The Queensland Fuel Price Summit

Petrol prices in Brisbane have been consistently 3¢ a litre (or two per cent) higher than prices charged in other comparable capital cities, according to presentations to the Queensland Government’s Queensland Fuel Price Summit last week.

The summit was called in response to the Australian Competition and Consumer Commission’s fuel price data that showed the comparative difference in Brisbane’s prices over recent years.

Queensland Minister for Main Roads, Road Safety and Ports and Minister for Energy, Water Supply and Biofuels Mark Bailey, who chaired the summit, said the Government wanted first to understand the reasons for the difference in average petrol prices and then discuss what could be done to reduce prices.

The ACCC, Queensland Treasury and the RACQ then made presentations, all pointing to the fact that Brisbane fuel prices were consistently higher than those of comparable cities.

The Australasian Convenience and Petroleum Marketers Association (ACAPMA) was then afforded an opportunity to provide a presentation on some of the possible reasons for this variance.

This was followed by a broader conversation that involved contributions from other industry stakeholders, including the Australian Institute of Petroleum and major fuel retailers

“ACAPMA’s key message to the Queensland Government was that fuel prices vary as a result of differences in both the structure and intensity of competition in the retail fuel market – a market which, of itself, is not one homogenous market but rather consists of a large number of smaller markets that operate independently of each other,” ACAPMA CEO Mark McKenzie said.

“We pointed to the fact that the intensity of retail market competition varies between capital cities, between metropolitan regions within these capital cities, and between and within the local areas that make up these metropolitan regions.”

ACAPMA also said the Australian retail fuel market comprised a large number of retail businesses that varied in size of operation, business models and cost structures.

“I think one of the central challenges for our industry is that the wider community has a very strong financial interest in the product we sell, but very few actually understand how our industry operates – and that is an issue we must address in the future,” Mr McKenzie said.

“There seems to be a widespread view that because most retail businesses are buying petrol at a similar wholesale price, that they should be selling at the same retail price – regardless of the variance in the operating costs borne by the large number of businesses that comprise the retail fuel market in Australia.

“Such a conclusion is nonsensical and, in fact, questions about the openness of competition would really need to be asked if all fuel retailers were charging the same price across all markets given these differences.”

While the summit noted the explanations put forward by industry for retail price variance, there was a stated desire for the Queensland community to be assured that the market was operating competitively.

This, in turn, led to suggestions from non-industry stakeholders that the ACCC needed to conduct an independent investigation of fuel prices in Queensland – a call echoed by Mr Bailey in his public statements immediately following the summit.

“I want the ACCC to now launch a study into the Queensland market as soon as possible,” he said. “I initially requested this when I wrote to ACCC Chairman Rod Sims earlier this year, and after today’s meeting I’m convinced this is the next step.”

Industry representatives did not oppose the minister’s call, despite such investigations creating a reporting burden for fuel retailers.

The ACCC has conducted similar investigations around the country for many years and these studies provide an opportunity for the community to be reassured by an ‘independent umpire’ that the retail fuel market is operating as it should.

The latter part of the meeting included a discussion about the possible need for the Queensland Government to introduce new regulations governing the use of fuel price boards, in order to reduce the risk of motorists becoming confused by the display of discounted fuel prices – which are wholly dependent on grocery dockets or a minimum spend in the retailer’s convenience store.
Industry stakeholders urged the Queensland Government to exercise care on this issue given that the industry’s experience in one state (ie, NSW) had resulted in the introduction of onerous price-board regulations that came at a significant regulatory cost to industry.

ACAPMA said it would continue to work cooperatively with Minister Bailey and the Queensland Government on this issue over coming months.

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