accc.gov.au

December quarter 2018

Report on the Australian petroleum market

February 2019

ISBN 978 1 920702 49 6

Australian Competition and Consumer Commission 23 Marcus Clarke Street, Canberra, Australian Capital Territory, 2601

© Commonwealth of Australia 2018

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The details of the relevant licence conditions are available on the Creative Commons website, as is the full legal code for the CC BY 3.0 AU licence.

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Important notice

The information in this publication is for general guidance only. It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. Because it is intended only as a general guide, it may contain generalisations. You should obtain professional advice if you have any specific concern.

The ACCC has made every reasonable effort to provide current and accurate information, but it does not make any guarantees regarding the accuracy, currency or completeness of that information.

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ACCC 02/19_1528

www.accc.gov.au

Contents

Key messages 1

1. Developments in the petroleum industry 91.1 Woolworths sold its retail sites to Euro Garages Group 91.2 Caltex and Woolworths launched an expanded loyalty partnership 91.3 Queensland’s fuel price reporting trial commenced 101.4 RACQ Fair Fuel Finder app commenced 101.5 OPEC announced crude oil production cuts 101.6 Independent Pricing and Regulatory Tribunal released a report on the

ethanol market in NSW 111.7 Price board arrangements in the ACT 111.8 Mobil completed two projects that increase its supply capacity 121.9 BP Australia and Great Southern Fuels announced an extension to their long-term

partnership 12

2. ACCC activities 132.1 ACCC and the petrol industry 132.2 Activities during the December quarter 2018 13

3. Retail petrol price movements in the capital cities 153.1 Retail prices over the year to December 2018 153.2 Retail prices compared with Mogas 95 prices 163.3 Gross indicative retail differences 173.4 Elements of the price change in the quarter 193.5 Retail prices in Brisbane were higher than the other four largest cities in aggregate 203.6 Price cycles in the five largest cities 223.7 Prices in the three smaller capital cities 223.8 Retail prices of the main petrol grades 233.9 Petrol prices in Australia and other OECD countries 24

4. Retail petrol price movements in regional locations 274.1 Influences on regional petrol prices 274.2 Regional petrol prices in aggregate 274.3 Prices in each of the states and territories 28

5. International price movements 335.1 Crude oil and refined petrol 335.2 AUD–USD exchange rate 35

6. Diesel and automotive LPG prices 376.1 Diesel price movements 376.2 Automotive LPG price movements 38

Appendix A: Key messages from the report ‘Petrol price cycles in Australia’ 39

Appendix B: Petrol price data for monitored locations 50

Appendix C: Update on regional market studies 56

1 Report on the Australian petroleum market—December 2018

Key messagesRetail petrol prices in the five largest cities fell significantly during the December quarter 2018During the December quarter 2018, average retail petrol prices across the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth) decreased significantly, as shown in the following chart.1

Seven-day rolling average retail petrol prices in the five largest cities: 1 January 2018 to 31 December 2018

cpl

115

125

135

145

155

165

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Source: ACCC calculations based on FUELtrac data.

Note: The area to the right of the dotted vertical line in this and subsequent charts represents the December quarter 2018.

Daily average prices (on a seven-day rolling average basis) increased during October 2018 and reached a high of 159.9 cents per litre (cpl) on 30 October. This was their highest level since mid-July 2008. In real terms (i.e. after adjusting for inflation), average prices were their highest since late-July 2014. Prices subsequently decreased by over 40.0 cpl to end the quarter at 119.2 cpl. This was their lowest level since August 2017.

In the December quarter 2018, quarterly average retail prices in the five largest cities were 142.1 cpl. This was a decrease of 4.6 cpl from the September quarter 2018 (146.7 cpl).

Annual average retail prices in the five largest cities were 142.4 cpl in calendar year 2018, an increase of 14.4 cpl from 2017 (128.0 cpl).

1 In this report, references to petrol are to regular unleaded petrol (RULP) unless otherwise specified. From 1 July 2014, the ACCC has used E10 prices instead of RULP prices for Sydney in the average price for the five largest cities. All prices are nominal prices unless otherwise specified.

2 Report on the Australian petroleum market—December 2018

Significantly lower international crude oil and refined petrol prices pushed retail prices downThe sharp decreases in daily average retail prices during November and December 2018 were influenced by decreases in international crude oil and refined petrol prices.

In the December quarter 2018, average Brent crude oil prices decreased by around USD 6 per barrel to around USD 69 per barrel. Average Mogas 95 prices (i.e. the international benchmark price for refined RULP relevant to Australia) decreased by around USD 13 per barrel to around USD 73 per barrel.

In Australian cents per litre, quarterly average Mogas 95 prices were 63.8 cpl in the December quarter 2018, a decrease of 9.9 cpl from the previous quarter.

Monthly average Mogas 95 prices decreased by 25.5 cpl in the December quarter 2018, from a high of 77.7 cpl in October 2018 to a low of 52.2 cpl in December 2018. Monthly average retail petrol prices in the five largest cities broadly followed. They decreased by 28.8 cpl, from a high of 157.9 cpl in October 2018 to a low of 129.1 cpl in December 2018. These price movements are shown in the following chart.

Monthly average retail petrol prices in the five largest cities and Mogas 95 prices: January 2018 to December 2018

40

50

60

70

80

90

100

100

110

120

130

140

150

160

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Five largest cities (LHS) Mogas 95 (RHS)

cpl

cpl

Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and the Reserve Bank of Australia (RBA).

The increases in international crude oil and refined petrol prices in the first nine months of 2018 were influenced by a number of factors, the major one being the agreements made in late-2016 by the Organisation of the Petroleum Exporting Countries (OPEC) cartel, and some other crude oil producing countries (including Russia), to cut production. This was compounded by concerns about international crude oil supplies arising from US sanctions against Iran, the political and economic crisis in Venezuela and a decrease in US crude oil inventories.

The sharp falls in international crude oil and refined petrol prices from early-October 2018 were due to concerns over a global trade war (with worries that it would reduce economic activity and subsequently demand for crude oil) and increasing US shale oil production.

In the December quarter 2018, the average AUD–USD exchange rate decreased by around USD 0.01 from the previous quarter. The AUD–USD exchange rate is a significant determinant of Australia’s retail petrol prices because international refined petrol is bought and sold in US dollars in global markets. The lower AUD–USD exchange rate in the quarter partially offset the influence of the decrease in international refined petrol prices on Australian retail petrol prices.

3 Report on the Australian petroleum market—December 2018

Refiner margins for petrol were the lowest in a decadeThe refiner margin is the difference between the price of refined petrol and the price of crude oil. In the December quarter 2018, average refiner margins decreased significantly to USD 4.3 per barrel, a decrease of USD 6.0 per barrel from the previous quarter (USD 10.3 per barrel). This was the lowest quarterly average refiner margin since the December quarter 2008. The decrease in refiner margins in the quarter was influenced by increased supply of refined petrol (from China and South Korea) and concerns about an economic slowdown in the Asian region.

Gross indicative retail margins increasedIn the December quarter 2018, average gross indicative retail differences (GIRDs) in the five largest cities were 13.9 cpl, an increase of 3.5 cpl from the previous quarter (10.4 cpl). This was their highest level since the December quarter 2017. In the December quarter 2018, GIRDs were highest in Perth (15.9 cpl) and lowest in Sydney (10.9 cpl).

GIRDs are a broad indicator of gross retail margins. They are calculated by subtracting average wholesale prices (as indicated by published terminal gate prices (TGPs)) from average retail prices. TGPs are the prices at which petrol can be purchased from wholesalers in the spot market and are posted on a regular basis on the websites of the major wholesalers.

TGPs vary across brands and cities. TGPs reflect the wholesale price of petrol only, and exclude other retail operating costs (such as freight, branding, rent, labour and utility costs). As GIRDs include these costs, they should not be confused with actual retail profits.

GIRDs reported by the ACCC are averages across the five largest cities over time. The level of prices, costs and profits vary significantly between retail operations and not all retail petrol sites will be achieving these gross margins. Some will be achieving higher gross margins, others lower. The ACCC’s petrol market studies found that profits per retail petrol site can vary considerably between retailers, with some retail sites making substantial profits, while other retail sites make very little.

There is usually a time lag between changes in TGPs and changes in retail prices, meaning that retailers do not necessarily pass on movements in TGPs straight away. This may reflect the stage in the petrol price cycle when TGPs change, or that some retailers may not need to purchase petrol at the time when TGPs change.

When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018) these lags often have the effect of reducing GIRDs. Conversely, when TGPs decrease by large amounts in a short period (which occurred in the December quarter 2018) these lags often have the effect of increasing GIRDs. In regional locations, where petrol sales are lower and stocks are replenished less often, the effect of these lags on GIRDs is frequently magnified.

Annual average GIRDs in the five largest cities in calendar year 2018 were 12.4 cpl, an increase of 0.2 cpl from 2017. In real terms, annual average GIRDs in 2018 were the same as 2017. They remain 4.0 cpl higher than the long-term average (shown in the following chart).

Retailers have previously advised the ACCC that the increase in GIRDs since 2014 may partly be due to increasing regulatory and compliance costs. However, the ACCC believes that the higher GIRDs cannot be fully explained by the increase in these costs.

4 Report on the Australian petroleum market—December 2018

Annual average GIRDs in the five largest cities in real terms: 2003 to 2018

4

5

6

7

8

9

10

11

12

13

cpl

Period avg: 8.4 cpl

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: ACCC calculations based on FUELtrac, Informed Sources, BP, Caltex, Mobil, Viva Energy and WA FuelWatch data, and Australian Bureau of Statistics, 6401.0—Consumer Price Index, Australia, December 2018, Tables 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes, at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Dec%202018?OpenDocument.

Note: The base year is 2018.

Falling international refined petrol prices accounted for most of the decrease in retail prices in the quarterThere are three broad components of the retail price of petrol: the international price of refined petrol, taxes (excise and GST) and other costs and margins at the wholesale and retail levels.

The following chart shows the average change in these components across the five largest cities between the September quarter 2018 and the December quarter 2018. The chart also separates the other costs and margins component into two elements: other wholesale costs and margins (which includes international shipping costs and other import costs, and wholesale costs and margins), and retail costs and margins (GIRDs).

5 Report on the Australian petroleum market—December 2018

Changes in the components of average retail petrol prices in the five largest cities: September quarter 2018 to December quarter 2018

73.7 63.8

9.1 11.5

53.5 52.9

10.4 13.9

0

20

40

60

80

100

120

140

160

180

Sep-18 Mogas 95 Exchange rate Other wholesale costs and margins

Taxes GIRDs Dec-18

Mogas 95 Other wholesale costs and margins Taxes GIRDs

146.7 cpl –11.2 cpl +1.3 cpl

–9.9 cpl

+2.4 cpl –0.6 cpl +3.5 cpl 142.1 cpl

-4.6 cpl

cpl

Source: ACCC calculations based on data from FUELtrac, OPIS, RBA and the Australian Taxation Office (ATO).

Notes: All prices are in Australian cents per litre.

The taxes component includes fuel excise and wholesale GST. The small amount of retail GST is included in GIRDs rather than in taxes, to be consistent with GIRDs reported elsewhere in this report.

The decrease in the average retail price in the five largest cities by 4.6 cpl in the December quarter 2018 was largely driven by the decrease in Mogas 95 prices. Excluding the effect of changes in the AUD-USD exchange rate (which decreased by around USD 0.01 in the quarter), Mogas 95 prices would have decreased by 11.2 cpl in the quarter. However, the decrease in the AUD-USD exchange rate offset the influence of the decrease in Mogas 95 prices by 1.3 cpl in Australian cents per litre terms. The net effect of movements in Mogas 95 prices and the AUD-USD exchange rate was that Mogas 95 prices in Australian cents per litre decreased by 9.9 cpl.

Taxes decreased slightly during the December quarter 2018, due to a decrease in the GST component as retail prices fell. Other wholesale costs and margins increased by 2.4 cpl in the quarter, and GIRDs increased by 3.5 cpl. Other wholesale costs and margins usually do not vary much between quarters, and the large change in the December quarter 2018 is likely to have been influenced by the large decrease in Mogas 95 prices over a very short period of time.

The two largest components of the average retail price—Mogas 95 and taxes—accounted for around 82 per cent of the average price of petrol in the December quarter 2018.

Perth prices were the highest of the five largest citiesIn the December quarter 2018, retail prices in Perth were the highest of the five largest cities. The quarterly average retail petrol price in Perth was 144.4 cpl, which was 1.1 cpl higher than in Melbourne (143.3 cpl) and 1.5 cpl higher than in Brisbane (142.9 cpl).

Brisbane prices are generally the highest among the five largest cities and this was only the third quarter since the cessation of the Queensland retail petrol subsidy in July 2009 in which Brisbane did not have the highest average prices among the five largest cities.

In the December quarter 2018, average retail prices in Brisbane were 0.9 cpl higher than the other four largest cities (i.e. Sydney, Melbourne, Adelaide and Perth) in aggregate (142.0 cpl). This was 1.7 cpl lower than the differential in the September quarter 2018 (2.6 cpl) and was the lowest quarterly differential since the cessation of the Queensland retail petrol subsidy.

6 Report on the Australian petroleum market—December 2018

Queensland’s fuel price transparency trial commenced and the RACQ launched its Fair Fuel Finder appOn 3 December 2018, the Queensland Government announced the commencement of its two-year fuel price reporting trial. Under the trial, all Queensland fuel retailers are required to report their undiscounted fuel prices to a data aggregator, which collates and checks the data and then provides it to app developers and websites. Fuel retailers must report a change in fuel prices within 30 minutes of a price change at the bowser.

Also on 3 December 2018, the Royal Automotive Club of Queensland (RACQ) launched its Fair Fuel Finder app, which uses fuel price data reported under the Queensland Government scheme to provide real-time fuel prices to motorists. It allows motorists to look up fuel prices and includes the RACQ’s Fair Fuel Price. This price, which is based on market data and RACQ research, is what the RACQ considers to be a fair fuel price in South East Queensland. On 2 January 2019, the RACQ stated that there had been over 26 000 downloads of the app.

This adds to the existing range of fuel price websites and apps that assist motorists to identify petrol prices at individual retail sites. Some of the websites and apps available around Australia include:

�� the NSW Government FuelCheck scheme, the NT Government MyFuel NT scheme and the WA Government FuelWatch scheme

�� motoring organisations’ fuel price websites and apps (such as the NRMA app)

�� commercial services such as the MotorMouth and Petrol Spy websites and apps, and the GasBuddy app

�� retailer apps such as 7-Eleven and Woolworths.

While there is a range of fuel price websites and apps available to motorists, some are more comprehensive and timely than others, and not all of them include prices for the lowest-priced retail sites. The government schemes are the most comprehensive and up-to-date. In jurisdictions without comprehensive government schemes (i.e. Victoria, South Australia, Tasmania and the ACT), commercial services such as MotorMouth, Petrol Spy and GasBuddy are often not complete and do not include all of the cheaper retail sites.

ACCC released its report on petrol price cycles in AustraliaOn 6 December 2018, the ACCC released its report on Petrol price cycles in Australia. The report analysed petrol price cycles in the five largest cities and a small number of regional locations. This was the third industry report prepared under the petrol monitoring Direction that was issued in December 2017.

The report found that price cycles provide opportunities for motorists to buy at relatively low prices towards the bottom (or trough) of the cycle in the five largest cities. These prices are often below the wholesale cost of petrol, as reflected by published TGPs.

The report also found that price cycles had changed significantly in the eastern capital cities (Sydney, Melbourne, Brisbane and Adelaide) over the last 10 years, where there is no longer a consistently cheap day of the week. Price cycles in these cities used to be weekly, but now they last for around four to five weeks. In Perth, however, price cycles are consistently weekly, with prices currently at the lowest point on a Monday.

While price cycles are less predictable in the eastern capital cities, the longer cycles result in longer delays between the average trough price and peak (i.e. top of the cycle) price. This provides more time for motorists to first notice that prices are starting to increase, and then to seek out lower priced retail sites that are yet to increase their prices. Additionally, not all petrol retail sites have the same prices. As a result of the price dispersion among retail sites, motorists can also make significant savings by seeking out lower priced retail sites throughout the price cycle.

