Report on the Australian petroleum market

Report on the Australian petroleum market
Report on the
Australian
petroleum
market
March quarter 2019




May 2019




                 accc.gov.au
Report on the Australian petroleum market
Australian Competition and Consumer Commission
23 Marcus Clarke Street, Canberra, Australian Capital Territory, 2601
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ACCC 06/19_1569
www.accc.gov.au
Report on the Australian petroleum market
Contents
      Key messages                                                                                   1

      1.      Developments in the petroleum industry                                                 8
              1.1      Changes to the Coles and Viva Energy retail alliance                          8
              1.2      The Foreign Investment Review Board approved the sale of Woolworths retail
                       sites to Euro Garages Group                                                   8
              1.3      ACCC accepted a variation to Woolworths’ shopper docket undertaking           8
              1.4      Viva Energy to acquire remaining 50 per cent of Liberty Oil’s wholesale
                       business and enter into a retail joint venture                                9
              1.5      Two petrol inquiries into the ACT fuel market commenced                       9
              1.6      Australian Government announced changes to fuel quality standards            10
              1.7      Increase in fuel excise                                                      11

      2.      ACCC activities                                                                       12
              2.1      ACCC and the petrol industry                                                 12
              2.2      Activities during the March quarter 2019                                     12

      3.      Retail petrol price movements in the capital cities                                   14
              3.1      Retail prices over the year to March 2019                                    14
              3.2      Retail prices compared with Mogas 95 prices                                  15
              3.3      Gross indicative retail differences                                          15
              3.4      Elements of the price change in the quarter                                  17
              3.5      Retail prices in Brisbane and Perth were higher than the other
                       three largest cities                                                         18
              3.6      Price cycles in the five largest cities                                      20
              3.7      Prices in the three smaller capital cities                                   20
              3.8      Retail prices of the main petrol grades                                      21
              3.9      Petrol prices in Australia compared with other OECD countries                22

      4.      Retail petrol price movements in regional locations                                   25
              4.1      Influences on regional petrol prices                                         25
              4.2      Regional petrol prices in aggregate                                          25
              4.3      Prices in each of the states and territories                                 26

      5.      International price movements                                                         31
              5.1      Crude oil and refined petrol                                                 31
              5.2      AUD-USD exchange rate                                                        33

      6.      Diesel and automotive LPG prices                                                      35
              6.1      Diesel price movements                                                       35
              6.2      Automotive LPG price movements                                               36

      Appendix A: Petrol price data for monitored locations                                         37

      Appendix B: Update on regional market studies                                                 42

      Appendix C: ACCC submission to the ACT Legislative Assembly petrol inquiry                    56




iii   Report on the Australian petroleum market — March 2019
Key messages
    Average retail petrol prices in the five largest cities were
    significantly lower in the March quarter 2019, although they
    were trending upwards
    In the March quarter 2019, average retail petrol prices across the five largest cities (Sydney, Melbourne,
    Brisbane, Adelaide and Perth) were 130.3 cents per litre (cpl).1 This was a decrease of 11.8 cpl from the
    December quarter 2018 (142.1 cpl).

    During the March quarter 2019 daily average prices (on a seven-day rolling average basis) decreased
    to a low of 115.4 cpl in early January. This was their lowest level in over two years. Prices then trended
    upwards to 144.4 cpl in late-March 2019. This is shown in the following chart.

    Seven-day rolling average retail petrol prices in the five largest cities: 1 April 2018 to 31 March 2019
             170



             160



             150
    cpl




             140



             130



             120



              110
                    Apr–18



                             May–18




                                       Jun–18



                                                 Jul–18




                                                           Aug–18




                                                                     Sep–18



                                                                              Oct–18




                                                                                        Nov–18



                                                                                                  Dec–18




                                                                                                            Jan–19




                                                                                                                      Feb–19



                                                                                                                               Mar–19


    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 March quarter 2019.



    Movements in average retail petrol prices largely reflected
    changes in international refined petrol prices
    Retail petrol prices in Australia are primarily determined by international refined petrol prices (which
    in turn are influenced by international crude oil 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.

