Low Petrol Prices: 'Who Really Benefits' asks VACC

SYDNEY – June 27, 2012: VACC, the peak automotive industry body in Victoria, has questioned the underlying causes of the current lower than average retail fuel prices for unleaded petrol in Melbourne. Pump prices are well below cost and VACC is concerned that independent service station owners are being compelled to sell fuel at a loss.

“Australia’s fuel prices are determined by a complex combination of factors including world oil prices, the Australian dollar and transport and delivery costs. However, the retail prices at the pump are really determined by Coles and Woolworths and their oil company partners, Shell and Caltex, respectively,” VACC Executive Director, David Purchase, said.

“The supermarkets control more than fifty per cent of the Australian retail fuel industry and lead the way on pump prices. Independent service station owners have no choice but to follow their pricing even if, as is happening now, it means they have to sell at a loss. For example, fuel is being sold at 120.9 cents per litre in some suburbs, but the actual cost price is closer to 126.9 cents per litre.

“Forty years ago, VACC had 3,050 independent service station members: today there are 215. The recent decline in numbers can be explained in part by the rapid rise of supermarket owned fuel outlets, particularly in metropolitan areas. We are concerned that the lower than average retail fuel prices we are experiencing now in the metropolitan area will have a negative impact on independent service stations and result in their number declining further,” Mr Purchase said.

For years, VACC has voiced its concerns to the Australian Competition and Consumer Commission (ACCC). VACC has previously called on ACCC to monitor predatory pricing and abuse of market power in the retail fuel industry and welcomed last month’s announcement by ACCC to investigate price information sharing arrangements in the retail petrol industry.

“Independent service stations do not have the ability to offset lower than average petrol prices by heavily discounted in-store groceries or through discount docket schemes. If fuel retailers are currently operating at a loss and selling fuel below the wholesale price, it begs two questions: firstly, why would market leaders chose to do this and secondly how are they compensating for it? We would be interested to know the answers,” Mr Purchase said.