7 Report on the Australian petroleum market—December 2018

The city–country petrol price differential increasedThe ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. The average differential between petrol prices in these regional locations and petrol prices in the five largest cities in the December quarter 2018 was 11.4 cpl. This was 5.0 cpl higher than in the September quarter 2018 (6.4 cpl).

The annual average differential between regional prices and those in the five largest cities in calendar year 2018 was 6.9 cpl, an increase of 1.9 cpl from 2017 (5.0 cpl).

Diesel and automotive LPG prices increasedIn the December quarter 2018, diesel and automotive LPG prices in the five largest cities both increased:

�� average retail diesel prices increased by 3.5 cpl, from 154.6 cpl in the September quarter 2018 to 158.1 cpl in the December quarter 2018

�� average retail automotive LPG prices increased by 3.2 cpl, from 85.2 cpl in the September quarter 2018 to 88.4 cpl in the December quarter 2018.

In annual terms, diesel and automotive LPG prices in the five largest cities also both increased:

�� annual average retail diesel prices in the five capital cities were 151.1 cpl in calendar year 2018, an increase of 21.2 cpl from 2017 (129.9 cpl)

�� annual average retail LPG prices in the five capital cities were 85.6 cpl in calendar year 2018, an increase of 10.1 cpl from 2017 (75.5 cpl).

ACCC regional market studiesThe ACCC has undertaken four regional petrol market studies—in Darwin, Launceston, Armidale and Cairns—and continues to monitor retail prices and GIRDs in those locations.

The ACCC has compared actual retail prices in Darwin, Launceston, Armidale and Cairns with estimated retail prices calculated on a long-term competitive cost basis. This calculation reflects the fact that costs (such as freight and operating costs on a per litre basis) are higher in those locations, and assumes that retail margins in those locations should be broadly similar to long-term average retail margins in the five largest cities.

This long-term competitive cost-based price provides a benchmark against which to compare current price levels. It is not static and will change as its underlying elements change over time. If retail prices are constantly above this benchmark price for a sustained period, this may be indicative of a less-competitive market in which retailers are earning higher margins at the expense of consumers.

Motorists in these locations are encouraged to use available fuel price websites and apps to find retail sites with relatively lower prices.

Darwin petrol prices decreased but remained above a long-term competitive cost-based priceIn the December quarter 2018, average retail prices in Darwin were 153.1 cpl, a decrease of 2.3 cpl from the September quarter 2018 (155.4 cpl). The average differential between prices in Darwin and the five largest cities was 11.0 cpl, an increase of 2.3 cpl from the September quarter 2018 (8.7 cpl).

In the December quarter 2018, average GIRDs in Darwin were 20.0 cpl, an increase of 5.9 cpl from the September quarter 2018 (14.1 cpl). The differential between petrol prices in Darwin and a long-term competitive cost-based price increased over the December quarter 2018.

Motorists in Darwin can use the MyFuel NT website and app to identify the highest and lowest priced retail sites in Darwin. For example, on 8 February 2019 it showed that there was a range of 9.4 cpl

8 Report on the Australian petroleum market—December 2018

between the highest priced retail sites in Darwin (131.9 cpl at four Coles Express retail sites) and the lowest (122.5 cpl at FuelXpress Winnellie).

Launceston petrol prices increased and remained significantly above a long-term competitive cost-based priceIn the December quarter 2018, average retail petrol prices in Launceston were 161.9 cpl, an increase of 1.5 cpl from the September quarter 2018 (160.4 cpl). The average differential between prices in Launceston and the five largest cities was 19.8 cpl, an increase of 6.1 cpl from the September quarter 2018 (13.7 cpl).

In the December quarter 2018, Launceston GIRDs were 28.3 cpl, an increase of 9.8 cpl from the September quarter 2018 (18.5 cpl). The differential between petrol prices in Launceston and a long-term competitive cost-based price increased over the December quarter 2018.

Motorists in Launceston can use available fuel price websites and apps, such as MotorMouth and GasBuddy, to find retail sites with relatively lower prices. For example, on 8 February 2019, using the GasBuddy app, there was a 7.2 cpl range between the highest priced retail sites in Launceston (145.9 cpl at one Mobil retail site and one Caltex retail site) and the lowest (138.7 cpl at one United retail site).

Armidale petrol prices increased and remained above a long-term competitive cost-based priceIn the December quarter 2018, average retail petrol prices in Armidale were 155.4 cpl, an increase of 3.1 cpl from the September quarter 2018 (152.3 cpl). The average differential between prices in Armidale and the five largest cities was 13.3 cpl in the December quarter 2018, an increase of 7.7 cpl from the September quarter 2018 (5.6 cpl).

In the December quarter 2018, average GIRDs in Armidale were 28.4 cpl, an increase of 11.3 cpl from the September quarter 2018 (17.1 cpl). The differential between petrol prices in Armidale and a long-term competitive cost-based price increased over the December quarter 2018.

Motorists in Armidale can use the FuelCheck website and app to identify the highest and lowest priced retail sites in Armidale. For example, on 8 February 2019, the FuelCheck website showed that there was a 9.9 cpl range between the highest priced RULP retail site in Armidale (139.9 cpl at Lowes Armidale) and the lowest (130.0 cpl at the Beardy Street Servo). There was a 6.0 cpl range between the highest priced E10 retail sites (139.9 cpl at Coles Express Armidale) and the lowest (133.9 cpl at three Caltex retail sites and one Woolworths retail site).

Cairns petrol prices increased and remained above a long-term competitive cost-based priceIn the December quarter 2018, the average retail petrol price in Cairns was 156.7 cpl, an increase of 1.5 cpl from the September quarter 2018 (155.2 cpl). The average differential between prices in Cairns and the five largest cities was 14.6 cpl in the December quarter 2018, an increase of 6.1 cpl from the September quarter 2018 (8.5 cpl).

In the December quarter 2018, average GIRDs in Cairns were 24.8 cpl, an increase of 9.6 cpl from the September quarter 2018 (15.2 cpl). Petrol prices in Cairns remained above a long-term competitive cost-based price.

Motorists in Cairns are now able to access site-specific petrol price data made available by websites and app providers under the Queensland fuel price reporting trial, which commenced on 3 December 2018. For example, on 8 February 2019, using the MotorMouth app, there was a 9.0 cpl range between the highest priced retail sites in Cairns (129.9 cpl at five Coles Express retail sites, one Shell retail site and one BP retail site) and the lowest (120.9 cpl at one United retail site and one Woolworths retail site).

9 Report on the Australian petroleum market—December 2018

1. Developments in the petroleum industry

1.1 Woolworths sold its retail sites to Euro Garages Group

On 9 November 2018, Woolworths Group Limited announced that it entered into a binding agreement to sell its 540 Woolworths-owned retail fuel sites to Euro Garages (EG) Group for $1.725 billion.2 EG Group is a fuel and convenience retailer that operates around 4700 retail sites across Europe and North America.

As part of the transaction, Woolworths Group and EG Group entered into a 15-year commercial alliance covering fuel discount redemption, loyalty schemes and wholesale product supply. Key features of the alliance include:

�� Woolworths’ 4.0 cpl shopper docket fuel discount will continue across the network of retail sites

�� customers will continue to earn Woolworths Rewards points on fuel and merchandise purchases across the network

�� Woolworths Group will commence a new wholesale food supply agreement to the network.

The transaction is subject to Foreign Investment Review Board approval, with completion expected to occur in early 2019.

On 5 July 2018, Caltex Australia and Woolworths announced an expansion and extension to their existing partnership.3 This included a new fuel supply agreement, which provides for Caltex to be the exclusive wholesale fuel supplier to Woolworths’ retail petrol sites for 15 years, regardless of ownership.

1.2 Caltex and Woolworths launched an expanded loyalty partnership

On 7 November 2018, Caltex and Woolworths launched an expanded loyalty partnership.4 Under the new arrangements, members of the Woolworths Rewards program will be able to earn Woolworths points on fuel and in-store purchases at over 680 newly participating Caltex retail site locations across Australia. These stores join an existing network of around 540 Woolworths retail sites where Woolworths Rewards members already earn points.

In addition, Woolworths Rewards members that spend $30 or more at Woolworths supermarkets can redeem their 4.0 cpl shopper docket discount on fuel at 125 new Caltex-branded locations. These stores join an existing network of 104 Caltex sites that already accept the Woolworths fuel discount offer.

2 Woolworths Group Limited, Woolworths Group to sell petrol business and enter into commercial alliance with EG Group, press release, 9 November 2018, at: https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-group-to-sell-petrol-business-and-enter-into-commercial-alliance-with-eg-group/, accessed on 8 February 2019.

3 Caltex Australia, Caltex and Woolworths extend and expand long term partnership, media statement, 5 July 2018, at: https://www.caltex.com.au/our-company/media-releases/caltex-and-woolworths-extend-and-expand-long-term-partnership, accessed on 8 February 2019; and Woolworths Group Limited, Woolworths Group Enters new alliance with Caltex, media statement, 5 July 2018, at: https://www.woolworthsgroup.com.au/page/media/Latest_News/woolworths-group-enters-convenience-and-loyalty-alliance-and-new-15-year-wholesale-fuel-arrangement-with-caltex/, accessed on 8 February 2019.

4 Caltex Australia, Expanded Caltex and Woolworths partnership begins today, helping Australian consumers save money on fuel and earn more Rewards, media release, 7 November 2018, at: https://www.caltex.com.au/our-company/media-releases/expanded-caltex-and-woolworths-partnership-begins-today-helping-australian-consumers, accessed on 8 February 2019.

10 Report on the Australian petroleum market—December 2018

1.3 Queensland’s fuel price reporting trial commencedOn 3 December 2018, the Queensland Government announced the commencement of its two-year fuel price reporting trial.5 Under the trial, all Queensland fuel retailers are required to report their undiscounted fuel prices to a data aggregator, which collates and checks the data and then provides it to app developers and websites. Fuel retailers must report a change in fuel prices within 30 minutes of a price change at the bowser.

A number of websites and apps make the fuel price information available for use by motorists, including MotorMouth, Petrol Spy, the RACQ’s Fair Fuel Finder (see below), Fuel Price Australia, FuelMap, Pumped, Vroom Fuel Watch and ServoTrack.6

1.4 RACQ Fair Fuel Finder app commencedOn 3 December 2018, the RACQ launched its Fair Fuel Finder app, which uses fuel price data reported under the Queensland Government scheme to provide real-time fuel prices to motorists.7 It allows motorists to look up fuel prices in their area and make an informed choice about where to purchase fuel. It also includes the RACQ’s Fair Fuel Price for their location, which is based on market data and RACQ research. This price is what the RACQ considers to be a fair fuel price in South East Queensland.8 On 2 January 2019, the RACQ stated that there had been over 26 000 downloads of the app.9

1.5 OPEC announced crude oil production cutsOn 7 December 2018, the OPEC and non-OPEC countries met and agreed, in view of a growing imbalance between global oil supply and demand in 2019, to reduce the overall production of crude oil by 1.2 million barrels per day (bpd). The reduction was to commence from January 2019 for an initial period of six months. OPEC countries would cut production by 0.8 million bpd and non-OPEC participating countries by 0.4 million bpd.10

OPEC and 11 non-OPEC countries, including Russia, had previously agreed (in late-2016) to decrease crude oil production by around 1.2 million bpd.11 This agreement was subsequently extended a number of times, most recently in November 2017, bringing the total supply reduction to around 1.8 million bpd.12

In June 2018, OPEC and other oil-producing countries agreed to increase crude oil production by around 1.0 million bpd from July 2018.13 This decision was taken in the context that strong global demand for crude oil, and increasing concerns about risks to global crude oil supplies, had increased pressure for OPEC to increase production.

5 The Hon. Dr Anthony Lynham, Minister for Natural Resources, Mines and Energy, Fuel prices on tap from midday today, media statement, 3 December 2018, at: http://statements.qld.gov.au/Statement/2018/12/3/fuel-prices-on-tap-from-midday-today, accessed on 8 February 2019.

6 Queensland Government Department of Natural Resources, Mines and Energy, Information for motorists, at: https://www.dnrme.qld.gov.au/energy/initiatives/fuel-price-reporting-trial/information-for-motorists, accessed on 8 February 2019.

7 RACQ, RACQ celebrates start of fuel price reporting trial, media release, 30 November, at: https://live.racq.com.au/2018/11/racq-to-celebrate-start-of-fuel-price-reporting-trial/, accessed on 8 February 2019.

8 RACQ, RACQ Fair price app, at: https://www.racq.com.au/fairfuel, accessed on 8 February 2019.9 RACQ, Fuel price reporting trial takes off, media release, 2 January 2019, at: https://live.racq.com.au/2019/01/fuel-price-reporting-

trial-takes-off-2/, accessed on 8 February 2019.10 OPEC, The 5th OPEC and non-OPEC Ministerial Meeting concludes, press release, 7 December 2018, at: https://www.opec.org/

opec_web/en/press_room/5279.htm, accessed on 8 February 2019.11 Bloomberg, OPEC Confounds Sceptics, Agrees to First Oil Cuts in 8 Years, 1 December 2016, at: https://www.bloomberg.com/

news/articles/2016-11-30/opec-said-to-agree-oil-production-cuts-as-saudis-soften-on-iran, accessed on 8 February 2019.12 Reuters, OPEC, Russia agree oil cut extension to end of 2018, 30 November 2017, at: https://www.reuters.com/article/us-

opecmeeting/opecrussia-agree-oil-cut-extension-to-end-of-2018-idUSKBN1DU0WW, accessed on 8 February 2019.13 Reuters, Oil jumps as OPEC agrees to modest output hikes, 22 June 2018, at: https://www.reuters.com/article/us-global-oil/

oiljumps-as-opec-agrees-to-modest-output-hikes-idUSKBN1JI03B, accessed on 8 February 2019.

11 Report on the Australian petroleum market—December 2018

1.6 Independent Pricing and Regulatory Tribunal released a report on the ethanol market in NSW

On 18 December 2018, the NSW Independent Pricing and Regulatory Tribunal released its final report on the wholesale and retail markets for fuel ethanol in 2017-18.14 The key conclusions of the report were:

�� The retail price of E10 across NSW was 2.2 cpl lower than the retail price of RULP on average over 2017-18.

�� Monthly sales of fuel ethanol in NSW averaged around 2.7 per cent of total petrol sales in 2017-18. This remains below the 6 per cent required if all fuel retailers were to meet the ethanol mandate on average across NSW.

�� E10 has become more widely available since the ethanol mandate was amended in January 2017. There has been an increase in the number of nozzles dispensing E10 as a proportion of all nozzles dispensing E10 or RULP. Of the total number of nozzles dispensing either E10 or RULP, in June 2018, 54 per cent dispensed E10 and 46 per cent dispensed RULP.

�� The proportion of service stations offering RULP in NSW fell from 92 per cent in September 2017 to 75 per cent in June 2018. Despite this reduction, RULP is still widely available. Three quarters of service stations in NSW continue to offer RULP, and almost all stations that do not offer it are located within a short drive of one that does.

�� Consumers continue to have an effective choice of fuel with widespread availability of E10, RULP and premium unleaded petrol (PULP). This choice is supported by a range of comparison websites and apps including the NSW Government’s FuelCheck service.

�� Competition between the three major ethanol producers—Manildra Group in NSW and Dalby Bio-Refinery and Wilmar BioEthanol in Queensland—continued during 2017-18, while plans for a number of additional ethanol production facilities have been progressing.

�� A less intrusive import parity pricing approach to determining the reasonable wholesale ethanol price remains appropriate.

1.7 Price board arrangements in the ACTOn 28 November 2018, the ACT Minister for Consumer Affairs announced that the Fair Trading (Fuel Prices) Act 1993 would be amended to:

�� ban service stations from displaying discounted prices on fuel boards (such as those that require a discount voucher or an in-store purchase)

�� require retailers to amend the price of fuel advertised on the fuel price board before changing the price displayed at the pump.15

Service stations will have six months to prepare for the changes once the amendments take effect.

14 IPART, Monitoring of wholesale and retail markets for fuel ethanol in 2017-18, final report, December 2018, at: https://www.ipart.nsw.gov.au/files/sharedassets/website/shared-files/investigation-compliance-monitoring-transport-publications-ethanol-market-monitoring-2018-19/final-report-monitoring-of-wholesale-and-retail-markets-for-fuel-ethanol-in-2017-18.pdf, accessed on 8 February 2019.