    Retail petrol prices in the five largest cities and Mogas 95 prices in Australian cents per litre moved in a
    broadly similar pattern during the quarter and over the longer term. This is shown in the following chart.




    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.



1   Report on the Australian petroleum market — March 2019
Monthly average retail petrol prices in the five largest cities and Mogas 95 prices: April 2018 to March 2019
           160                                                                                                                   100


           150                                                                                                                   90


           140                                                                                                                   80


           130                                                                                                                   70
    cpl




                                                                                                                                       cpl
           120                                                                                                                   60


           110                                                                                                                   50


          100                                                                                                                    40
                   Apr–18



                            May–18



                                     Jun–18



                                              Jul–18



                                                        Aug–18



                                                                  Sep–18



                                                                           Oct–18



                                                                                    Nov–18



                                                                                             Dec–18



                                                                                                      Jan–19



                                                                                                               Feb–19



                                                                                                                        Mar–19
                                              Five largest cities (LHS)              Mogas 95 (RHS)

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

    Both Brent crude oil (the most widely used benchmark on global markets) and Mogas 95 prices
    decreased in the March quarter 2019:
    ƒƒQuarterly average Brent crude oil prices were around USD 63 per barrel (a decrease of
          USD 6 per barrel from the previous quarter).
    ƒƒQuarterly average Mogas 95 prices were around USD 67 per barrel (also a decrease of
          USD 6 per barrel). In Australian cents per litre, quarterly average Mogas 95 prices were 59.0 cpl in the
          March quarter 2019, a decrease of 4.8 cpl from the previous quarter.

    Changes in international crude oil and refined petrol prices over the past year have been influenced by
    a number of factors, the major one being the agreements made since late-2016 by the Organisation of
    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 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.

    Increases in Brent crude oil prices since early-January 2019 have been due to increasing compliance
    with production cuts among OPEC countries and Russia.


    Refiner margins for petrol continued to decrease
    The refiner margin is the difference between the price of refined petrol and the price of crude oil.
    In the March quarter 2019, the average refiner margin decreased to USD 3.9 per barrel, a decrease
    of USD 0.4 per barrel from the previous quarter (USD 4.3 per barrel). This was the lowest quarterly
    average refiner margin since the December quarter 2008. The decrease in the refiner margin over the
    past two quarters 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 across the five largest cities
    were the lowest in four years
    In the March quarter 2019, average gross indicative retail differences (GIRDs) in the five largest cities
    were 9.5 cpl, a decrease of 4.4 cpl from the previous quarter. This was their lowest level in four years (in
    both real and nominal terms).


2   Report on the Australian petroleum market — March 2019
Average GIRDs decreased in all five largest cities:
    ƒƒGIRDs were the lowest in four years in Sydney (6.5 cpl) and Brisbane (10.8 cpl), and the lowest in
       three years in Melbourne (9.6 cpl)
    ƒƒGIRDs in Adelaide (9.6 cpl) and Perth (10.9 cpl) also decreased from the previous quarter, but they
       were not as low as in the September quarter 2018.

    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 petrol
    market studies prepared by the ACCC between 2015 and 2017 found that profits per retail petrol site
    could vary considerably between retailers, with some retail sites making substantial profits, while other
    retail sites make very little.

    When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018
    and the March quarter 2019) lags between changes in TGPs and changes in retail prices 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.


    Decreases in international refined petrol prices and GIRDs
    were the main factors contributing to lower retail petrol
    prices in the quarter
    There 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 change in these components across the five largest cities between the
    December quarter 2018 and the March quarter 2019. The chart 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).




3   Report on the Australian petroleum market — March 2019
Changes in the components of average retail petrol prices in the five largest cities: December quarter 2018 to
    March quarter 2019
          180
                                                                           -11.8 cpl

          160
                    142.1 cpl         -5.2 cpl
                                                            +0.4 cpl       -2.1 cpl        -0.5 cpl     -4.4 cpl    130.3 cpl
          140
                      13.9
                                                                                                                       9.5
          120

          100         52.9
                                                                                                                      52.4
                                                 -4.8 cpl
    cpl




          80
                      11.5
                                                                                                                       9.4
          60

          40         63.8                                                                                             59.0

          20

           0
                    Dec–18           Mogas 95          Exchange rate    Other wholesale     Taxes        GIRDs       Mar–19
                                                                       costs and margins

                                Mogas 95          Other wholesale costs and margins             Taxes   GIRDs

    Source:     ACCC calculations based on data from FUELtrac, OPIS, the 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 11.8 cpl in the March quarter 2019
    was largely driven by the decrease in Mogas 95 prices and GIRDs.

