Motorists slugged with highest January petrol prices since 2004

January 08, 2014
News.com.au
MOTORISTS are being hit with the highest January prices for petrol since 2004 – and economists warn that the pain at the bowser will get even worse.
In the first week of January, Australian Institute of Petroleum figures show that motorists in Victoria and Western Australia were enjoying the cheapest average petrol cost per litre – $1.55 – while drivers in the Northern Territory were being slugged with a whopping $1.74 per litre.
Tasmania was the next most expensive place to fill up the tank, with an average of $1.62 per litre, followed by Queensland on $1.60 per litre and New South Wales and South Australia, both on a $1.58 average price per litre.
Prices were higher than the state average in Sydney, Melbourne, Adelaide and particularly in Brisbane, where motorists were paying 1.7 cents per litre above the state average.
In Perth, Hobart and Darwin, drivers were paying slightly less than the state average to fill up.
Motorists have been warned to prepare for more hip-pocket pain with further price hikes forecast for next week.
Commsec economist Savanth Sebastian said increasing overseas demand and a weaker Aussie dollar would keep pushing petrol prices up in the next week or two.
Consumer advocates are calling on independent fuel retailers to get serious about taking on the major chains, but industry experts say that new limits on shopper docket discounts could keep prices high.
Under an agreement that came into force on January 1, Coles and Woolworths have capped their discount offers to 4c a litre. It followed an investigation by the Australian Competition and Consumer Commission that raised concerns that the shopper docket deals, cross-subsidised by supermarket profits, could distort the market and increase the general fuel price.
Some older dockets do not expire until February but an ACCC spokesman yesterday said the 4c cap should start to have an impact in the next few weeks.
Geoff Trotter, general manager of petrol price monitor Fueltrac, said the onus was now on the independents.
“Let’s see some competition,” he said. “It’s time the independents put up or shut up.
“They now have the more level playing field they have been calling for years. The size of the margins means there’s plenty of room for serious competition in offering lower prices to motorists.
“We reckon they have been crying crocodile tears to some extent while enjoying the higher margins. Now we will see.”
RACQ spokeswoman Renee Smith blamed “greedy” retailers, saying drivers were paying the price of a greater concentration of market power by services stations owned by Coles and Woolworths. The supermarket chains, however, said they simply followed the market trend and the increases were driven by factors such as high international oil prices and a weaker Aussie dollar.
Service stations’ profit margins on pump prices have increased from 4c a litre a decade ago to 10c now, with wholesale margins adding another 9.4c a litre.
The price rises come as BP and Shell are both considering plans to sell their Australian petrol stations and refineries as they shift their focus to exploration and production, according to market speculation.
Shell is believed to be in talks with two parties, including a consortium led by investment bank Macquarie Group, for a $3 billion sale of its 900 petrol stations and Geelong refinery.
BP is also considering a similar sale of its petrol stations and refineries in Queensland and Western Australia, according to market talk.
The company owns 225 stations and sells fuel under the BP brand at a further 1100 outlets across the country. In South Australia, Peregrine Corporation – owned by the wealthy Shahin family – acquired BP’s 16 metropolitan and 12 regional sites in a deal announced a year ago.
Yesterday, all parties said they did not comment on market speculation, although BP Australia spokeswoman Jamie Jardine noted the energy giant last month allocated an extra $150 million for investment in its retail operations.
Any sale by Shell will also affect Coles, which leases 630 petrol stations from Shell and operates them under a Shell-Coles Express banner.
Coles corporate affairs general manager Robert Hadler declined to provide details but said the retailer had “all the normal commercial protections in place”.
Shell has been looking for a buyer of the Geelong refinery, which supplies half Victoria’s fuel, since April.
Shell sold its 226 petrol stations in New Zealand in 2010 and they have since been rebranded Z Energy.
The stations were bought by New Zealand Superannuation Fund and Wellington-based infrastructure investment company Infratil for $NZ695 million ($643 million).
IBISWorld research analyst Ryan Kerin said any sale here was likely to follow the Kiwi model, where the buyer paid a royalty to use Shell branding for a set time while a new corporate face was phased in.
Mr Kerin warned less profitable outlets would come under pressure. “Any new owners will be looking to extract value,” he said.
The number of petrol stations around Australia fell from 20,000 in 1970 to about 6300 in 2011.