15 Shane Rattenbury MLA, ACT Minister for Consumer Affairs, Banning confusing petrol discount boards, media release, 28 November 2018, at: https://www.cmtedd.act.gov.au/open_government/inform/act_government_media_releases/rattenbury/2018/banning-confusing-petrol-discount-boards, accessed on 8 February 2019.

12 Report on the Australian petroleum market—December 2018

1.8 Mobil completed two projects that increase its supply capacity

On 17 October 2018, Mobil announced the completion of two projects—a new 3 km jet fuel pipeline and two new storage tanks—that increase its capacity to meet the growing demand for transportation fuels.16 The two newly constructed tanks store unleaded petrol and jet fuel at the Mobil Yarraville Terminal and the pipeline provides a direct connection from the Yarraville Terminal to the Somerton Pipeline.

These projects, which commenced in 2016, were part of a $400 million investment Mobil has made to improve the Yarraville Terminal and Altona Refinery over the past five years.

1.9 BP Australia and Great Southern Fuels announced an extension to their long-term partnership

On 26 November 2018, BP Australia and Great Southern Fuels (GSF) announced a five-year extension to their long-term partnership.17 GSF and BP have been working together to service regional WA for over 33 years. Under the extended agreement, GSF will continue to operate BP’s regional depot business in WA’s wheat-belt region.

GSF is a bulk fuel and lubricant distributor operating in the Great Southern, Upper Great Southern and Central wheat-belt regions. It operates and/or supplies over 85 of WA’s rural BP retail outlets and delivers to metropolitan retail sites and BP commercial accounts.

16 Mobil Oil Australia, Mobil boosts its capacity to meet Australia’s growing demand for transportation fuels, news release, 17 October 2018, at: https://www.exxonmobil.com.au/en-au/company/news-and-updates/news-releases-and-alerts/mobil-boosts-its-capacity-to-meet-growing-demand-for-transportation-fuels, accessed on 8 February 2019.

17 BP Australia, Great Southern Fuels and BP Australia extend long-term partnership, press release, 26 November 2018, at: https://www.bp.com/content/dam/bp-country/en_au/media/media-releases/BP-and-Great-Southern-fuels-long-term-partnership-extended.pdf, accessed on 8 February 2019.

13 Report on the Australian petroleum market—December 2018

2. ACCC activities2.1 ACCC and the petrol industryThe main role of the ACCC is to enforce the Competition and Consumer Act 2010 (the Act) across the Australian economy, including the fuel industry. The ACCC’s activities under the Act include enforcement and compliance, mergers and acquisitions assessments, authorisations and notifications, and administration of the Oilcode.

Wholesale and retail petrol prices in Australia are determined by market forces. The ACCC does not set prices in petrol markets and does not have the powers to do so. In the absence of conduct that is in breach of the Act, high petrol prices are not illegal.

The ACCC’s petrol monitoring role is to assist consumers navigate this complex industry. Through its petrol monitoring reports, industry reports and other information channels, the ACCC promotes transparency in the Australian petroleum industry and improved public awareness of the factors that determine retail petrol prices.

2.2 Activities during the December quarter 20182.2.1 Report on petrol price cycles in AustraliaOn 6 December 2018, the ACCC released its report on petrol price cycles in Australia.18 The report analysed petrol price cycles in the five largest cities and a small number of regional locations. The key messages of the report are provided in appendix A.

This was the third industry report prepared under the petrol monitoring Direction issued in December 2017.

2.2.2 Stakeholder engagement and communications activityIn the December quarter 2018, the ACCC responded to fuel-related media enquiries on price and competition issues, including media enquiries arising from the release of the ACCC’s third petrol industry report. Responses were also prepared for Ministerial and other correspondence on fuel-related competition and consumer matters. Issues raised included: high fuel prices in both regional and metropolitan locations; retail petrol price differentials; the responsiveness of Australian retail fuel prices to changes in international prices; the operation of fuel discount schemes; and other retail site business practices.

In November 2018, the ACCC hosted a meeting of the Fuel Consultative Committee (FuelCC). It comprises representatives from major fuel retailers, refiner-wholesalers, peak industry associations and motoring organisations, and meets twice a year. The information and views shared at the FuelCC increase the ACCC’s understanding of fuel industry issues and assist it in undertaking its roles related to competition and consumer protection in the fuel industry.

Topics discussed at the FuelCC included:

�� ACCC petrol monitoring reports and issues likely to be covered in future reports under the current monitoring Direction

�� developments in fuel price transparency arrangements across Australia

�� updates on Australian refinery and terminal capital developments

�� compliance costs for businesses in the downstream fuel industry

�� influences on recent wholesale and retail petrol price movements.

18 ACCC, Petrol price cycles in Australia, December 2018, at: https://www.accc.gov.au/publications/petrol-industry-reports/petrol-price-cycles-in-australia.

14 Report on the Australian petroleum market—December 2018

In the December quarter 2018, the fuel-related pages on the ACCC website received 181 603 page views. Of this total, the petrol price cycle web page received 178 919 page views, making it the most viewed page on the ACCC website in the quarter. The number of views of the petrol price cycle web page increased by around 23 per cent in the December quarter 2018.

15 Report on the Australian petroleum market—December 2018

3. Retail petrol price movements in the capital cities

This chapter focuses on petrol prices across the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth). It also examines retail prices in the three smaller capital cities (Canberra, Hobart and Darwin). Petrol prices in regional locations across Australia are discussed in chapter 4.

3.1 Retail prices over the year to December 2018Chart 3.1 shows that seven-day rolling average retail petrol prices in the five largest cities generally trended upwards for the first 10 months of the year, but decreased significantly during the last two months.19

Chart 3.1: Seven-day rolling average retail petrol prices in the five largest cities: 1 January 2018 to 31 December 2018

cpl

115

125

135

145

155

165

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Source: ACCC calculations based on FUELtrac data.

Retail prices were at a low of 129.4 cpl in mid-March 2018. They then increased to a high of 153.7 cpl at the start of June 2018. Prices subsequently decreased to 139.3 cpl in early August 2018, before trending upwards for the remainder of the September quarter 2018.

In the December quarter 2018, prices increased during the month of October 2018, to a high of 159.9 cpl. This was their highest level since July 2008.20 Prices subsequently decreased by over 40 cpl, albeit with a short-term increase during mid-December, to end the quarter at 119.2 cpl. This was their lowest level since August 2017.

Average prices in the December quarter 2018 were 142.1 cpl, a decrease of 4.6 cpl from the September quarter 2018 (146.7 cpl).

Annual average retail prices in the five largest cities were 142.4 cpl in calendar year 2018, an increase of 14.4 cpl from 2017 (128.0 cpl).

19 A seven-day rolling average price is the average of the current day’s price and prices on the six previous days. Traditionally, the ACCC has used a seven-day rolling average to smooth out the influence of petrol price cycles in the larger cities on price movements. This has been less effective in recent years because the duration of price cycles in most of the larger cities has become substantially greater than seven days.

20 In real terms, seven-day rolling average prices were their highest since late-July 2014.

16 Report on the Australian petroleum market—December 2018

3.2 Retail prices compared with Mogas 95 pricesRetail petrol prices in Australia are primarily determined by international refined petrol prices and the AUD–USD exchange rate. The relevant benchmark for Australia is the price of Singapore Mogas 95 Unleaded (Mogas 95), which is the price of refined petrol in the Asia-Pacific region.

Chart 3.2 shows that retail petrol prices in the five largest cities and Mogas 95 prices in Australian cents per litre moved in a broadly similar pattern in the year to December 2018. This indicates that, in aggregate, changes in domestic retail prices are predominantly driven by changes in the international price of refined petrol.

Chart 3.2: Monthly average retail petrol prices in the five largest cities and Mogas 95 prices: January 2018 to December 2018

40

50

60

70

80

90

100

100

110

120

130

140

150

160

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Five largest cities (LHS) Mogas 95 (RHS)

cpl

cpl

Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and RBA.

In the year to December 2018:

�� monthly average Mogas 95 prices varied by 25.9 cpl, from a high of 78.1 cpl in September 2018 to a low of 52.2 cpl in December 2018

�� monthly average retail prices in the five largest cities varied by 28.8 cpl, from a high of 157.9 cpl in October 2018 to a low of 129.1 cpl in December 2018.

Quarterly average Mogas 95 prices were 63.8 cpl in the December quarter 2018, a decrease of 9.9 cpl from the previous quarter.

More details on movements in Mogas 95 prices are provided in chapter 5.

17 Report on the Australian petroleum market—December 2018

3.3 Gross indicative retail differencesAverage gross indicative retail differences (GIRDs) in the five largest cities were 13.9 cpl in the December quarter 2018, an increase of 3.5 cpl from the previous quarter (see table 3.1).

Table 3.1: Quarterly average retail petrol prices, TGPs and GIRDs in the five largest cities: March quarter 2018 to December quarter 2018

Location Quarter Retail prices cpl

TGPs cpl

GIRDs cpl

Five largest cities Mar-18 135.5 123.1 12.4

Jun-18 145.2 132.4 12.8

Sep-18 146.7 136.3 10.4

Dec-18 142.1 128.2 13.9

2018 average 142.4 130.0 12.4

Sydney Mar-18 132.0 121.9 10.1

Jun-18 143.3 131.2 12.1

Sep-18 145.3 135.2 10.1

Dec-18 137.9 127.0 10.9

2018 average 139.6 128.9 10.7

Melbourne Mar-18 137.1 123.1 14.0

Jun-18 146.0 132.4 13.6

Sep-18 148.0 136.3 11.7

Dec-18 143.3 128.3 15.0

2018 average 143.6 130.1 13.5

Brisbane Mar-18 138.2 123.6 14.6

Jun-18 148.4 132.9 15.5

Sep-18 148.8 136.7 12.1

Dec-18 142.9 128.6 14.3

2018 average 144.6 130.5 14.1

Adelaide Mar-18 132.7 123.3 9.4

Jun-18 142.7 132.7 10.0

Sep-18 145.1 136.6 8.5

Dec-18 142.1 128.5 13.6

2018 average 140.7 130.3 10.4

Perth Mar-18 137.4 123.5 13.9

Jun-18 145.3 132.7 12.6

Sep-18 146.5 136.7 9.8

Dec-18 144.4 128.5 15.9

2018 average 143.4 130.4 13.0

Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch.

Note: Retail prices, TGPs and GIRDs in Sydney are for E10.

18 Report on the Australian petroleum market—December 2018

GIRDs are calculated by subtracting average TGPs from average retail petrol prices. TGPs are the prices at which petrol can be purchased from wholesalers in the spot market and are posted on a regular basis on the websites of the major wholesalers. Although few wholesale transactions occur at TGPs, they can be regarded as indicative wholesale prices. TGPs, which vary across brands and cities, reflect the wholesale price of petrol only, and exclude other retail operating costs (such as freight, branding, rent, labour and utility costs).

GIRDs are a broad indicator of gross retail margins, and should not be confused with actual retail profits. The GIRDs reported by the ACCC are averages across the five largest cities over time. The level of prices, costs and profits vary significantly between retail operations and not all retail petrol sites will be achieving these gross margins. Some will be achieving higher gross margins, others lower. The ACCC petrol market studies found that profits per retail petrol site can vary considerably between retailers, with some retail sites making substantial profits, while other retail sites make very little.

There is usually a time lag between changes in TGPs and changes in retail prices, meaning that retailers do not necessarily pass on movements in TGPs straight away. This may reflect the stage in the petrol price cycle when TGPs change, or that some retailers may not need to purchase petrol at the time when TGPs change.

When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018) these lags often have the effect of reducing GIRDs. Conversely, when TGPs decrease by large amounts in a short period (which occurred in the December quarter 2018) these lags often have the effect of increasing GIRDs. In regional locations, where petrol sales are lower and stocks are replenished less often, the effect of these lags on GIRDs is frequently magnified.

Table 3.1 shows that, in the five largest cities over the year to December 2018, quarterly average GIRDs:

�� increased in all five largest cities in the December quarter 2018

�� were highest in Brisbane and lowest in Adelaide in the first three quarters of 2018

�� were highest in Perth and lowest in Sydney in the December quarter 2018

�� varied significantly over the year and across cities, ranging from a high of 15.9 cpl (in Perth in the December quarter 2018) to a low of 8.5 cpl (in Adelaide in the September quarter 2018).

The table also shows that annual average GIRDs in 2018 in the five largest cities were 12.4 cpl, which was 0.2 cpl higher than annual average GIRDs in 2017. In real terms, they remain the same as 2017 and the highest on record. GIRDs are currently 4.0 cpl higher than the annual average over the last 15 years (8.4 cpl) (see chart 3.3).

19 Report on the Australian petroleum market—December 2018

Chart 3.3: Annual average petrol GIRDs in the five largest cities in real terms: 2003 to 2018

4

5

6

7

8

9

10

11

12

13

cpl

Period avg: 8.4 cpl

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: ACCC calculations based on FUELtrac, Informed Sources, BP, Caltex, Mobil, Viva Energy and WA FuelWatch data, and Australian Bureau of Statistics, 6401.0—Consumer Price Index, Australia, December 2018, Tables 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes, at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Dec%202018?OpenDocument.

Note: The base year is 2018.

Annual average GIRDs in 2018 were the highest on record in real terms in Melbourne and Perth.

As noted in earlier ACCC quarterly reports, retailers have previously advised the ACCC that the increase in GIRDs in recent years may partly reflect increasing regulatory and compliance costs, especially in NSW.21 Although many of these costs may have been one–off expenses, they may need to be recouped over a number of years. However, the ACCC believes that the higher GIRDs since 2014–15 cannot be fully explained by the increase in these costs.

3.4 Elements of the price change in the quarterThere are three broad components of the retail price of petrol: the international price of refined petrol, taxes (excise and GST) and other costs and margins at the wholesale and retail levels.

Chart 3.4 shows the average change in these components across the five largest cities between the September quarter 2018 and the December quarter 2018. The chart also separates the other costs and margins component into two elements: other wholesale costs and margins (which includes international shipping costs and other import costs, and wholesale costs and margins), and retail costs and margins (represented by GIRDs).

21 As noted in the Report on the Australian petroleum market—September quarter 2016 (p. 1), these costs included: clean air regulations; underground petroleum storage systems regulations; the ethanol mandate; FuelCheck; and fuel price board specifications. Retailers also mentioned regulatory costs associated with the Queensland ethanol mandate, other costs associated with capital expenditure to maintain or upgrade sites, and increases in operating costs, freight and litigation at: https://www.accc.gov.au/system/files/Report%20on%20the%20Australian%20petroleum%20market%20September%20quarter%202016.pdf.

20 Report on the Australian petroleum market—December 2018

Chart 3.4: Changes in the components of average retail petrol prices in the five largest cities: September quarter 2018 to December quarter 2018

73.7 63.8

9.1 11.5

53.5 52.9

10.4 13.9

0

20

40

60

80

100

120

140

160

180

Sep-18 Mogas 95 Exchange rate Other wholesale costs and margins

Taxes GIRDs Dec-18

Mogas 95 Other wholesale costs and margins Taxes GIRDs

146.7 cpl –11.2 cpl +1.3 cpl

–9.9 cpl

+2.4 cpl –0.6 cpl +3.5 cpl 142.1 cpl

-4.6 cpl

cpl

Source: ACCC calculations based on data from FUELtrac, OPIS, RBA and the ATO.

Notes: All prices are in Australian cents per litre.

The taxes component includes fuel excise and wholesale GST. The small amount of retail GST is included in GIRDs rather than in taxes, to be consistent with GIRDs reported elsewhere in this report.

The decrease in the average retail price in the five largest cities by 4.6 cpl in the December quarter 2018 was largely driven by the decrease in Mogas 95 prices. Excluding the effect of changes in the AUD-USD exchange rate (which decreased by around USD 0.01 in the quarter), Mogas 95 prices would have decreased by 11.2 cpl in the quarter. However, the decrease in the AUD-USD exchange rate offset the influence of the decrease in Mogas 95 prices by 1.3 cpl in Australian cents per litre terms. The net effect of movements in Mogas 95 prices and the exchange rate was that Mogas 95 prices in Australian cents per litre decreased by 9.9 cpl.