    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. Excluding the effect of
    changes in the exchange rate (which decreased by around USD 0.01 in the quarter), Mogas 95 prices
    would have decreased by 5.2 cpl in the quarter. However, the decrease in the exchange rate offset the
    influence of the decrease in Mogas 95 prices by 0.4 cpl. The net effect of movements in Mogas 95 prices
    and the exchange rate was that Mogas 95 prices decreased by 4.8 cpl.

    GIRDs decreased by 4.4 cpl and other wholesale costs and margins decreased by 2.1 cpl in the quarter.

    The two largest components of the average retail price of petrol —Mogas 95 and taxes—accounted for
    around 85 per cent of the average price in the March quarter 2019.


    The influence of the supermarket chains in the retail petrol
    market is diminishing
    The supermarket chains (Coles Express and Woolworths) recently changed how they participate in the
    retail petrol market.

    On 6 February 2019, Coles and Viva Energy announced an extension of, and changes to, their retail
    alliance. As a result, from early March 2019, Viva Energy has been setting the retail price of fuel at Coles
    Express retail sites, with Coles becoming a commission agent. Coles remains responsible for operating
    the stores and providing convenience store offerings.

    In late-2018, Woolworths announced that it would sell its 540 Woolworths-owned retail fuel sites to
    Euro Garages (EG) Group. The sale received regulatory clearance from the Foreign Investment Review
    Board in late-February 2019 and completion of the sale occurred in early-April 2019.

    Coles will continue to offer loyalty benefits and shopper docket discounts across the alliance sites.
    Similarly, Woolworths’ shopper docket discounts and Woolworths Rewards loyalty program will
    continue across the network of EG retail sites.


4   Report on the Australian petroleum market — March 2019
With these changes, the presence of the supermarket chains in the retail petrol market is significantly
    reduced from a short time ago when they had a substantial presence for many years.

    Before the changes, the supermarket chains operated and set retail petrol prices at around 1 250
    retail sites for a number of years. This represented around 17 per cent of total retail sites at the end of
    December 2018.2 At the height of their presence in the retail market in 2012-13, the supermarket chains
    accounted for 51 per cent of the retail petrol market by volume (Coles Express had 26 per cent and
    Woolworths had 25 per cent). Although the shares declined in recent years, in 2016-17 Coles Express
    had the largest share of total volume of petrol sales in Australia (around 19 per cent), followed by
    Woolworths (with around 18 per cent).3

    The ACCC intends to monitor the impact of these changes over time, including the levels of retail petrol
    prices offered by these retailers.


    Two petrol inquiries into the ACT petrol market
    commenced
    On 11 February 2019, the Chief Minister of the ACT announced two inquiries into high petrol prices
    in the ACT: one undertaken by the ACT Legislative Assembly and the other by the ACT Independent
    Competition and Regulatory Commission (ICRC). Both inquiries are to report in June 2019.

    On 8 March 2019, the ACCC provided a submission to the ACT Legislative Assembly inquiry.4 On
    28 March 2019, staff of the ACCC attended a public hearing of the ACT Legislative Assembly inquiry
    in Canberra. They noted that the major reason for higher retail prices in Canberra is weak retail
    competition and that fuel price transparency may help promote a more competitive outcome.

    The ACCC has also provided assistance and advice to the inquiry being undertaken by the ACT ICRC.


    Brisbane and Perth petrol prices were higher than other
    large Australian cities
    Brisbane prices are generally the highest among the five largest cities. However, in the March quarter
    2019, retail prices in both Brisbane and Perth were the highest of the five largest cities. Quarterly
    average retail petrol prices in both Brisbane and Perth were 131.9 cpl, 5.6 cpl higher than in Sydney
    (126.3 cpl), 1.5 cpl higher than in Melbourne (130.4 cpl) and 1.2 cpl higher than in Adelaide (130.7 cpl).


