed on transport costs and there not being enough other service stations to provide competition. There maty be an element of this. but it only part of it.

Chairperson, Rod Sims says in it: “At this time the Australian economy needs all the assistance it can get, and lower world crude oil prices are one of the few positives from current world events”.

The overarching role of the oil companies and the big petrol station chains are left out.

Most of the price is set at the wholesale level. The oil companies take a cut from all levels in the supply chain, from taking the crude out of the ground, to refining, to distribution. They own each stage. By far the biggest portion of every dollar paid at the bowser goes to them.

According to the ACC’s own data, the breakdown of the price is 57 percent up to the refined product. A small 9 percent goes to the wholesaler and retail levels. Then the government imposes a 34 percent tax. These combined makes up the price paid at the bowser.

A large share of the service stations are owned the Cole Group, Caltex, BO, Woolworths Group, 7-Eleven, which means, it is a group of large retailers and oil companies that set the final retail price.

NRMA spokesman, Peter Khoury, hit it close to the mark. “Freight costs for petrol should only be 1 or 2 cents a litre, and that is being generous to the oil companies,” he said.

“Freight costs for petrol should only be 1 or 2 cents a litre, and that is being generous to the oil companies,” he said.

“There is at least some evidence that prices are falling in some regions, which is good, but overall it is taking too long for prices to fall.”

Western Australia’s RAC Manager for Vehicles and Fuels, Alex Forrest, pitched in to suggest oil companies should be prepared to cut their margins in the circumstances.

The point is that they are well positioned to operate as a cartel and engage in price fixing. This is what has to be dealt with to overcome price gouging.

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