Taxes decreased slightly during the December quarter 2018, due to a decrease in the GST component as retail prices fell. Other wholesale costs and margins increased by 2.4 cpl in the quarter, and GIRDs increased by 3.5 cpl. Other wholesale costs and margins usually do not vary much between quarters, and the large change in the December quarter 2018 is likely to have been influenced by the large decrease in Mogas 95 prices over a short period of time.

The two largest components of the average retail price—Mogas 95 and taxes—accounted for around 82 per cent of the average price of petrol in the December quarter 2018.

3.5 Retail prices in Brisbane were higher than the other four largest cities in aggregate

Brisbane prices are generally the highest among the five largest cities. However, in the December quarter 2018, this was not the case and retail prices in Perth were the highest of the five largest cities. The quarterly average retail petrol price in Perth was 144.4 cpl, which was 1.1 cpl higher than in Melbourne (143.3 cpl) and 1.5 cpl higher than in Brisbane (142.9 cpl).

This was only the third quarter since the cessation of the Queensland retail petrol subsidy in July 2009 in which Brisbane did not have the highest average prices among the five largest cities.22

22 Prior to 1 July 2009, the Queensland Government provided a petrol subsidy at the retail level of 8.4 cpl (around 9.2 cpl when GST is included). In the nine-year period from 2000-01 to 2008-09, annual average petrol prices in Brisbane were 7.8 cpl below the annual average in the other four largest cities.

21 Report on the Australian petroleum market—December 2018

In the December quarter 2018, average retail prices in Brisbane were 0.9 cpl higher than the other four largest cities (i.e. Sydney, Melbourne, Adelaide and Perth) in aggregate (142.0 cpl). This was 1.7 cpl lower than the differential in the September quarter 2018 (2.6 cpl) and was the lowest quarterly differential since the cessation of the Queensland retail petrol subsidy.

Chart 3.5 shows quarterly average retail prices in Brisbane and average prices across the other four largest cities over the two years to December 2018. Over this period Brisbane retail prices were on average 2.9 cpl higher than the average across the other four largest cities (ranging from a low of 0.9 cpl in the December quarter 2018 to a high of 4.3 cpl in the December quarter 2017).

Chart 3.5: Quarterly average retail prices in Brisbane and the other four largest cities: March quarter 2017 to December quarter 2018

115

125

135

145

155

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Brisbane Other four largest cities

cpl

Source: ACCC calculations based on FUELtrac data.

The ACCC released its report on the Brisbane petrol market in October 2017.23 It noted that petrol prices in Brisbane had been significantly higher than those in the other four largest cities for the previous eight years. Between 2009–10 and 2016–17, Brisbane motorists paid on average 3.3 cpl more for petrol than motorists in the other four largest cities.

The report found that the main factor influencing the higher prices in Brisbane was higher retail margins on petrol, which contributed to profits in Brisbane being significantly higher than the average across Australia. It also found that retail pricing was less competitive in Brisbane, with retailers setting prices higher at the top and bottom of the price cycle than retailers in Sydney. Furthermore, Brisbane had fewer retail chains that were effective and vigorous price competitors. Brisbane had only four retailers in this category (7-Eleven, Woolworths, Puma Energy and United), while Sydney had seven (Speedway, Metro, Budget, Westside, United, 7-Eleven and Woolworths).

23 ACCC, Report on the Brisbane petrol market, October 2017, at: https://www.accc.gov.au/publications/petrol-market-studies/ report-on-the-brisbane-petrol-market.

22 Report on the Australian petroleum market—December 2018

3.6 Price cycles in the five largest citiesRetail petrol prices in the five largest cities in Australia move in cycles. These price cycles do not occur in the smaller capital cities or in most regional locations. Price cycles are the result of pricing decisions made by petrol retailers aiming to maximise profits. They only occur at the retail level; wholesale prices do not exhibit similar cyclical movements.

Table 3.2 shows that over the year to December 2018, the number of price cycles in each quarter varied in Sydney, Melbourne, Brisbane and Adelaide. In the December quarter 2018, the number of price cycles in all four cities decreased from the previous quarter (by two in Sydney and Melbourne, and by one in Brisbane and Adelaide). Brisbane had the fewest price cycles in 2018, with 11 price cycles. Perth had the most price cycles, with a regular weekly cycle over the year.

Table 3.2: Number of price cycles per quarter in the five largest cities: March quarter 2018 to December quarter 2018

Quarter Sydney Melbourne Brisbane Adelaide Perth

Mar-18 3 3 3 4 13

Jun-18 4 3 3 4 13

Sep-18 4 4 3 5 13

Dec-18 2 2 2 4 13

2018 13 12 11 17 52

Source: ACCC calculations based on FUELtrac data.

The ACCC released its report on petrol price cycles in Australia in December 2018. The report noted that while motorists find price cycles frustrating, they can use price cycles to their advantage to make substantial savings across the year. The key messages of the report are provided in appendix A.

3.7 Prices in the three smaller capital citiesThe differential between retail petrol prices in the three smaller capital cities (Canberra, Hobart and Darwin) and the five largest cities increased in the December quarter 2018 to 15.8 cpl, compared with the previous quarter (9.8 cpl).

Chart 3.6 shows that in the year to December 2018, monthly average retail prices:

�� in Canberra, Hobart and Darwin were always higher than in the five largest cities

�� were highest in Hobart in 10 months, and in Darwin in the remaining two months.

23 Report on the Australian petroleum market—December 2018

Chart 3.6: Monthly average retail petrol prices in Canberra, Hobart, Darwin and the five largest cities: January 2018 to December 2018

Canberra Hobart Darwin Five largest cities

cpl

125

135

145

155

165

175

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Source: ACCC calculations based on FUELtrac data.

In the December quarter 2018, average retail prices in:

�� Canberra were 158.9 cpl, which was 16.8 cpl higher than in the five largest cities (142.1 cpl)

�� Hobart were 161.7 cpl (19.6 cpl higher)

�� Darwin were 153.1 cpl (11.0 cpl higher).

Factors that may lead to relatively higher prices in Canberra, Hobart and Darwin are similar to those factors influencing prices in regional locations (outlined in section 4.1).

Recent movements in Darwin retail prices are discussed further in appendix C.

3.8 Retail prices of the main petrol gradesChart 3.7 shows that retail prices of the main grades of unleaded petrol—RULP, PULP 95, PULP 98, and E10—all moved in a similar manner over the year to December 2018.24

24 E10 prices are for Sydney and Brisbane only. RULP prices in Sydney are used in this section to calculate average RULP prices in the five largest cities.

24 Report on the Australian petroleum market—December 2018

Chart 3.7: Monthly average retail prices of RULP, PULP 95, PULP 98 and E10 in the five largest cities: January 2018 to December 2018

cpl

125

135

145

155

165

175

185

Jan-18

Feb-

18

Mar-18

Apr

-18

May

-18

Jun-18

Jul-1

8

Aug

-18

Sep-

18

Oct-18

Nov

-18

Dec

-18

E10RULP PULP 95 PULP 98

Source: ACCC calculations based on FUELtrac data.

In the December quarter 2018, the average differential in the five largest cities between:

�� RULP and PULP 95 prices was 12.9 cpl (unchanged from the previous quarter)

�� RULP and PULP 98 prices was 21.0 cpl (an increase of 0.4 cpl)

�� E10 and RULP prices was 3.3 cpl (an increase of 2.1 cpl).

Retail prices of the main grades of petrol move in a similar manner because they are all influenced by international refined petrol benchmark prices (which, in turn, predominantly move in line with changes in the international price of crude oil).

However, the price differentials between the various types of petrol vary over time. For example, while retailers will generally set the price of PULP at a fixed premium to RULP, premiums are adjusted from time to time in response to factors such as changes in international benchmark price differentials and local supply and demand conditions.

3.9 Petrol prices in Australia and other OECD countriesCompared with other developed countries Australia’s retail petrol prices are relatively low. However, a degree of caution needs to be exercised when comparing international petrol prices, because fuel quality standards differ among countries, as does the availability and use of fuel types.

Chart 3.8 shows average retail PULP 95 prices—both including and excluding taxes—among 34 countries in the Organisation for Economic Co-operation and Development (OECD) in the September quarter 2018 (the latest data available). It shows that of these countries, Australia had the fourth-lowest retail PULP 95 prices.

25 Report on the Australian petroleum market—December 2018

Chart 3.8: Average retail PULP 95 prices and taxes in OECD countries: Australian cents per litre, September quarter 2018

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280

United States

Mexico

Canada

Australia

Turkey

Chile

Poland

Hungary

Lithuania

Luxembourg

Czech Republic

Austria

Latvia

Spain

New Zealand

Slovenia

Estonia

Slovak Republic

United Kingdom

Korea

Switzerland

Ireland

Germany

Belgium

France

Sweden

Finland

Israel

Portugal

Greece

Italy

Denmark

Norway

Netherlands

Australian cpl

Price less tax Tax component Average price less tax

Source: Department of the Environment and Energy, Australian Petroleum Statistics, issue 268, November 2018.

Note: All international prices shown are for PULP 95 RON, except for New Zealand (96 RON).

Chart 3.9 shows average retail RULP prices—both including and excluding taxes—among 10 OECD countries in the September quarter 2018. In the majority of OECD countries other than Australia, RULP is not sold in significant quantities. The chart shows that Australia had the fourth-lowest retail RULP prices among these countries. Excluding taxes, RULP prices in Australia were the equal fourth-lowest of the OECD countries.

26 Report on the Australian petroleum market—December 2018

Chart 3.9: Average retail RULP prices and taxes in OECD countries: Australian cents per litre, September quarter 2018

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280

United StatesMexicoCanadaAustralia

ChileJapanKorea

New ZealandAustria

Denmark

Australian cpl

Price less tax Tax component Average price less tax

Source: Department of the Environment and Energy, Australian Petroleum Statistics, issue 268, November 2018.

27 Report on the Australian petroleum market—December 2018

4. Retail petrol price movements in regional locations

The ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. These locations are identified in appendix B.

4.1 Influences on regional petrol pricesMovements in retail petrol prices in regional locations are largely driven by changes in international refined petrol prices and the AUD–USD exchange rate, as they are in the five largest cities.

However, prices are generally higher in regional locations. A number of factors may contribute to these higher prices, including: a lower level of local competition; lower volumes of fuel sold; distance/location factors; and lower convenience store sales. The influence of these factors varies significantly from location to location. This means that there may be substantial differences in prices between specific regional locations.

4.2 Regional petrol prices in aggregateIn the December quarter 2018, the differential between average prices in regional locations in aggregate (regional prices) and prices in the five largest cities was 11.4 cpl. This was 5.0 cpl higher than in the September quarter 2018 (6.4 cpl).

Chart 4.1 shows that monthly average regional prices increased by 6.1 cpl to 161.3 cpl in October 2018, up from 155.2 cpl in September 2018. They subsequently decreased by 5.0 cpl and 13.2 cpl in November and December 2018 respectively, to finish the quarter at 143.1 cpl. The decrease between September and December 2018 of 12.1 cpl was less than that in the five largest cities over the same period (23.1 cpl).

Chart 4.1: Monthly average retail petrol prices in regional locations in aggregate and the five largest cities: January 2018 to December 2018

cpl

125

130

135

140

145

150

155

160

165

Five largest citiesAll regional locations

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Source: ACCC calculations based on FUELtrac data.

28 Report on the Australian petroleum market—December 2018

The monthly average differential between regional prices and prices in the five largest cities varied substantially during 2018, ranging from a high of 17.0 cpl in November 2018 to a low of 3.0 cpl in September 2018. During the December quarter 2018, the monthly average differential ranged between 3.4 cpl (in October) and 17.0 cpl (in November).

In December 2018, average prices in 169 locations (representing around 92 per cent of monitored locations) were higher than the average price in the five largest cities. Average prices in 13 locations (around 7 per cent) were lower than the average price in the five largest cities.

While retail petrol prices in regional locations generally follow movements in the international price of refined petrol, they often do not respond as quickly—either up or down—as prices in the five largest cities. For example, between August and September 2018, average petrol prices in the five cities increased significantly, in line with international refined petrol prices, while average petrol prices in regional locations increased to a lesser extent. Similarly, average petrol prices in regional locations did not decrease at the same rate as those in the five largest cities in November 2018.

Further information on petrol price movements in the December quarter 2018 in all locations monitored by the ACCC is presented in appendix B.

4.3 Prices in each of the states and territoriesCharts 4.2 to 4.8 show seven-day rolling average retail petrol prices in regional locations in each state and the NT, along with those of the relevant capital city, from 1 January to 31 December 2018. These charts also show the average differential between prices in regional locations in the state/territory and the respective capital city in the months of September and December 2018, and in calendar year 2018.

In December 2018, monthly average regional prices were higher than average capital city prices in NSW, Victoria, Queensland, SA, WA and the NT. The monthly average regional price in Tasmania was lower than the average price in Hobart.

Charts 4.2 to 4.8 show that price comparisons between capital cities and regional locations are significantly influenced by price cycles in a number of the capital cities over the short term. An example is the price differential between Melbourne and Victorian regional locations in September 2018.

Chart 4.2: Seven-day rolling average petrol prices in New South Wales regional locations and Sydney: 1 January 2018 to 31 December 2018

NSW regional locations Sydney

cpl

100

110

120

130

140

150

160

170

180

Dec avg: 16.8 cplSep avg: 3.6 cpl

Jan-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

2018 avg: 9.8 cpl

Source: ACCC calculations based on FUELtrac data.

Note: E10 prices are used for Sydney and RULP prices are used for all NSW regional locations.

29 Report on the Australian petroleum market—December 2018

Chart 4.3: Seven-day rolling average petrol prices in Victorian regional locations and Melbourne: 1 January 2018 to 31 December 2018

cpl

Vic regional locations Melbourne

100

110

120

130

140

150

160

170

180Ja

n-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Dec avg: 7.6 cplSep avg: –2.9 cpl

2018 avg: 2.8 cpl

Source: ACCC calculations based on FUELtrac data.

Chart 4.4: Seven-day rolling average petrol prices in Queensland regional locations and Brisbane: 1 January 2018 to 31 December 2018

cpl

Qld regional locations Brisbane

100

110

120

130

140

150

160

170

180

Dec avg: 8.7cplSep avg: 1.9 cpl

2018 avg: 4.5 cpl

Jan-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Source: ACCC calculations based on FUELtrac data.

30 Report on the Australian petroleum market—December 2018

Chart 4.5: Seven-day rolling average petrol prices in South Australian regional locations and Adelaide: 1 January 2018 to 31 December 2018

cpl

SA regional locations Adelaide

100

110

120

130

140

150

160

170

180Ja

n-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Dec avg: 11.1 cplSep avg: 0.2 cpl

2018 avg: 5.3 cpl

Source: ACCC calculations based on FUELtrac data.

Chart 4.6: Seven-day rolling average petrol prices in Western Australian regional locations and Perth: 1 January 2018 to 31 December 2018

cpl

WA regional locations Perth

100

110

120

130

140

150

160

170

180

Jan-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Dec avg: 20.6 cplSep avg: 10.3 cpl

2018 avg: 9.6 cpl

Source: ACCC calculations based on FUELtrac data.

31 Report on the Australian petroleum market—December 2018

Chart 4.7: Seven-day rolling average petrol prices in Tasmanian regional locations and Hobart: 1 January 2018 to 31 December 2018

cpl

Tas regional locations Hobart

100

110

120

130

140

150

160

170

180Ja

n-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Dec avg: –8.1 cplSep avg: –0.5 cpl

2018 avg: –1.4 cpl

Source: ACCC calculations based on FUELtrac data.

Chart 4.8: Seven-day rolling average petrol prices in Northern Territory regional locations and Darwin: 1 January 2018 to 31 December 2018

cpl

NT regional locations Darwin

100

110

120

130

140

150

160

170

180

Jan-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Dec avg: 17.3 cplSep avg: 8.4 cpl

2018 avg: 7.0 cpl

Source: ACCC calculations based on FUELtrac data.

Chart 4.9 shows seven-day rolling average retail petrol prices in Canberra from 1 January to 31 December 2018. There are no prices available for locations in the ACT other than Canberra.