    The city–country petrol price differential decreased
    The ACCC monitors fuel prices in all capital cities and over 190 regional locations across Australia. In
    the March quarter 2019, the differential between average prices in regional locations in aggregate and
    prices in the five largest cities was 7.0 cpl. This was 4.4 cpl lower than in the December quarter 2018
    (11.4 cpl).


    Diesel and automotive LPG prices were significantly lower
    In the March quarter 2019, diesel and automotive LPG prices in the five largest cities both decreased:
    ƒƒAverage retail diesel prices decreased by 14.5 cpl, from 158.1 cpl in the December quarter 2018 to
        143.6 cpl in the March quarter 2019.
    ƒƒAverage retail automotive LPG prices decreased by 6.9 cpl, from 88.4 cpl in the December quarter
        2018 to 81.5 cpl in the March quarter 2019.


    2   ACCC calculations based on data from the Informed Sources Netwatch database.
    3   As a share of ACCC monitored companies. See ACCC, Retail and wholesale petrol market shares in Australia, September 2018,
        p. 4, at: https://www.accc.gov.au/publications/petrol-industry-reports/retail-wholesale-petrol-market-shares-in-australia.
    4   A copy of the ACCC submission is at appendix C.



5   Report on the Australian petroleum market — March 2019
ACCC regional market study locations
    Between 2015 and 2017, the ACCC undertook 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 these locations 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 these locations, and assumes that retail margins in
    these 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.

    Darwin petrol prices decreased significantly
    In the March quarter 2019, average retail petrol prices in Darwin were 130.0 cpl, a decrease of 23.1 cpl
    from the December quarter 2018 (153.1 cpl). The quarterly average price in Darwin was 0.3 cpl lower
    than the five largest cities, a decrease of 11.3 cpl in the differential between the two from the December
    quarter 2018 (11.0 cpl).

    In the March quarter 2019, Darwin GIRDs were 5.0 cpl, a decrease of 15.0 cpl from the December
    quarter 2018 (20.0 cpl). Darwin GIRDs in the March quarter 2019 were 4.5 cpl lower than the five largest
    cities (9.5 cpl) and were at their lowest level since the June quarter 2016.

    Over the March quarter 2019, the differential between rolling annual average petrol prices in Darwin
    and a rolling long-term competitive cost-based price decreased significantly. In the quarter, average
    quarterly retail petrol prices in Darwin reflected a competitive cost-based price.

    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 13 May 2019 there was a 4.5 cpl range between the highest
    priced retail sites in Darwin (144.9 cpl at four Coles Express retail sites) and the lowest (140.4 cpl at
    FuelXpress Winnellie).

    Launceston petrol prices decreased significantly but remained
    substantially above a long-term competitive cost-based price
    In the March quarter 2019, average retail petrol prices in Launceston were 146.4 cpl, a decrease of
    15.5 cpl from the December quarter 2018 (161.9 cpl). The average differential between prices in
    Launceston and the five largest cities was 16.1 cpl, a decrease of 3.7 cpl from the December quarter
    2018 (19.8 cpl).

    In the March quarter 2019, Launceston GIRDs were 19.8 cpl, a decrease of 8.5 cpl from the December
    quarter 2018 (28.3 cpl). The differential between rolling annual average petrol prices in Launceston and
    a rolling long-term competitive cost-based price decreased over the March quarter 2019, but remained
    significantly high.

    Motorists in Launceston can use available fuel price websites and apps, such as MotorMouth and
    GasBuddy, to identify the highest and lowest priced retail sites in Launceston. For example, on
    13 May 2019, using the GasBuddy app, there was a 10.1 cpl range between the highest priced retail
    sites in Launceston (161.9 cpl at one BP retail site) and the lowest (151.8 cpl at one United retail site and
    one BP retail site).

    Armidale petrol prices decreased significantly but remained above a
    long-term competitive cost-based price
    In the March quarter 2019, average retail petrol prices in Armidale were 137.7 cpl, a decrease of 17.7 cpl
    from the December quarter 2018 (155.4 cpl). The average differential between prices in Armidale and


6   Report on the Australian petroleum market — March 2019
the five largest cities was 7.4 cpl in the March quarter 2019, a decrease of 5.9 cpl from the December
    quarter 2018 (13.3 cpl).

