Petrol station pricing mirrors bank tactics on interest rates, review finds

Karen Collier
October 29, 2013
Herald Sun

PETROL stations jack up prices up to eight times faster than they drop them, a five-year review has found.

And the worst spots for this in Victoria are Bendigo, Ararat, Benalla and Yarrawonga, the study by the University of New England, in NSW, concluded.

Professor of macroeconomics Abbas Valadkhani likened the phenomenon, dubbed “rocket-feather pricing”, to that of banks quickly slugging customers with higher interest rates but passing on rate reductions at a slower pace.

“When the cost of petrol goes up, the retail price shoots up like a rocket. But when the wholesale cost goes down, the price goes down like a feather,” Prof Valadkhani said.

His research, which studied outlets at 111 metropolitan and country locations nationwide, examined the speed of price movements when retail unleaded fuel prices were substantially above or below expected levels.

He said Bendigo’s bowser prices rose eight times faster than they fell, Benalla’s moved almost five times faster, and Ararat and Yarrawonga’s lifted three times faster.

Earlier analysis, released in May, identified one in four of the 111 areas, examined from late 2007 to early 2012, were hot spots for fuel rip-offs.

In Victoria, 17 per cent of areas were hot spots.

Only Western Australia, which has a government body monitoring fuel prices, had no offenders.

Prof Valadkhani said exploitation was more likely when there was less competition.

“The reason we see petrol stations ripping motorists off is simply because they can,” he said.

“The evidence is clear that only effective government regulation and monitoring can ensure petrol stations do the right thing.”

CommSec earlier this month revealed that the nation’s motorists were being charged 14 cents more for petrol than the wholesale price – a 15-month high.

The gap eased to 11.3c last week, still well above the long-term average.