32 Report on the Australian petroleum market—December 2018

Chart 4.9: Seven-day rolling average petrol prices in Canberra: 1 January 2018 to 31 December 2018cp

l

100

110

120

130

140

150

160

170

180

Jan-18

Feb-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Source: ACCC calculations based on FUELtrac data.

33 Report on the Australian petroleum market—December 2018

5. International price movementsThe main influences on movements in retail petrol prices in Australia are the international price of refined petrol (which, in turn, is influenced by the international price of crude oil) and the AUD–USD exchange rate.

5.1 Crude oil and refined petrolCrude oil prices are an important influence on movements in refined petrol prices around the world. There are a number of international benchmarks used for pricing crude oil, including Brent, West Texas Intermediate (WTI), Tapis and Dubai. The most widely used benchmark on global markets is Brent crude oil.

The relevant international benchmark price for petrol in Australia is the price of refined petrol in the Asia-Pacific region. For RULP it is Singapore Mogas 95 Unleaded (Mogas 95). This benchmark is used for pricing petrol in Australia due to Australia’s proximity to Singapore, which is one of the world’s most important trading and refining centres.

5.1.1 Price movements over the last two yearsChart 5.1 shows movements in Brent crude oil and Mogas 95 prices in the two years to December 2018.

Chart 5.1: Weekly average Brent crude oil and Mogas 95 prices: January 2017 to December 2018

Brent crude oil Mogas 95

USD

per bl

40

50

60

70

80

90

100

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Source: ACCC calculations based on data from Platts and OPIS.

Weekly average Brent crude oil prices trended downwards between January 2017 and the end of June 2017, to a low of around USD 45 per barrel. Weekly average Brent crude oil prices then trended upwards throughout the second-half of 2017 and for the first nine months of 2018, to around USD 81 per barrel at the end of September 2018 (an increase of around 80 per cent).

In the December quarter 2018, weekly average Brent crude oil prices increased to around USD 84 per barrel, which was their highest level since late-October 2014. Prices then decreased significantly throughout the quarter to around USD 52 per barrel at the end of the quarter (a decrease of around 38 per cent). This was their lowest level since August 2017.

34 Report on the Australian petroleum market—December 2018

Mogas 95 prices moved in a similar manner to Brent crude oil prices over the two-year period. In the December quarter 2018, weekly average Mogas 95 prices were around USD 94 per barrel at the beginning of October 2018. This was their highest level since late-October 2014. Weekly average Mogas 95 prices then decreased to around USD 55 per barrel at the end of the December 2018 quarter (a decrease of around 42 per cent). This was their lowest level since early-August 2016.

Quarterly average Brent crude oil and Mogas 95 prices both decreased in the December quarter 2018. Quarterly average Brent crude oil prices were around USD 69 per barrel (a decrease of USD 6 per barrel from the previous quarter) and quarterly average Mogas 95 prices were USD 73 per barrel (a decrease of USD 13 per barrel).

The increases in crude oil prices in the first nine-months of 2018 were largely influenced by agreements made by the OPEC cartel, and some other crude oil producing countries (including Russia), since late-2016 to cut production. This was compounded by concerns about international crude oil supplies arising from US sanctions against Iran, the political and economic crisis in Venezuela and a decrease in US crude oil inventories. The sharp fall in crude oil prices from early-October 2018 was due to concerns over a global trade war (with worries that it would reduce economic activity and subsequently demand for crude oil) and increasing US shale oil production.25

The difference between the price of refined petrol and crude oil is referred to as the refiner margin. In the December quarter 2018, the refiner margin decreased significantly to USD 4.3 per barrel, a decrease of USD 6.0 per barrel from the previous quarter (USD 10.3 per barrel). This was the lowest quarterly average refiner margin since the December quarter 2008. The decrease in the refiner margin was influenced by increased supply of refined petrol (from China and South Korea) and concerns about an economic slowdown in the Asian region.26

5.1.2 Crude oil prices in the long termAs with many commodities, crude oil prices fluctuate greatly. In the short term, market sentiment about economic conditions and geo-political events can drive rapid movements in crude oil prices. Over the medium to longer term, prices are driven by supply and demand factors, with periods of high or low prices lasting several years.

Extended periods of high crude oil prices provide an incentive for producers to invest in exploration and expansion. This leads to an increase in supply, which in turn puts downward pressure on prices. Conversely, when crude oil prices are low, producers tend not to invest, which puts upward pressure on prices, as growth in demand is not met by supply.

Chart 5.2 shows that, over the 40 years to December 2018, WTI crude oil prices in real terms were on average around USD 61 per barrel. Over the last 10 years, prices were historically high, with the average around USD 79 per barrel. In the December quarter 2018, real WTI crude oil prices were on average around USD 59 per barrel, which was around USD 11 per barrel lower than the September quarter 2018 and around USD 2 per barrel lower than the 40-year average.

25 Reuters, A slippery trade: oil slump proves bears right, 24 November 2018, at: https://www.reuters.com/article/us-markets-oilmajors-bears-graphic/a-slippery-trade-oil-slump-proves-bears-right-idUSKCN1NS1IU, accessed on 8 February 2019.

26 Reuters, UPDATE 1-Asian gasoline refining margins crash to loss-making 7-year lows, 5 December 2018, at: https://www.reuters.com/article/gasoline-asia/update-1-asian-gasoline-refining-margins-crash-to-loss-making-7-year-lows-idUSL4N1YA2PV, accessed on 8 February 2019.

35 Report on the Australian petroleum market—December 2018

Chart 5.2: Monthly average real WTI crude oil prices: January 1979 to December 2018

0

20

40

60

80

100

120

140

160

180 19

79

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

WTI 40-year average 10-year average

USD

per bl

Source: ACCC calculations based on data used with permission from The Wall Street Journal, WSJ.com, Copyright 2015 Dow Jones & Company, Inc. All rights reserved, Reuters and U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index for all urban consumers, at: http://www.dlt.ri.gov/Lmi/pdf/cpi.pdf, accessed on 8 February 2019.

Note: Real prices are shown in December quarter 2018 dollars.

5.2 AUD–USD exchange rateThe AUD–USD exchange rate is a significant determinant of Australia’s retail petrol prices, because international refined petrol is bought and sold in US dollars in global markets.

Chart 5.3 shows that in the two years to December 2018, the AUD–USD exchange rate fluctuated between a low of USD 0.70 and a high of USD 0.81. The average AUD–USD exchange rate during the two-year period was USD 0.76.

Chart 5.3: Daily AUD–USD exchange rates: 1 January 2017 to 31 December 2018

0.69

0.71

0.73

0.75

0.77

0.79

0.81

0.83

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

USD

Source: RBA data.

Note: Exchange rates are the daily RBA 4.00 pm closing rates. See: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.

36 Report on the Australian petroleum market—December 2018

In the December quarter 2018, the average AUD–USD exchange rate was USD 0.72, which was around USD 0.01 lower than the September quarter 2018. Had the AUD–USD exchange rate remained at the September 2017 high of USD 0.81, average retail petrol prices in the December quarter 2018 in Australia would have been 8.2 cpl lower (everything else being equal).

The lower AUD–USD exchange rate partially offset the influence of the decrease in international petrol prices on Australian retail petrol prices in the December quarter 2018.

37 Report on the Australian petroleum market—December 2018

6. Diesel and automotive LPG prices6.1 Diesel price movementsQuarterly average retail diesel prices in the five largest cities in the December quarter 2018 were 158.1 cpl, an increase of 3.5 cpl from the September quarter 2018 (154.6 cpl).

The appropriate international benchmark price for diesel is the price of Singapore Gasoil with 10 parts per million sulphur content (Gasoil 10 ppm). International demand for diesel is different from that for petrol, in part because of diesel’s off-road, industrial and electricity generation uses. However, both petrol and diesel are refined from crude oil and their prices tend to broadly follow similar movements over the long term.

Chart 6.1 shows that seven-day rolling average retail diesel prices in the five largest cities broadly tracked Gasoil 10 ppm prices over the year to 31 December 2018.

Chart 6.1: Seven-day rolling average retail diesel prices in the five largest cities and Gasoil 10 ppm prices: 1 January 2018 to 31 December 2018

cpl

cpl

45

55

65

75

85

95

105

115

125

135

145

155

165

175

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

Retail prices (LHS) Gasoil 10 ppm (lagged 11 days) (RHS)

Source: ACCC calculations based on data from FUELtrac, Platts, OPIS and RBA.

Note: Gasoil 10 ppm prices are lagged by 11 days as there is generally around a one- to two-week lag between changes in international prices and changes in retail prices in the five largest cities.

Seven-day rolling average retail diesel prices were 161.6 cpl at the beginning of the December quarter 2018. They increased to a high of 166.9 cpl in late-October 2018, before steadily decreasing to 142.2 cpl at the end of the quarter. Gasoil 10 ppm prices in Australian cents per litre were 81.0 cpl at the beginning of the quarter. They increased to a high of 88.4 cpl in late-October 2018, and subsequently decreased to 61.6 cpl at the end of the quarter.

Quarterly average Gasoil 10 ppm prices in the December quarter 2018 were 72.9 cpl, a decrease of 4.1 cpl from the September quarter 2018 (77.0 cpl).

Unlike petrol prices, diesel prices in the five largest cities do not move in cycles. Diesel prices may not have price cycles because a large proportion of sales are to commercial users who purchase diesel on a contractual basis. According to the Australian Institute of Petroleum, only around 25 per cent of the diesel used in Australia is sold through retail outlets, and much of that is sold to account customers, with very little sold to private customers.27

27 Australian Institute of Petroleum (AIP), Facts about diesel prices & the Australian fuel market, 12 November 2018, p. 3, at: https://www.aip.com.au/sites/default/files/download-files/2018-11/Facts%20about%20Diesel%20Prices%20and%20the%20Australian%20Fuel%20Market_0.pdf, accessed on 8 February 2019.

38 Report on the Australian petroleum market—December 2018

6.2 Automotive LPG price movementsQuarterly average retail automotive LPG prices in the five largest cities in the December quarter 2018 were 88.4 cpl, an increase of 3.2 cpl from the September quarter 2018 (85.2 cpl).

The appropriate international benchmarks for automotive LPG are the Saudi Aramco Contract Prices for propane and butane (Saudi CP). These prices only change once a month, at the start of each month. International LPG prices loosely move in line with international refined petrol and diesel prices.

Seven-day rolling average retail automotive LPG prices at the beginning of the December quarter 2018 in Australian cents per litre were 88.0 cpl. They subsequently increased to a high of 90.6 cpl in mid-October (see chart 6.2). Prices then decreased to a low of 82.5 cpl in late-December, and ended the quarter at 82.8 cpl. Over the same period the Saudi CP benchmarks increased by 3.5 cpl to 49.6 cpl in October and subsequently decreased by 17.3 cpl to 32.3 cpl in December 2018.

The chart shows that average retail automotive LPG prices were not as responsive, both down and up, to movements in Saudi CP benchmark prices in the last year.

Chart 6.2: Seven-day rolling average retail automotive LPG prices in the five largest cities and monthly Saudi CP benchmarks: 1 January 2018 to 31 December 2018

30

40

50

60

70

55

65

75

85

95

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-18

Aug

-18

Sep

-18

Oct-18

Nov

-18

Dec

-18

cpl

cpl

Retail prices (LHS) Saudi CP (RHS)

Source: ACCC calculations based on data from FUELtrac, RBA, Gas Energy Australia and Reuters.

As the Saudi CP benchmarks only change at the start of each month, the relationship between movements in the international benchmark prices and retail prices for automotive LPG is somewhat different from petrol and diesel. Furthermore, international LPG prices are influenced by non-transport factors, such as demand for heating, particularly in the Northern Hemisphere.

Like diesel prices, retail automotive LPG prices tend to be less volatile than petrol prices and do not move in cycles. Automotive LPG usage in Australia is significantly less than petrol and diesel usage, and there are fewer retailers of automotive LPG, particularly outside Victoria (where around half of Australia’s automotive LPG is sold).

39 Report on the Australian petroleum market—December 2018

Appendix A: Key messages from the report ‘Petrol price cycles in Australia’Petrol price cycles are frustrating for motorists, but they can be used to buy petrol below cost and save moneyPrice cycles (i.e. the sudden, sharp increases in the price of petrol, followed by a gradual decline) are a prominent, and longstanding, feature of retail petrol prices in Australia’s five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth).28 They occur among all the main grades of petrol, but not for diesel and automotive LPG prices.

Price cycles are frustrating for motorists, especially when prices increase quickly and by significant amounts. However, price cycles do provide opportunities for motorists to buy at relatively low prices towards the bottom (or trough) of the cycle. These prices are often below wholesale cost, as reflected by published terminal gate prices (TGPs). While not all motorists have discretion about the timing of their petrol purchases, many do.

The following chart shows petrol price cycles in Sydney in the first nine months of 2018.

Daily average retail petrol prices and estimated average costs of supplying petrol in Sydney: 1 January to 30 September 2018

110

120

130

140

150

160

170

Jan-18

Feb

-18

Mar-18

Apr-18

May

-18

Jun-18

Jul-1

8

Aug

-18

Sep

-18

cpl

16.1 21.5 21.021.6

15.3

17.9 17.2 20.5 20.7 17.7

16.1

Estimated average costs of supplying petrolRetail price

Source: ACCC calculations based on data from FUELtrac and a range of petrol retailers.

Note: These are E10 prices.

The chart shows that price increases in each cycle are substantial. The numbers at the top of each cycle (the peak) show the average price increase in each cycle, which were up to 21.6 cents per litre (cpl). As these figures are based on daily average prices, the price increases at individual retail sites may be significantly more, up to 30 cpl according to ACCC analysis.

The chart also shows that once average prices reached the peak of the price cycle, they often decreased by as much as, or more, than they increased.

The red band in the chart presents a range of the estimated average costs faced by retailers in supplying petrol. This includes the wholesale cost of petrol (as reflected by published TGPs) as well

28 References to petrol are to regular unleaded petrol (RULP) unless otherwise specified. From 1 January 2014, the ACCC has used E10 (i.e. RULP with up to 10 per cent ethanol) prices instead of RULP prices in Sydney. As a result of the ethanol mandate in NSW, sales of E10 are greater than sales of RULP in Sydney. All prices in this appendix are nominal prices.

40 Report on the Australian petroleum market—December 2018

as freight and other retail operating costs (such as branding, rent, labour and utility costs). The chart shows that when prices are at the peaks, they are well above these estimated average costs, but for a lot of the cycle they are at or below them.

In the first nine months of 2018, daily average prices were at, or below, estimated average supply costs around one third to half of the time in Sydney, Adelaide and Perth. In Melbourne and Brisbane they were at or below estimated average supply costs between around 20 and 40 per cent of the time.

The ACCC encourages motorists to maximise their opportunities throughout the price cycle and purchase petrol at the lowest possible price. This report describes the opportunities available for motorists and highlights the potential savings they can make.

Not all retail sites increase their prices at the same timeIt is important to note that not all retail sites increase prices at the same time. Typically, during a price cycle, a small number of retail sites increase prices first, and others follow over several days. This provides opportunities for motorists to notice prices beginning to increase, seek out lower prices at other retail sites and fill up.

Longer cycles in the eastern capital cities (i.e. Sydney, Melbourne, Brisbane and Adelaide) in recent years have resulted in longer delays between the trough price and the peak price. It takes up to a week for prices across a market to increase from the trough price to the peak price, meaning although some retail sites increase prices first, others maintain lower prices for a number of days. This contrasts with 2009, when average prices moved from the trough price to the peak price across a market in one or two days.

This feature of price cycles provides more time for motorists to notice that prices are starting to increase, and then to seek out lower priced retail sites that are yet to increase their prices.

Analysis of the price cycle that occurred in Sydney in June 2018 indicates the time it took for retail sites across the market to reach the peak price. This is shown in the following chart.

Proportion of retail sites at their peak price in each day of the price increase phase of the price cycle in Sydney in June 2018

3%

10%

19%

52%

68%

83%

94% 96%98%

0

20

40

60

80

100

Tro

ugh

12-Jun

e

Day

1

Day

2

Day

3

Day

4

Day

5

Pea

k18

-Jun

e

Day

7

Day

8

pro

portio

n o

f re

tail sites

Source: ACCC calculations based on FuelCheck data.