    In the March quarter 2019, average GIRDs in Armidale were 18.0 cpl, a decrease of 10.4 cpl from the
    December quarter 2018 (28.4 cpl). The differential between rolling annual average petrol prices in
    Armidale and a rolling long-term competitive cost-based price remained broadly stable.

    Motorists in Armidale can use the FuelCheck website and app to identify the highest and lowest priced
    retail sites in Armidale. For example, on 13 May 2019, the FuelCheck website showed that there was a
    3.0 cpl range between the highest priced RULP retail site in Armidale (148.9 cpl at Caltex Armidale) and
    the lowest (145.9 cpl at Lowes Armidale). There was a 2.0 cpl range between the highest priced E10
    retail sites (146.9 cpl at three Caltex retail sites, one Woolworths retail site and one Coles Express retail
    site) and the lowest (144.9 cpl at Lowes Armidale).

    Cairns petrol prices decreased significantly
    In the March quarter 2019, the average retail petrol price in Cairns was 130.7 cpl, a decrease of 26.0 cpl
    from the December quarter 2018 (156.7 cpl). The average differential between prices in Cairns and
    the five largest cities was 0.4 cpl in the March quarter 2019, a decrease of 14.2 cpl from the December
    quarter 2018 (14.6 cpl).

    In the March quarter 2019, average GIRDs in Cairns were 6.1 cpl, a decrease of 18.7 cpl from the
    December quarter 2018 (24.8 cpl). Cairns GIRDs in the March quarter 2019 were 3.4 cpl lower than in
    the five largest cities (9.5 cpl), and were the lowest since the ACCC began collecting Cairns data in the
    September quarter 2009.

    The difference between rolling annual average petrol prices in Cairns and the rolling long-term
    competitive cost-based price was significantly lower in 2018 and the first quarter of 2019 than in 2017.
    This may have been due to more vigorous competition following the increasing presence of United in
    the Cairns area since the March quarter 2018. In the March quarter 2019, average quarterly retail petrol
    prices in Cairns reflected a 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) to identify the highest and lowest priced retail sites in Cairns. For example, on 13 May 2019, using
    the MotorMouth website (which draws on Queensland government data), there was a 9.4 cpl range
    between the highest priced retail sites in Cairns (156.9 cpl at Stratford Driveway Discount Fuels) and the
    lowest (147.5 cpl at White Rock General Store).




7   Report on the Australian petroleum market — March 2019
1.             Developments in the petroleum
                   industry
    1.1            Changes to the Coles and Viva Energy retail alliance
    On 6 February 2019, Coles Group Limited (Coles) and Viva Energy Australia announced an extension of,
    and changes to, their retail alliance.5 The new agreement took effect in early March 2019 and lasts until
    2029. As part of the agreement, Viva Energy will make a one-off payment of $137 million to Coles.

    Changes to the alliance mean that Viva Energy will set the retail price of fuel at Coles Express retail
    sites, and Coles will become a commission agent. Viva Energy will be responsible for the marketing of
    retail fuel and Coles will remain responsible for operating the stores and providing convenience store
    offerings. Viva Energy will receive a royalty on convenience store sales. Customers will receive loyalty
    benefits and shopper docket discounts across all alliance sites. Shopper docket discounts will be funded
    by Coles.


    1.2            The Foreign Investment Review Board approved
                   the sale of Woolworths retail sites to Euro Garages
                   Group
    On 9 November 2018, Woolworths Group Limited (Woolworths) announced that it had entered into
    a binding agreement to sell its 540 Woolworths-owned fuel sites to Euro Garages (EG) Group for
    $1.725 billion.6 EG Group is a fuel and convenience retailer that operates around 4 700 retail sites across
    Europe and North America.

    On 28 February 2019, Woolworths announced that EG Group had received confirmation from the
    Foreign Investment Review Board (FIRB) that the Commonwealth has no objection to EG acquiring
    these retail sites.7 Completion of the sale occurred on 1 April 2019.8


    1.3            ACCC accepted a variation to Woolworths’ shopper
                   docket undertaking
    On 1 March 2019, the ACCC announced that it had accepted a variation to an undertaking provided
    by Woolworths in 2013 relating to its shopper docket fuel discount offers. The variation changes how
    Woolworths can fund the discounts.

