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ACAPMA PETROLEUM INDUSTRY REPORT HAS THE ACCC LOST THE PLOT ON FUEL PRICES? The problem with the competition watchdog’s outrageous claims about the fuel retail industry was much darker than simply being a cheap shot playing to populist antagonism against the businesses. Y ou really have to wonder about the ACCC’s agenda at times. This month brought the release of a major report detailing the economics of the Australian fuel industry, coupled with a somewhat unrelated media release alleging that fuel retailers were profiteering by not passing through savings in wholesale prices created by the COVID-19 global economic downturn. The report itself was innocuous enough, albeit long overdue. Titled ‘The financial performance of the downstream petroleum industry (2002 to 2018)’, it covered fuel supply, fuel wholesale and fuel retail businesses in Australia and is the first of its kind in more than seven years, despite the ACCC collecting the data needed for this report throughout that time. The headline finding of the report was that net profit margins for fuel retailers (albeit before tax) had ‘nearly doubled’ from an average of 1.6 cents per litre (cpl) in the five years ending June 30, 2014 to an average of 3cpl in the 2017/18 financial year. Quite apart from the fact that the rather cute analysis sought to compare a single year with a five-year average despite having data for other years within the time period, the headline grabbing statement was far more prominent in the ACCC media than the subsequent explanation. Rather than being due to fuel retailers upping profit on petrol products, the ACCC report acknowledged that most of the increase appeared to be a significant rise in the buying of higher margin premium fuel products, effectively lifting the average margin on fuel products because consumers were voluntarily choosing these products. The ACCC explanation effectively challenges the historical view of the nation’s motoring clubs and many politicians in that an increasing proportion of motorists aren’t adopting price sensitive buying behaviour, but instead seeing the value that comes from buying higher priced premium fuels. The ACCC analysis notes that annual purchases of premium fuels have increased over the past nine years. Annual purchases of 95RON increased from nine per cent to 13 per cent between 2009/10 and 2017/19 while sales of 98RON almost doubled over the period, up from 10 per cent to 18 per cent. The higher margin levied on these premium fuels mean that the average yield on all grades of motor spirit increased because of a change in consumer purchase patterns, not because of anything the industry did on the cost side. As a result of there really being ‘nothing to see here’, the ACCC instead decided to launch an attack on the industry, alleging that fuel retailers weren’t passing on the full value of savings realised as a result of the COVID-19 economic downturn. This attracted the desired attention of the media and the national news media, with press releases of various politicians scathing in their criticism of the industry profiteering at the cost of the Australian motoring public, most of whom had stopped buying fuel because they were stuck at home. What was missed by most is that 45cpl of the supposed 50cpl that the ACCC believed should have been passed on had already occurred in the larger high volume markets, so the commentary was limited to the small volume capital city markets and regional markets And therein lies the explanation. Had the ACCC decided to ask the industry before making such outrageous claims, it would have been told that lower turnover means wholesale price changes take longer to pass through, particularly for those who buy fuel on contract. What was interesting is that the ACCC provided no evidence to support its claims. It was just an allegation of wrongdoing that was masked as a ‘warning’ by the ACCC Commissioner in press statements made this month. Shortly after the ACCC release, ACAPMA was asked for a ‘please explain’ on behalf of fuel retailers and duly sought to provide reasoned commentary on what was effectively an unreasonable claim. The association also took the unprecedented step of releasing a video explanation via various social media platforms, receiving more than 60,000 views over seven days. But the problem with the ACCC statements was much darker than simply being another ‘cheap shot’ playing to populist and longstanding antagonism against the fuel retail businesses, two thirds of which are small-to-family enterprises as the ACCC well knows. Within eight hours of the ACCC statement, ACAPMA began receiving reports of service station staff being abused. In two cases, these reports included that retail staff were being spat at by members of the public. In short, the ACCC’s comments and subsequent media reporting appear to have incited community aggression against service station staff. The ACCC knows, above all others, that discussion on petrol prices is acutely political, with very little understanding of how fuel prices really work. Therefore, it’s incumbent on all commentators to ensure they’re commenting in a responsible and factual manner. Sadly, the ACCC appears to have failed in this responsibility given its recent actions begging the question of whether the ACCC has actually lost the plot when it comes to its role of monitoring fuel prices in Australia. 62 CONVENIENCE WORLD MAY/JUN, 2020