Note: The chart uses cumulative proportions and does not account for a potential small decrease in price post-peak for some retail sites.

Daily average prices in Sydney reached a trough on Tuesday 12 June and a peak on Monday 18 June. The chart shows that the majority of retail sites had not increased their prices to a peak price two days after 12 June (when prices started to increase at a small number of retail sites). Only around half of retail sites in Sydney had increased to a peak price after three days, and it took six days after prices started to increase for 94 per cent of retail sites to reach a peak price.

41 Report on the Australian petroleum market—December 2018

Motorists in the eastern capital cities can take advantage of the longer price cycles to fill up at lower priced retail sitesAnalysis of the location of the lower priced retail sites in Sydney during the price increase phase of the cycle in June 2018 indicates that lower prices were available to motorists in most geographical areas of Sydney.

The following map plots retail sites across Sydney on 12 June, when average prices across the market were at the trough of the cycle. The overwhelming majority of retail sites had a low price (these are shown in blue). The few retail sites that had increased their prices are shown in red.

Day of the trough of the June 2018 Sydney price cycle—Tuesday 12 June 2018

retail sites that have increased their price to their peak price

retail sites that have not increased their price to their peak price

Source: ACCC calculations based on FuelCheck data.

The following map plots the same retail sites on Friday 15 June, three days after average prices started to increase, showing that nearly half of retail sites had not yet increased their prices. These sites are geographically dispersed.

While a significant number of these sites were located in the south western suburbs of Sydney, the map shows that many of the lower priced retail sites were scattered throughout the rest of Sydney, meaning motorists across the city could access lower petrol prices by shopping around.

42 Report on the Australian petroleum market—December 2018

Day three of the June 2018 Sydney price cycle increase—Friday 15 June 2018

retail sites that have increased their price to their peak price

retail sites that have not increased their price to their peak price

Source: ACCC calculations based on FuelCheck data.

By Monday 18 June, six days after average prices started to increase, most retail sites had moved to a peak price. However, there were still a small number of retail sites that had not. This is shown in the following map.

43 Report on the Australian petroleum market—December 2018

Day six of the June 2018 Sydney price cycle increase—Monday 18 June 2018

retail sites that have increased their price to their peak price

retail sites that have not increased their price to their peak price

Source: ACCC calculations based on FuelCheck data.

Overall, the maps highlight that motorists in Sydney generally have up to six days after prices start to increase (and potentially longer depending on particular locations) to shop around to seek out lower priced retail sites.

For the other eastern capital cities (Melbourne, Brisbane and Adelaide), the time for average prices to increase from a trough to a peak has also increased significantly; from one to two days in 2009 to six or seven days in 2017. As such, similar opportunities are likely to be available to motorists in Melbourne, Brisbane and Adelaide.

The ACCC estimates that motorists in Sydney who take advantage of the delays in price movements from the trough to the peak, and regularly fill up at the trough price of the cycle rather than at the peak price, could save themselves $175 per year. This calculation is based on a motorist that fills up a 50 litre tank once a week and, on 14 of those occasions (i.e. the number of price cycles in Sydney in 2017–18), buys petrol at the trough price rather than the peak price (i.e. 25 cpl lower). Motorists in Melbourne and Brisbane could save $150 per year and motorists in Adelaide could save $200 per year.29

Motorists in Perth can take advantage of weekly price cycles, with prices consistently the lowest on a MondayIn contrast to the eastern capital cities, Perth’s price cycles have occurred on a weekly basis since 2011, making them highly predictable for motorists.

Prices are consistently the lowest on a Monday and usually highest on a Tuesday. The consistency of price cycles in Perth has likely been influenced by the WA FuelWatch scheme, which has been in operation since 2001.

29 In Melbourne and Brisbane there were 12 price cycles in 2017–18 and 16 in Adelaide.

44 Report on the Australian petroleum market—December 2018

This scheme requires petrol retailers to notify the WA Government of the next day’s retail price by 2 pm each day. Petrol retailers must sell petrol at this price for a 24-hour period from 6 am on the following morning. The petrol price at each retail site is publicly available on the FuelWatch website. Therefore, petrol prices in Perth can only change once per day and petrol retailers must commit to their prices a day in advance.

The high degree of certainty in Perth’s price cycles provides motorists with a weekly opportunity to buy petrol at the lowest prices. In 2016, around one quarter of petrol sales occurred on the lowest priced day (Monday). At the same time, around 10 per cent of sales occurred on the highest priced day (Tuesday), suggesting that many motorists in Perth adjust their purchases to the cheapest day. It also suggests that more motorists in Perth could take advantage of ‘cheap Mondays’.

The ACCC estimates that motorists in Perth, who fill up once a week, and always on the cheapest day of each week, could save themselves around $520 a year, compared with always filling up on the most expensive day.

Throughout the price cycle, motorists can make significant savings by seeking out lower priced retail sitesNot all petrol retail sites have the same prices. Motorists in the eastern capital cities can make savings across the price cycle by seeking out lower priced retail sites.

Analysis of the Sydney petrol market in the first half of 2018 shows that in addition to the considerable variation in price between retail sites as prices increase from trough to peak, there is also a degree of price dispersion between retail sites once prices have reached a peak and are decreasing.

This is consistent with conclusions in the ACCC report Petrol prices are not the same: petrol prices by major retailer in 2017 (released in May 2018), which showed that average petrol prices varied significantly between major retailers. This was particularly the case in Sydney.

The following chart shows the difference between each major retailer’s annual average E10 price and the market annual average E10 price in Sydney in 2017. There was a 9.5 cpl range between the highest and lowest average priced major retailer in Sydney.

Difference between each major retailer’s annual average E10 price and the market annual average E10 price in Sydney in 2017

–6 –4 –2 Market average 2 4 6

Speedway (4%)

Metro (9%)

Budget (4%)

Westside (1%)

Small independents (21%)

United (2%)

7-Eleven (16%)

Woolworths (8%)

BP Jasbe (2%)

Caltex COCO (13%)

BP COCO (7%)

Coles Express (12%)

cpl

Source: ACCC calculations based on Informed Sources data and information provided by some major retailers.

Notes: The number in brackets for each major retailer is the proportion of retail sites in the city for that retailer.

The proportions of retail sites shown in the chart do not total 100 per cent due to rounding.

The annual average Woolworths price was equal to the market average price.

BP Jasbe is a BP-branded independent chain.

45 Report on the Australian petroleum market—December 2018

The daily average petrol price dispersion between relatively high- and low-priced retail sites in Sydney in June 2018 is shown in the following chart. It excludes the top 25 per cent most-expensive retail sites and the cheapest 25 per cent of retail sites, to provide an indication of the general price range available to most motorists in Sydney.

General daily average petrol price dispersion between retail sites in Sydney in June 2018

0

5

10

15

20

25

30

1-Jun-18 8-Jun-18 15-Jun-18 22-Jun-18 29-Jun-18

Trough day Peak day

cpl

Source: ACCC calculations based on FuelCheck data.

The range in prices across this subset of retail sites in Sydney was between 6 cpl and 8 cpl for most of June 2018. During the price increase phase of the price cycle (between 12 and 18 June) the price range was as high as 25 cpl. Excluding the seven days of the price increase phase, the average range between the highest and lowest prices in Sydney in June 2018 was around 7 cpl.

The range of prices across Sydney shows that motorists can save money by shopping around to find lower priced retail sites outside the price increase phase.

As noted earlier, motorists in the eastern capital cities could make savings by buying at the trough price instead of the peak price for every price cycle.

Motorists in Sydney who shop around could make additional savings of around 7 cpl every time they filled up in the other weeks during the year. From doing so, the ACCC estimates that motorists in Sydney could make further savings of around $130 per year. This calculation is based on a motorist that fills up a 50 litre tank once a week, saving 7 cpl each week for the 38 weeks in Sydney in 2017–18 that did not have a price cycle peak. In Melbourne and Brisbane, further savings could be $100 per year, and $90 per year in Adelaide.30

By taking advantage of the price cycles savings can be substantialThe potential savings can add up. The ACCC estimates that motorists who both time their purchases at the trough of the cycle, as well as seek out lower priced retail sites over the rest of the cycle, could potentially save around $300 per year in Sydney and Adelaide, and around $250 per year in Melbourne and Brisbane.

Assuming that one third of motorists fill up once a week, that similar savings are available for all petrol grades, and that all of these motorists took advantage of the above savings, the total potential savings in Sydney would be around $260 million per year. Savings in the other eastern capital cities per year

30 On the assumption that the general dispersion between the highest and lowest prices in Sydney may be larger than in the other cities, the ACCC has assumed an average price dispersion of 5 cpl in the savings calculations of the other cities.

46 Report on the Australian petroleum market—December 2018

would be: around $220 million in Melbourne, around $105 million in Brisbane and around $75 million in Adelaide.31

The potential savings for motorists that fill up more than once a week would be greater, and motorists that fill up less frequently would save a lower amount. However, these illustrative savings indicate that motorists can use price cycles to their advantage to save money on their petrol purchases.

The ACCC website shows motorists the best times to buy, and fuel price websites and apps show the best places to buyFree fuel price websites and apps enable motorists to buy petrol at lower prices.

The ACCC has been reporting on petrol price cycles since 2001. The ACCC website includes up to date price charts, and information on the characteristics of the petrol price cycles, in Sydney, Melbourne, Brisbane, Adelaide and Perth. The website also includes buying tips, which are updated three times a week, that provide guidance to motorists to help them decide when to buy petrol. Some other fuel price websites and apps also provide information to motorists to help them decide when is the best time to buy petrol.

A range of fuel price websites and apps can assist motorists to identify petrol prices at individual retail sites and decide where to buy. Some of the websites and apps available around Australia include:

�� the NSW Government FuelCheck scheme and the WA Government FuelWatch scheme

�� motoring organisations’ fuel price websites and apps

�� commercial services such as the MotorMouth website and app, and apps operated by GasBuddy, 7-Eleven and Woolworths.

To further take advantage of low prices available through the price cycle, motorists can also utilise offers by some petrol retailers that guarantee prices for a period. For example, the 7-Eleven app provides motorists with near real-time fuel price data at 7-Eleven retail sites and allows registered users to ‘lock in’ 7-Eleven’s best local price and then redeem it at any 7-Eleven retail site Australia-wide within seven days.

While there is a range of fuel price websites and apps available to motorists, the ACCC notes that motorists should be aware that some are more comprehensive and timely than others, and not all of them include prices for the lowest-priced retail sites. The government schemes are the most comprehensive and up-to-date, whereas the commercial services (such as MotorMouth and GasBuddy) may not include all of the cheaper retail sites.

In addition to the NSW and WA Government schemes, in May 2018 the Queensland Government announced a two-year trial of a fuel price reporting scheme. This commenced on 3 December 2018, and provides motorists in Brisbane with comprehensive petrol price information.

Price cycles are the result of the pricing behaviour of petrol retailersPetrol price cycles in Australia are not driven by movements in underlying costs or wholesale prices. Price cycles are solely due to the pricing decisions made by petrol retailers, that are aiming to maximise profits.

The price increase phase of the cycle begins when prices in the market have reached their low point and an initial retailer (i.e. the price ‘leader’) increases prices to improve their margins. This is generally initiated by one or two major retailers, which increase prices substantially at a small number of retail sites. As other retailers respond to this price increase with similar price increases, the increased price then spreads across the majority of retail sites within a location.

31 The estimated total savings in Perth if all motorists purchased petrol at the trough price rather than the peak price in every price cycle would be around $210 million per year.

47 Report on the Australian petroleum market—December 2018

The price decrease phase involves a gradual process of retail sites following, matching or undercutting each other’s prices in local areas by small amounts. This occurs as retailers have an incentive to discount or match lower prices in order to increase sales or prevent a loss of sales.

Variability in retailer’s pricing strategies throughout the price cycle means prices across a location can vary significantly. Some retailers may delay increasing prices at certain retail sites to capture higher sales, and some retailers may seek to reduce prices more aggressively at particular retail sites to win sales from local competitors.

Case study: Geraldton, WAGeraldton in WA provides a clear example of the influence of a single retailer’s pricing behaviour on other retailers. Geraldton is one of the few regional locations in Australia that has a petrol price cycle. Price cycles in Geraldton started when Coles Express entered the market in April 2016.

Daily average retail petrol prices in Geraldton in 2016

100

110

120

130

140

Jan-

16

Feb-16

Mar-16

Apr-16

May-16

Jun-

16

Jul-16

Aug

-16

Sep

-16

Oct-16

Nov-16

Dec

-16

cpl

Source: ACCC calculations based on FuelWatch data.

Analysis of prices at each retail site in Geraldton shows that when Coles Express opened a retail site in Geraldton it adopted the same pricing strategy it had at all of its 53 retail sites in Perth. Subsequently, other retail sites in Geraldton, but not all, appear to have responded to prices at the Coles Express retail site by adjusting their pricing strategies to a broadly similar cyclical pattern. By January 2017, five retail sites in Geraldton had adopted a similar strategy. By May 2018 eight of the 11 retail sites selling petrol followed the weekly price cycle.

Price cycles, in and of themselves, are not illegalSometimes competing businesses sell goods or services at the same or similar price levels so that the price fluctuations of one petrol retailer are matched by others. In general, independent decisions by petrol retailers to adjust prices throughout price cycles reflect this process, and are not usually the result of collusive behaviour that would raise concerns under the Competition and Consumer Act 2010 (CCA).

In November 2017, the CCA was amended to prohibit a person from engaging in a ‘concerted practice’ that substantially lessens competition. These changes broaden the net for capturing anti-competitive conduct. The concept of a ‘concerted practice’ involves communication or cooperative behaviour that does not require all of the elements of an ‘arrangement or understanding’ to be reached between parties, but does involve more than a person independently responding to market conditions. The concerted practice provisions are yet to be tested in court.

48 Report on the Australian petroleum market—December 2018

If, when setting prices, petrol retailers are doing no more than responding quickly to each other’s published prices, this is likely to be parallel pricing from each petrol retailer’s independent response to market conditions. The ACCC is currently of the view that this is not a concerted practice in breach of the CCA.

There may be occasions where anomalies in price cycles will trigger an investigation into whether the pricing outcome resulted from an agreement or concerted practice. The ACCC’s monitoring of petrol prices across Australia allows the ACCC to consider such anomalies.

The communication or exchange of price (or other market sensitive) information between competitors can be anti-competitive. The ACCC has previously considered how elements of the Australian retail petrol market operate in this context under Part IV of the CCA. For example, in August 2014 the ACCC took court action against Informed Sources and several major petrol retailers that subscribed to Informed Sources’ price exchange services (BP, Caltex, Coles Express, Woolworths and 7-Eleven).

The ACCC resolved these proceedings by accepting court enforceable undertakings from Informed Sources and other market participants. The undertakings provide for greater transparency of petrol price information by making the information available to motorists at the same time the petrol retailers receive it, which has in turn helped to promote fuel price websites and apps that motorists can use to shop around.

Price cycles have changed significantly in the eastern capital cities over the last 10 yearsIn the eastern capital cities the duration of petrol price cycles (i.e. the length of time between one trough and the next trough) has increased significantly over the last 10 years. In 2007, price cycles generally occurred on a weekly basis, providing an opportunity for motorists to fill up regularly at the lowest point in the cycle. ‘Cheap Tuesdays’ were a phenomenon in 2007, and by 2009 Wednesday had become the cheapest day of the week.

Over time price cycles in these capital cities have lengthened. In 2017, the average duration of price cycles ranged from around four to five weeks. Similarly, the number of price cycles that occurred each year in these cities decreased significantly, from 52 price cycles in 2009 (one each week) to between 10 and 14 price cycles in 2017 (depending on the city). These changes in price cycles have been largely influenced by changing pricing behaviour by petrol retailers.

The ACCC’s analysis indicates that, compared with the weekly cycles in 2009, the increased duration of price cycles over time has made it more difficult for motorists to buy petrol consistently at the lowest point of the cycle.

