Australia: Fueling the Price Cycle

April 2009

The Australian Competition and Consumer Commission (ACCC) has prepared a petrol industry monitoring report which found that the weekly fuel price cycle is getting bigger and more regular.

The Report of the ACCC into the prices, costs and profits of unleaded petrol in Australia, raises concerns about price signalling among major petrol retailers during the price-hiking phase of the price cycle. 

“However, it could be that some price-sensitive motorists buy their petrol mainly on the heavy discounting days of the cycle when petrol is supplied at or below cost,” The Minister for Competition Policy, and Small Business, Dr Craig Emerson, said  “According to the ACCC, the oil majors (BP, Caltex, Mobil), supermarket retailers (Coles Express and Woolworths) and large independent retailers (including 7-Eleven) then seek to recover losses during the price-hiking phase of the cycle.”

According to Dr Emerson, the ACCC’s report indicates that in each capital city one of the major petrol retailers usually leads the market up sharply after the bottom of the price cycle and the other major retailers follow in the knowledge they won’t be undercut by rivals. 

He believes this is because the major petrol retailers subscribe to the Informed Sources website through which vital real-time price information is transmitted, that allows them to know what price each other is charging within minutes of the first weekly price rises occurring.

“The majority of independent retailers are not subscribers to Informed Sources, making their pricing decisions harder to observe. This is not a criticism of Informed Sources. In its absence alternative vehicles for conveying real-time price movements could be relied upon,” Dr Emerson said.

The ACCC report also shows that it is usually the independent retailers and Woolworths that lead the market down each week, and markets with more prevalent independent retailers have a less pronounced fuel price cycle. 

Written By Sacha Delfosse