    Under the 2013 undertaking, Woolworths’ fuel discounts linked to supermarket purchases were limited
    in size and scope. The undertaking required these discounts to be funded only through Woolworths’
    petrol division. Given the sale of Woolworths’ service stations to EG Group, the ACCC accepted a
    variation proposed by Woolworths to vary the undertaking to remove this requirement and allow
    Woolworths to fund fuel discounts linked to supermarket purchases from outside its petrol division.



    5   Coles Group, New alliance partnership to restore leadership position and convenience trading update, ASX release,
        6 February 2019, at: https://www.asx.com.au/asxpdf/20190206/pdf/442dnsb80wsxc0.pdf, accessed on 16 May
        2019; and Viva Energy Australia, Viva Energy and Coles Express extend and strengthen the retail Alliance, ASX release,
        6 February 2019, at: https://www.asx.com.au/asxpdf/20190206/pdf/442dnngvjxnx6s.pdf, accessed on 16 May 2019.
    6   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 16 May 2019.
    7   Woolworths Group Limited, FIRB approval of EG Group’s proposed acquisition of Woolworths Petrol, ASX announcement,
        28 February 2019, at: https://www.woolworthsgroup.com.au/icms_docs/195497_firb-approval-of-eg-groups-
        acquisition-of-woolworths-petrol.pdf, accessed on 16 May 2019.
    8   Woolworths Group Limited, Woolworths Group market update, press release, 1 April 2019, at: https://www.
        woolworthsgroup.com.au/page/media/Press_Releases/woolworths-group-market-update/, accessed on 16 May 2019.


8   Report on the Australian petroleum market — March 2019
The undertaking, as varied, continues to operate after the sale of Woolworths’ service stations to
    EG Group and allows Woolworths to continue to fund the shopper docket fuel discounts it offers to
    supermarket customers. Of most importance, fuel discount offers linked to supermarket purchases
    remain limited to 4.0 cpl.9


    1.4            Viva Energy to acquire remaining 50 per cent of
                   Liberty Oil’s wholesale business and enter into a
                   retail joint venture
    On 27 February 2019, Viva Energy announced its intention to acquire the remaining 50 per cent interest
    in Liberty Oil’s wholesale business.10 The business includes a network of 17 regional storage depots,
    a transport fleet of more than 50 vehicles, and supply to a network of more than 250 dealer owned
    service stations carrying either the Shell or Liberty brands. Viva Energy acquired an initial 50 per cent
    stake in Liberty Oil’s wholesale business in 2014.

    Viva Energy and Liberty Oil will also enter into a new retail joint venture, where Viva Energy will own
    50 per cent of Liberty Oil’s retail business. Viva Energy intends on maintaining Liberty Oil Holdings as
    an independent business. The joint venture also provides Viva Energy with the option to acquire the
    remaining 50 per cent of the Liberty Oil retail business in 2024.

    The transaction is subject to regulatory approvals from the ACCC and the FIRB.


    1.5            Two petrol inquiries into the ACT fuel market
                   commenced
    On 11 February 2019, the Chief Minister of the ACT announced that there would be two inquiries into
    high petrol prices in the ACT: one undertaken by the ACT Legislative Assembly and the other by the
    ACT Independent Competition and Regulatory Commission (ICRC).11

    On 14 February 2019, the ACT Legislative Assembly referred matters related to fuel prices in the ACT
    to a Select Committee on Fuel Pricing for inquiry and report.12 The Committee is required to report by
    6 June 2019. Matters to be addressed by the Committee are:
    ƒƒfuel price methodology and key determinants
    ƒƒcharacteristics of the ACT fuel market, including historical changes
    ƒƒthe impact of fuel prices on the ACT community
    ƒƒreasons for significant pricing discrepancies within the ACT and when compared to other Australian
        communities and capital cities
    ƒƒconsideration of best practice approaches and initiatives in other jurisdictions which have a
        meaningful impact on reducing fuel prices
    ƒƒregulatory and legislative solutions and barriers, particularly around competition and retail margin.