In addition to changes in the duration and number of price cycles in the five largest cities, the magnitude of the price increase has also changed over time. In 2009, the average price cycle increase ranged from around 8 cpl to 14 cpl depending on the city (or between around 7 per cent and 11 per cent of the annual average price). By 2017, the average price cycle increase ranged from around 18 cpl to 24 cpl (between around 14 per cent and 19 per cent of the annual average price).

Price cycles occur in a small number of locations outside the five largest capital citiesThe ACCC monitors petrol prices in all capital cities and over 190 regional locations across Australia. Analysis of price movements in all of these locations in 2017–18 indicates that, apart from the price cycles in the five largest cities, there were 13 locations that had price cycles. These were:

�� Geelong, Koo Wee Rup, Wallan and Seymour in Victoria

�� the Gold Coast, Sunshine Coast, Caboolture and Ipswich in Queensland

�� Central Coast, Wollongong and Tweed Heads South in NSW

�� Gawler in SA

�� Geraldton in WA.

49 Report on the Australian petroleum market—December 2018

In most cases, the locations with price cycles in 2017–18 are close to the five largest cities, which also have price cycles. Motorists in those locations can use the information about price cycles in the five largest cities to help them decide when to buy petrol.

Background to ACCC monitoringOn 20 December 2017, the then Treasurer issued a new Direction to the ACCC to monitor the prices, costs and profits relating to the supply of petroleum products and related services in Australia. The Direction, issued under s. 95ZE of the CCA, took effect from that date and lasts for two years.

The ACCC’s role is to assist consumers to navigate this complex industry. Under the new Direction, the ACCC produces quarterly petrol monitoring reports focusing on price movements in the capital cities and over 190 regional locations across Australia. It also produces industry reports that focus on particular aspects of consumer interest in the fuel market in relation to prices, costs and profits. This is the third industry report under the new Direction.

50 Report on the Australian petroleum market—December 2018

Appendix B: Petrol price data for monitored locationsThe ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia.

Monthly average retail petrol prices for September and December 2018, and the change between the two, are shown in table B1.32 The table also shows the differential between average petrol prices in the five largest cities and each regional location in the month of December 2018 and calendar year 2018.33

Table B1: Monthly average petrol prices in September and December 2018 and city–country differentials in the month of December 2018 and 2018—cpl

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

Sydney 152.0 127.8 –24.2

Melbourne 154.5 131.2 –23.3

Brisbane 153.1 133.5 –19.6

Adelaide 152.6 123.2 –29.4

Perth 148.9 129.8 –19.1

Five largest cities 152.2 129.1 –23.1

Hobart 160.0 158.1 –1.9 29.0 13.2

Canberra 157.0 150.4 –6.6 21.3 10.6

Darwin 155.3 142.8 –12.5 13.7 9.8

New South Wales

Albury 153.4 132.5 –20.9 3.4 4.5

Armidale 156.4 149.6 –6.8 20.5 9.0

Ballina 155.5 151.5 –4.0 22.4 8.9

Batemans Bay 156.3 147.2 –9.1 18.1 7.8

Bathurst 155.4 136.5 –18.9 7.4 5.5

Bega 156.2 150.1 –6.1 21.0 8.1

Broken Hill 157.9 153.6 –4.3 24.5 9.3

Bulahdelah 157.1 153.0 –4.1 23.9 7.5

Casino 153.8 145.8 –8.0 16.7 7.4

Central Coast 152.4 131.3 –21.1 2.2 3.2

Coffs Harbour 157.2 148.8 –8.4 19.7 9.2

Cooma 156.7 138.3 –18.4 9.2 7.4

Coonabarabran 155.1 152.9 –2.2 23.8 7.3

Cootamundra 151.7 133.0 –18.7 3.9 2.7

Cowra 155.2 144.6 –10.6 15.5 5.4

Deniliquin 156.2 150.8 –5.4 21.7 8.6

Dubbo 157.5 147.0 –10.5 17.9 8.5

Forbes 154.9 152.1 –2.8 23.0 7.9

32 For a price to be included in the table there had to be a price observation on at least 75 per cent of days in the month/year. Nine locations—Blackall, Buronga, Charleville, Cloncurry, Coober Pedy, Normanton, Oberon, Tennant Creek and Weipa— did not have sufficient data for September 2018 and/or December 2018. E10 prices instead of RULP prices are reported in Sydney, Bulahdelah, Coonabarabran, Cowra, Gilgandra, Gunnedah, Lithgow, Ulladulla, Wellington and West Wyalong.

33 The source for all prices in this appendix is ACCC calculations based on FUELtrac data.

51 Report on the Australian petroleum market—December 2018

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

Forster 155.8 152.0 –3.8 22.9 9.2

Gilgandra 154.8 148.3 –6.5 19.2 5.9

Glen Innes 155.3 147.6 –7.7 18.5 7.8

Goulburn 154.5 143.2 –11.3 14.1 2.0

Grafton 154.9 143.7 –11.2 14.6 6.4

Griffith 153.4 147.7 –5.7 18.6 6.6

Gundagai 158.4 157.9 –0.5 28.8 11.5

Gunnedah 155.4 136.9 –18.5 7.8 3.4

Hay 154.9 148.5 –6.4 19.4 6.3

Inverell 154.8 134.8 –20.0 5.7 6.0

Jerilderie 155.9 149.7 –6.2 20.6 8.6

Kempsey 156.0 143.9 –12.1 14.8 6.7

Leeton 151.1 139.4 –11.7 10.3 3.3

Lismore 152.0 149.1 –2.9 20.0 5.1

Lithgow 147.5 120.8 –26.7 –8.3 –2.6

Merimbula 154.5 136.2 –18.3 7.1 4.4

Mittagong 158.2 136.4 –21.8 7.3 9.4

Moama 151.8 147.4 –4.4 18.3 5.6

Moree 155.7 147.4 –8.3 18.3 7.5

Moruya 157.5 136.4 –21.1 7.3 7.5

Moss Vale 159.9 151.0 –8.9 21.9 12.1

Mudgee 159.2 151.4 –7.8 22.3 10.6

Murwillumbah 161.4 136.1 –25.3 7.0 10.4

Muswellbrook 158.2 126.4 –31.8 –2.7 6.0

Narrabri 156.3 138.8 –17.5 9.7 7.3

Newcastle 153.0 133.9 –19.1 4.8 4.4

Nowra 159.9 137.9 –22.0 8.8 3.2

Nyngan 153.9 146.8 –7.1 17.7 6.0

Orange 156.1 141.9 –14.2 12.8 5.6

Parkes 156.5 152.0 –4.5 22.9 9.2

Port Macquarie 156.9 153.1 –3.8 24.0 9.7

Queanbeyan 157.7 144.5 –13.2 15.4 7.0

Singleton 157.8 137.3 –20.5 8.2 9.4

Tamworth 156.6 141.8 –14.8 12.7 7.6

Taree 155.3 148.3 –7.0 19.2 8.5

Temora 154.0 146.3 –7.7 17.2 5.0

Tumut 152.6 144.6 –8.0 15.5 6.2

Tweed Heads South 151.8 143.9 –7.9 14.8 4.1

Ulladulla 152.8 140.0 –12.8 10.9 5.1

Wagga Wagga 153.5 132.7 –20.8 3.6 3.1

Wauchope 157.6 150.7 –6.9 21.6 9.2

Wellington 152.6 144.1 –8.5 15.0 5.6

52 Report on the Australian petroleum market—December 2018

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

West Wyalong 156.1 145.0 –11.1 15.9 6.8

Wollongong 156.0 138.1 –17.9 9.0 4.9

Woolgoolga 156.4 154.7 –1.7 25.6 10.0

Yass 155.1 148.7 –6.4 19.6 7.8

Northern Territory

Alice Springs 165.1 160.7 –4.4 31.6 18.0

Katherine 156.5 159.6 3.1 30.5 12.0

Queensland

Atherton 154.2 146.7 –7.5 17.6 7.6

Ayr 154.7 142.2 –12.5 13.1 6.6

Biloela 160.1 149.7 –10.4 20.6 10.3

Blackwater 156.6 159.8 3.2 30.7 10.2

Bowen 154.8 139.6 –15.2 10.5 6.9

Bundaberg 150.4 130.4 –20.0 1.3 1.3

Caboolture 152.5 135.7 –16.8 6.6 2.4

Cairns 156.7 142.7 –14.0 13.6 7.1

Charters Towers 154.4 144.7 –9.7 15.6 7.2

Childers 152.4 131.0 –21.4 1.9 2.9

Cunnamulla 164.3 147.5 –16.8 18.4 8.6

Dalby 152.9 144.6 –8.3 15.5 6.5

Emerald 159.1 152.2 –6.9 23.1 10.3

Gladstone 153.2 134.3 –18.9 5.2 4.4

Gold Coast 151.4 132.9 –18.5 3.8 0.6

Goondiwindi 159.2 159.2 0.0 30.1 10.6

Gympie 150.3 126.8 –23.5 –2.3 –0.3

Hervey Bay 156.7 133.3 –23.4 4.2 7.4

Ingham 156.1 152.3 –3.8 23.2 8.5

Innisfail 158.2 153.4 –4.8 24.3 9.2

Ipswich 154.3 131.3 –23.0 2.2 2.2

Kingaroy 152.8 127.9 –24.9 –1.2 4.5

Longreach 160.9 160.0 –0.9 30.9 13.5

Mackay 158.5 138.0 –20.5 8.9 7.4

Mareeba 156.5 148.0 –8.5 18.9 8.0

Maryborough 151.3 128.3 –23.0 –0.8 1.6

Miles 151.5 127.1 –24.4 –2.0 0.1

Moranbah 150.1 150.4 0.3 21.3 6.7

Mt Isa 161.3 156.7 –4.6 27.6 14.3

Rockhampton 156.9 141.4 –15.5 12.3 8.5

Roma 153.7 144.3 –9.4 15.2 6.8

Sunshine Coast 152.5 135.1 –17.4 6.0 3.8

Toowoomba 150.3 125.5 –24.8 –3.6 2.6

Townsville 154.6 137.5 –17.1 8.4 6.5

53 Report on the Australian petroleum market—December 2018

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

Tully 155.9 156.0 0.1 26.9 8.5

Warwick 150.1 135.6 –14.5 6.5 5.2

Whitsunday 152.4 147.4 –5.0 18.3 7.2

Yeppoon 156.2 142.0 –14.2 12.9 8.2

South Australia

Bordertown 151.7 133.8 –17.9 4.7 2.0

Ceduna 158.8 149.9 –8.9 20.8 6.9

Clare 149.9 123.1 –26.8 –6.0 –0.1

Gawler 153.8 124.2 –29.6 –4.9 0.5

Kadina 147.4 124.7 –22.7 –4.4 0.5

Keith 152.8 138.0 –14.8 8.9 3.7

Loxton 149.0 137.6 –11.4 8.5 0.5

Mt Gambier 152.1 132.6 –19.5 3.5 3.9

Murray Bridge 148.0 128.4 –19.6 –0.7 1.1

Naracoorte 151.3 135.2 –16.1 6.1 3.0

Port Augusta 158.0 145.7 –12.3 16.6 7.9

Port Lincoln 152.9 135.4 –17.5 6.3 5.1

Port Pirie 149.9 127.7 –22.2 –1.4 0.6

Renmark 153.2 129.8 –23.4 0.7 3.5

Tailem Bend 148.2 137.6 –10.6 8.5 2.8

Victor Harbour 154.1 129.5 –24.6 0.4 3.9

Whyalla 157.3 138.1 –19.2 9.0 6.6

Tasmania

Burnie 158.5 144.5 –14.0 15.4 10.7

Campbell Town 158.7 150.3 –8.4 21.2 11.9

Devonport 158.8 151.4 –7.4 22.3 11.1

Huonville 160.9 154.5 –6.4 25.4 13.2

Launceston 161.8 153.1 –8.7 24.0 14.3

New Norfolk 160.8 152.6 –8.2 23.5 13.6

Queenstown 161.6 144.1 –17.5 15.0 11.8

Smithton 159.2 142.5 –16.7 13.4 9.5

Sorell 159.1 156.3 –2.8 27.2 12.0

Ulverstone 158.6 150.2 –8.4 21.1 11.3

Wynyard 156.9 148.9 –8.0 19.8 10.5

Victoria

Ararat 151.3 153.0 1.7 23.9 6.7

Bairnsdale 147.1 138.2 –8.9 9.1 0.6

Ballarat 148.4 130.7 –17.7 1.6 2.5

Benalla 149.7 141.8 –7.9 12.7 4.7

Bendigo 149.1 135.6 –13.5 6.5 2.5

Cobram 153.4 142.0 –11.4 12.9 4.5

Colac 151.5 134.4 –17.1 5.3 3.4

54 Report on the Australian petroleum market—December 2018

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

Corryong 156.0 137.3 –18.7 8.2 6.3

Echuca 152.1 148.5 –3.6 19.4 6.0

Euroa 152.6 132.1 –20.5 3.0 4.6

Geelong 155.4 132.4 –23.0 3.3 1.7

Hamilton 151.6 141.7 –9.9 12.6 5.4

Horsham 150.8 153.1 2.3 24.0 6.5

Koo Wee Rup 155.6 132.1 –23.5 3.0 2.8

Kyabram 152.5 142.0 –10.5 12.9 4.9

Lakes Entrance 152.2 145.6 –6.6 16.5 5.3

Leongatha 155.0 134.7 –20.3 5.6 4.2

Mansfield 153.3 148.9 –4.4 19.8 7.3

Mildura 152.6 145.6 –7.0 16.5 5.1

Moe 149.5 135.9 –13.6 6.8 3.6

Morwell 146.9 138.1 –8.8 9.0 0.5

Portland 152.7 129.1 –23.6 0.0 4.5

Sale 151.4 143.2 –8.2 14.1 5.7

Seymour 149.8 129.1 –20.7 0.0 1.5

Shepparton 147.1 129.9 –17.2 0.8 0.0

Swan Hill 152.3 147.2 –5.1 18.1 5.0

Traralgon 150.1 137.9 –12.2 8.8 4.4

Wallan 153.5 132.9 –20.6 3.8 1.0

Wangaratta 149.6 129.3 –20.3 0.2 2.7

Warrnambool 151.3 143.5 –7.8 14.4 5.3

Wodonga 150.9 134.8 –16.1 5.7 3.6

Wonthaggi 153.4 134.4 –19.0 5.3 3.9

Yarrawonga 154.5 147.4 –7.1 18.3 7.0

Western Australia

Albany 154.1 144.1 –10.0 15.0 7.0

Boulder 160.9 153.4 –7.5 24.3 12.0

Bridgetown 155.5 146.6 –8.9 17.5 6.4

Broome 175.0 175.6 0.6 46.5 27.5

Bunbury 155.8 138.6 –17.2 9.5 6.6

Busselton 153.2 140.8 –12.4 11.7 5.0

Carnarvon 161.1 158.0 –3.1 28.9 13.8

Collie 158.1 147.3 –10.8 18.2 9.4

Dongara 152.2 149.2 –3.0 20.1 4.7

Esperance 157.6 153.6 –4.0 24.5 10.3

Eucla 173.4 157.4 –16.0 28.3 22.4

Geraldton 155.0 150.2 –4.8 21.1 8.2

Kalgoorlie 161.0 153.2 –7.8 24.1 12.6

Karratha 166.9 165.8 –1.1 36.7 19.9

Manjimup 154.1 138.9 –15.2 9.8 5.3

55 Report on the Australian petroleum market—December 2018

Location September 2018 monthly avg

December 2018 monthly avg

Change September 2018

to December 2018

Differential December 2018

Differential 2018

Mount Barker 152.9 144.0 –8.9 14.9 3.6

Port Hedland 165.9 165.4 –0.5 36.3 17.2

Waroona 153.5 125.3 –28.2 –3.8 –0.3

56 Report on the Australian petroleum market—December 2018

Appendix C: Update on regional market studiesUnder the previous monitoring Direction, the ACCC undertook regional petrol market studies in Darwin, Launceston, Armidale and Cairns. The ACCC continues to monitor prices and GIRDs in those locations.

DarwinThe ACCC’s report on the Darwin petrol market was released in November 2015.34 It found that the increase in retail petrol margins in Darwin in 2012–13 and 2013–14 had imposed a significant cost on motorists. The report noted that higher prices and profits in Darwin were the result of weak retail competition.

