The ACCC has released its latest petrol monitoring report which confirms that in the days and weeks following the fuel excise cut and that the subsequent increase to prices was a result of cycle and international factors, not gouging with Gross Indicative Retail Differences (GIRD) falling for the sixth consecutive quarter with a fall of 13.4 cents per litre in the March 2022 quarter.
The ACCC notes that the confluence of the fuel excise cut and a temporary fall in the cost of international refined petrol in April along with the Australian petrol price cycle being on the bottom of the swing lead to very deep falls in petrol prices between 25 and 48 cents per litre.
The Report goes further to note that the deep dive of price was not sustained as the price cycle turned and the higher international refined petrol prices stemming from Russia’s war in Ukraine again pushed up wholesale and retail prices in Australia.
“We can see from our petrol market monitoring that the cut to the fuel excise has been passed on to Australian motorists in the vast majority of locations,” ACCC Chair Gina Cass-Gottlieb said.
See below for more detail from the ACCC.
Elisha Radwanowski BCom (HRM&IR)
From the ACCC:
Daily average retail petrol prices and terminal gate prices in nominal terms in the five largest cities: 11 March to 10 May 2022
Notes: Terminal gate prices are indicative wholesale prices. There are lags between changes in wholesale prices and retail prices. The excise cut had been passed on to retail prices in the vast majority of locations after 6 weeks (i.e. by 10 May).
“Retail petrol prices will still fluctuate with changes in international prices and the price cycles in the largest capital cities, even though the excise cut has flowed through to the bowser,” Ms Cass-Gottlieb said.
“Our monitoring will continue for the duration of the excise cuts. Petrol retailers who fail to maintain the cuts can expect to hear from us.”
Diesel prices also decreased
The report also found that daily average retail diesel prices in the 5 largest cities decreased by around 33 cpl between 29 March and 18 April. Over the same period, average diesel wholesale prices in the 5 largest cities decreased by around 32 cpl.
Prices increased to 14-year high in March 2022
Daily average retail petrol prices in the five largest cities hit an inflation adjusted (real)14-year high of 214.9 cpl in March 2022.
In the March quarter this year, quarterly average retail petrol prices in the five largest cities were 181.9 cpl, an increase of 19.1 cpl from the December quarter 2021 (162.8 cpl). This was the fifth consecutive quarter in which prices have increased.
Between the December quarter 2020 and the March quarter 2022, average retail prices increased by about 50 per cent.
Seven-day rolling average retail petrol prices in nominal terms in the five largest cities: 1 January 2020 to 31 March 2022
Source: ACCC calculations based on data from FUELtrac.
Notes: The area to the right of the dotted vertical line represents the March quarter 2022. A 7-day rolling average price is the average of the current day’s price and prices on the 6 previous days.
In real terms, prices in the March quarter 2022 were some of the highest in the past 20 years, and the highest since July 2008.
International prices pushed up Australia’s retail prices
International refined petrol prices, which are driven by international crude oil prices, and the AUD–USD exchange rate, largely determine movements in retail petrol prices in Australia.
Singapore’s Mogas 95 is the relevant benchmark for petrol prices in Australia.
In the March quarter 2022, quarterly average Mogas 95 prices were 98.8 cpl (an increase of 17.9 cpl from the December quarter 2021). This was the highest in real terms in almost 14 years.
“Our domestic retail petrol prices largely follow the international benchmark price because most of the fuel we use in Australia is imported,” Ms Cass-Gottlieb said.
“It takes around one to two weeks for a change in the price of Mogas 95 to flow on to the retail price of petrol in Australia’s largest capital cities.”
In the March quarter 2022, crude oil prices increased sharply due to geo-political tensions around Russia’s war in Ukraine, stronger demand from the easing of the global pandemic and slower crude oil production growth. Numerous countries imposed sanctions against Russian companies and stopped buying Russian crude oil, which led to global shortages as Russia is a major oil supplier.
Gross retail margins
Gross indicative retail differences (GIRDs) are the difference between average retail prices and average wholesale prices, and they broadly indicate gross retail margins. As GIRDs do not account for retail operating costs, they should not be interpreted as actual retail profits.
In the March 2022 quarter, average GIRDs in the five largest cities fell slightly to 13.4 cpl.
Average GIRDs in the five largest cities have trended downwards over the last six quarters, after hitting a record high in the September quarter 2020 (18.7 cpl). Average GIRDs decreased by 5.3 cpl over the 6 quarters to below pre-pandemic levels.
“When wholesale prices increase significantly in a short period, the lag between changes in wholesale and retail prices can have the effect of reducing gross retail margins,” Ms Cass-Gottlieb said.
“During lockdown periods of the pandemic, some retailers may have increased their margins to offset lower sales volumes and cover their fixed costs. But margins have declined again as demand for petrol has returned and sales volumes have increased.”