Darwin petrol prices decreased in the December quarter 2018Chart C1 shows quarterly average retail petrol prices in Darwin and the five largest cities from the March quarter 2016 to the December quarter 2018.

Chart C1: Quarterly average retail petrol prices in Darwin and the five largest cities: March quarter 2016 to December quarter 2018

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Darwin Five largest cities

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Source: ACCC calculations based on FUELtrac data.

In the December quarter 2018, average retail petrol prices in Darwin were 153.1 cpl, a decrease of 2.3 cpl from the September quarter 2018 (155.4 cpl).

The market study noted that the average differential between prices in Darwin and the five largest cities in 2012–13 and 2013–14 was over 19.0 cpl. Since then it has decreased significantly.

In the December quarter 2018, the average differential between prices in Darwin and the five largest cities was 11.0 cpl, an increase of 2.3 cpl from the September quarter 2018 (8.7 cpl). In 2018, the annual average differential was 9.8 cpl, an increase of 3.2 cpl from 2017.

34 ACCC, Report on the Darwin petrol market, 23 November 2015, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-darwin-petrol-market.

57 Report on the Australian petroleum market—December 2018

Darwin petrol prices were above a long-term competitive cost-based priceThe ACCC’s Darwin report noted that motorists were paying around 10 cpl more than they should have been in a competitive market. This was based on a comparison of GIRDs in Darwin with those in the larger capital cities.

Chart C2 shows Darwin petrol prices on a rolling annual average basis from 1 January 2015 to 31 December 2018. Each daily price in the chart is the average of that day’s price and prices on the previous 364 days. Analysis of prices over the long term enables short-term influences (such as lags in regional price movements) to be smoothed out.

The chart also shows estimated Darwin prices calculated on a long-term cost basis. This calculation reflects the fact that costs (such as freight and operating costs per litre) are higher in Darwin, and assumes that retail margins in Darwin should be broadly similar to long-term average retail margins in the five largest cities. This long-term competitive cost-based price provides a benchmark against which to compare current price levels. It is not static and will change as its underlying elements change over time. If retail prices are constantly above this benchmark price for a sustained period this may be indicative of a less-competitive market, in which retailers are earning higher margins at the expense of consumers.

Chart C2: Rolling annual average retail prices and a long-term competitive cost-based price in Darwin, and the difference: 1 January 2015 to 31 December 2018

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ACCC announces Darwin market study 10 March 2015

ACCC report released 23 November 2015

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Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)

Jan-15

Apr-15

Jul-15

Oct-15

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Apr-16

Jul-16

Oct-16

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Apr-18

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Oct-18

Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Darwin market study.

The chart indicates that petrol prices in Darwin remained above a long-term competitive cost-based price in the December quarter 2018.

Darwin GIRDs increased in the December quarter 2018Chart C3 shows quarterly average GIRDs in Darwin and the five largest cities over a three-year period from the March quarter 2016 to the December quarter 2018. GIRDs in Darwin have decreased in recent years since the peak of 30.6 cpl in the September quarter 2014.

However, in the December quarter 2018, Darwin GIRDs were 20.0 cpl, an increase of 5.9 cpl from the September quarter 2018 (14.1 cpl). Darwin GIRDs were 6.1 cpl higher than the five largest cities in the December quarter 2018, an increase of 2.4 cpl from the previous quarter (3.7 cpl). Annual average GIRDs in Darwin were 17.3 cpl in 2018, an increase of 3.2 cpl from 2017.

58 Report on the Australian petroleum market—December 2018

Chart C3: Quarterly average petrol GIRDs in Darwin and the five largest cities: March quarter 2016 to December quarter 2018

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Darwin Five largest cities

Source: ACCC calculations based on data from FUELtrac, AIP, BP, Caltex, Mobil, Viva Energy and FuelWatch.

Darwin retail prices since the introduction of MyFuel NTThe MyFuel NT scheme commenced on 1 November 2017. It is a territory-wide real-time mandatory retail fuel price reporting scheme, which gives consumers access (via website or mobile app) to live price data from every fuel retailer in the NT. MyFuel NT is similar to the FuelCheck scheme in NSW.

Chart C4 shows daily average petrol prices and TGPs (lagged by five days) in Darwin over the period 1 September 2017 to 31 December 2018.

Retail prices increased significantly prior to the introduction of MyFuel NT following an increase in TGPs. However, the increase in retail prices (around 11.0 cpl) was larger than the increase in TGPs (around 8.0 cpl) and occurred immediately. Retail prices increased in mid-November 2017 by around 5.0 cpl, and again in early-December 2017 by a further 4.0 cpl to around 149.0 cpl.

At the beginning of the December quarter 2018, retail prices in Darwin were 157.7 cpl. They increased by 6.0 cpl to 163.7 cpl at the end of October 2018. They subsequently decreased by 26.1 cpl to 137.6 cpl in late-December 2018. TGPs were 146.9 cpl at the beginning of the December quarter 2018. They increased by 5.3 cpl to 152.2 cpl in mid-October 2018. They subsequently decreased by 33.3 cpl to 118.9 cpl at the end of the quarter.

59 Report on the Australian petroleum market—December 2018

Chart C4: Daily average retail petrol prices and TGPs in Darwin: 1 September 2017 to 31 December 2018

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125

135

145

155

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175 Sep

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Retail price TGP (lagged 5 days)

MyFuel NT introduced 1 November 2017

Source: ACCC calculations based on data from FUELtrac and AIP.

Motorists can use the MyFuel NT scheme to identify the highest and lowest priced retail sites in Darwin.

On 8 February 2019 it showed that there was a range of 9.4 cpl between the highest priced retail sites in Darwin (131.9 cpl at four Coles Express retail sites) and the lowest (122.5 cpl at FuelXpress Winnellie).

LauncestonThe ACCC report on the Launceston petrol market was released in July 2016.35 It found that between 2012–13 and the first half of 2015–16 Launceston motorists paid on average around 12 cpl more for petrol than motorists in the five largest cities. The report noted that if the Launceston market was more competitive, motorists could expect savings of 4–5 cpl on a sustainable basis. The three main factors causing higher prices in Launceston were higher transport costs, higher wholesale operating costs and margins, and higher retail operating costs and margins.

Launceston petrol prices increased in the December quarter 2018In the December quarter 2018, average retail petrol prices in Launceston were 161.9 cpl, an increase of 1.5 cpl from the September quarter 2018 (160.4 cpl) (see chart C5). The average differential between prices in Launceston and the five largest cities was 19.8 cpl, an increase of 6.1 cpl from the September quarter 2018 (13.7 cpl). In 2018, the annual average differential was 14.3 cpl, an increase of 0.8 cpl from 2017.

35 ACCC, Report on the Launceston petrol market, 20 July 2016, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-launceston-petrol-market.

60 Report on the Australian petroleum market—December 2018

Chart C5: Quarterly average retail petrol prices in Launceston and the five largest cities: March quarter 2016 to December quarter 2018

cpl

100

110

120

130

140

150

170

160

Launceston Five largest cities

Mar-16

Jun-16

Sep

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Dec

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Mar-17

Jun-17

Sep

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Dec

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Jun-18

Sep

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Dec

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Source: ACCC calculations based on FUELtrac data.

Launceston petrol prices remained significantly above a long-term competitive cost-based priceChart C6 shows Launceston petrol prices on a rolling annual average basis and estimated Launceston prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 December 2018. These prices have been calculated on the same basis as outlined for Darwin. The chart shows that the differential between petrol prices in Launceston and a long-term competitive cost-based price increased over the December quarter 2018 and remains significantly high. This may reflect the absence of vigorous and effective competition in Launceston.

Motorists in Launceston can use available fuel price websites and apps, such as MotorMouth and GasBuddy, to find retailers with relatively lower prices.

On 8 February 2019, using the GasBuddy app, there was a 7.2 cpl range between the highest priced retail sites in Launceston (145.9 cpl at one Mobil retail site and one Caltex retail site) and the lowest (138.7 cpl at one United retail site).

61 Report on the Australian petroleum market—December 2018

Chart C6: Rolling annual average retail prices and a long-term competitive cost-based price in Launceston, and the difference: 1 January 2015 to 31 December 2018

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ACCC announces Launceston market study 10 May 2015

ACCC report released 20 July 2016

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Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)

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Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Launceston market study.

Launceston GIRDs increased significantly in the December quarter 2018Chart C7 shows quarterly average GIRDs in Launceston and the five largest cities over the three-year period from the March quarter 2016 to the December quarter 2018.

In the December quarter 2018, Launceston GIRDs were 28.3 cpl, an increase of 9.8 cpl from the September quarter 2018 (18.5 cpl). Launceston GIRDs in the December quarter 2018 were 14.4 cpl higher than in the five largest cities (13.9 cpl). Annual average GIRDs in Launceston were 21.2 cpl in 2018, an increase of 0.9 cpl from 2017.

62 Report on the Australian petroleum market—December 2018

Chart C7: Quarterly average petrol GIRDs in Launceston and the five largest cities: March quarter 2016 to December quarter 2018

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Launceston Five largest cities

Source: ACCC calculations based on data from FUELtrac, AIP, BP, Caltex, Mobil, Viva Energy and FuelWatch.

Note: Hobart TGPs are used as a proxy for TGPs in Launceston.

ArmidaleThe ACCC report on the Armidale petrol market was released in November 2016.36 It found that relatively weak retail competition in Armidale, reflected by a lack of price discounting, contributed to E10 prices in Armidale being on average 8.0 cpl higher than RULP prices in the five largest cities between 2012–13 and 2014–15.

Armidale petrol prices increased in the December quarter 2018Chart C8 shows quarterly average retail petrol prices in Armidale and the five largest cities from the March quarter 2016 to the December quarter 2018.

In the December quarter 2018, average retail petrol prices in Armidale were 155.4 cpl, an increase of 3.1 cpl from the September quarter 2018 (152.3 cpl). The average differential between prices in Armidale and the five largest cities was 13.3 cpl in the December quarter 2018, an increase of 7.7 cpl from the September quarter 2018 (5.6 cpl). In 2018, the annual average differential was 7.0 cpl, an increase of 3.1 cpl from 2017.

36 ACCC, Report on the Armidale petrol market, 21 November 2016, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-armidale-petrol-market. References to petrol prices in Armidale are to E10 prices.

63 Report on the Australian petroleum market—December 2018

Chart C8: Quarterly average retail petrol prices in Armidale and the five largest cities: March quarter 2016 to December quarter 2018

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Armidale Five largest cities

Source: ACCC calculations based on FUELtrac data.

Armidale petrol prices were above a long-term competitive cost-based priceChart C9 shows Armidale petrol prices on a rolling annual average basis and estimated Armidale prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 December 2018. These prices have been calculated on the same basis as outlined for Darwin. The chart indicates that at the end of December 2018, petrol prices in Armidale were above a long-term competitive cost-based price.

Motorists in Armidale can use the FuelCheck website and app to identify the highest and lowest priced retail sites in Armidale.

On 8 February 2019, the FuelCheck website showed that there was a 9.9 cpl range between the highest priced RULP retail site in Armidale (139.9 cpl at Lowes Armidale) and the lowest (130.0 cpl at the Beardy Street Servo). There was a 6.0 cpl range between the highest priced E10 retail sites (139.9 cpl at Coles Express Armidale) and the lowest (133.9 cpl at three Caltex retail sites and one Woolworths retail site).

64 Report on the Australian petroleum market—December 2018

Chart C9: Rolling annual average retail prices and a long-term competitive cost-based price in Armidale, and the difference: 1 January 2015 to 31 December 2018

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ACCC announces Armidale market study 3 August 2015

ACCC report released 21 November 2016

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Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)

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Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Armidale market study.

Armidale GIRDs increased significantly in the December quarter 2018Chart C10 shows quarterly average GIRDs in Armidale and the five largest cities over a three-year period from the March quarter 2016 to the December quarter 2018.

In the December quarter 2018, average GIRDs in Armidale were 28.4 cpl, an increase of 11.3 cpl from the September quarter 2018 (17.1 cpl). Armidale GIRDs in the December quarter 2018 were 14.5 cpl higher than in the five largest cities (13.9 cpl). Annual average GIRDs in Armidale were 20.6 cpl in 2018, an increase of 3.5 cpl from 2017.

Chart C10: Quarterly average petrol GIRDs in Armidale and the five largest cities: March quarter 2016 to December quarter 2018

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Armidale Five largest cities

Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch data.

Note: Sydney and Brisbane E10 TGPs from monitored companies are used as a proxy for Armidale TGPs.

65 Report on the Australian petroleum market—December 2018

CairnsThe ACCC report on the Cairns petrol market was released in May 2017.37 It found that between 2012–13 and the first half of 2016–17, the average differential between prices in Cairns and the five largest cities was around 11.0 cpl. It concluded that a lack of vigorous and effective retail price competition in Cairns contributed to the increase in retail margins and profits in recent years.

Cairns petrol prices increased in the December quarter 2018Chart C11 shows quarterly average retail petrol prices in Cairns and the five largest cities from the March quarter 2016 to the December quarter 2018.

In the December quarter 2018, the average retail petrol price in Cairns was 156.7 cpl, an increase of 1.5 cpl from the September quarter 2018 (155.2 cpl). The average differential between prices in Cairns and the five largest cities was 14.6 cpl in the December quarter 2018, an increase of 6.1 cpl from the September quarter 2018 (8.5 cpl). However, in 2018, the annual average differential was 7.1 cpl, a decrease of 4.7 cpl from 2017.

Chart C11: Quarterly average retail petrol prices in Cairns and the five largest cities: March quarter 2016 to December quarter 2018

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160

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Jun-16

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Cairns Five largest cities

Source: ACCC calculations based on FUELtrac data.

Cairns petrol prices were above a long-term competitive cost-based priceChart C12 shows Cairns petrol prices on a rolling annual average basis and estimated Cairns prices calculated on a long-term competitive cost basis from 1 January 2015 to 31 December 2018. These prices have been calculated on the same basis as outlined for Darwin. The chart indicates that petrol prices in Cairns were above a long-term competitive cost-based price. The difference between petrol prices in Cairns and the long-term competitive cost-based price decreased significantly during most of 2018. This decrease may have been due to more vigorous competition following the increasing presence of United in the Cairns area since the March quarter 2018.

Motorists in Cairns are able to access site-specific petrol price data made available by websites and app providers under the Queensland fuel price reporting trial, which commenced on 3 December 2018.

37 ACCC, Report on the Cairns petrol market, 29 May 2017, at: https://www.accc.gov.au/publications/petrol-market-studies/report-on-the-cairns-petrol-market.

66 Report on the Australian petroleum market—December 2018

On 8 February 2019, using the MotorMouth app, there was a 9.0 cpl range between the highest priced retail sites in Cairns (129.9 cpl at five Coles Express retail sites, one Shell retail site and one BP retail site) and the lowest (120.9 cpl at one United retail site and one Woolworths retail site).

Chart C12: Rolling annual average retail prices and a long-term competitive cost-based price in Cairns, and the difference: 1 January 2015 to 31 December 2018

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ACCC announces Cairns market study

19 April 2016

ACCC report released 30 May 2017

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Di�erence (RHS) Retail price (LHS) Competitive cost based price (LHS)

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Source: ACCC calculations based on data from Informed Sources, FUELtrac and the companies that participated in the Cairns market study.

Cairns GIRDs increased significantly in the December quarter 2018Chart C13 shows quarterly average GIRDs in Cairns and the five largest cities over the three-year period from the March quarter 2016 to the December quarter 2018.

In the December quarter 2018, average GIRDs in Cairns were 24.8 cpl, an increase of 9.6 cpl from the September quarter 2018 (15.2 cpl). Cairns GIRDs in the December quarter 2018 were 10.9 cpl higher than in the five largest cities (13.9 cpl). Annual average GIRDs in Cairns were 15.8 cpl in 2018, a decrease of 4.6 cpl from 2017.

67 Report on the Australian petroleum market—December 2018

Chart C13: Quarterly average petrol GIRDs in Cairns and the five largest cities: March quarter 2016 to December quarter 2018

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Cairns Five largest cities

Source: ACCC calculations based on data from FUELtrac, BP, Caltex, Mobil, Viva Energy and FuelWatch.