    9   ACCC, Woolworths fuel discount undertaking varied, media release, 1 March 2019, at: https://www.accc.gov.au/media-
        release/woolworths-fuel-discount-undertaking-varied.
    10 Viva Energy, Viva Energy to acquire remaining 50% interest in Liberty Oil’s wholesale business, media release,
       27 February 2019, at: https://www.asx.com.au/asxpdf/20190227/pdf/4430df1bzjrxfm.pdf, accessed on 16 May 2019.
    11 The Riot ACT!, Dual fuel inquiries to probe ACT’s bowser pain, by Ian Bushnell, 11 February 2019, at: https://the-riotact.
       com/dual-fuel-inquiries-to-probe-acts-bowser-pain/286363, accessed on 16 May 2019.
    12 ACT Legislative Assembly, Select Committee on Fuel pricing: Invitation to make a submission, February 2019, at: https://
       www.parliament.act.gov.au/in-committees/select_committees/fuel-prices, accessed on 16 May 2019.


9   Report on the Australian petroleum market — March 2019
On 22 February 2019, the ICRC received a reference from the ACT Treasurer to undertake a factual
     analysis of petrol prices and competition in the ACT market.13 This involved consideration of a number
     of matters including:
     ƒƒcomparisons of average petrol prices and costs faced by petrol suppliers with other capital cities and
        regional towns in proximity to the ACT
     ƒƒhow petrol prices are determined in the ACT
     ƒƒthe nature of costs faced by ACT petrol suppliers
     ƒƒthe structure of the market, including any variation observed across different locations within the
        ACT
     ƒƒwhether there is effective competition in the ACT market, including whether barriers to entry exist
        and the level of information available to consumers.

     The ICRC released a draft report outlining its draft findings on 8 May 2019.14 The final report is to be
     provided to the ACT Treasurer by 28 June 2019.


     1.6            Australian Government announced changes to fuel
                    quality standards
     On 25 February 2019, the Australian Government announced the ‘Climate Solutions Package’, a
     $3.5 billion investment to deliver on Australia’s 2030 Paris climate commitments.15 This included
     changing Australia’s fuel quality standards by:
     ƒƒreducing sulphur in petrol to 10 parts per million from 1 July 2027, while retaining RULP for now
     ƒƒreducing the pool average of aromatic content in petrol from 42 per cent to 35 per cent, effective
        from 1 January 2022
     ƒƒreviewing the aromatic content in petrol limit by 2022 to set a reduced limit by 2027 or establish an
        alternative solution
     ƒƒthe Department of the Environment and Energy continuing to consult with industry on the
        remaining parameters in the fuel standards to finalise these before the current standards sunset on
        1 October 2019.16

     According to the Better fuel for cleaner air: Regulation impact statement, released in August 2018, this
     approach is estimated to deliver the following benefits and costs:
     ƒƒ$1.7 billion avoided in health and vehicle maintenance costs between 2027 and 2040. Benefits would
        increase to $2.1 billion if a reduction in the limit of aromatics to 35 per cent was also decided as a
        result of the aromatics review.
     ƒƒIn 2027, there will be a small increase of 0.9 cpl in the price of RULP, increasing to 1.0 cpl in 2030. This
        amount will then decline as lower sulphur fuel becomes the benchmark in the region.
        –– The small increase in petrol price due to the improved fuel standards is expected to be offset by
           the significant health benefits, better vehicle operability and improved fuel efficiency for those
           that purchase the advanced vehicle technology in Euro 6 vehicles.17




     13 ICRC, Petrol Price Inquiry, https://www.icrc.act.gov.au/industry-references/petrol-price-inquiry, accessed on 16 May 2019.
     14 ICRC, Commission releases draft report on the ACT petrol price investigation, media release, 8 May 2019, at: https://www.icrc.
        act.gov.au/__data/assets/pdf_file/0003/1361073/Petrol-inquiry-draft-report-media-release.pdf, accessed on 16 May 2019.
     15 The Hon Scott Morrison MP, Prime Minister of Australia, and the Hon Melissa Price MP, Minister for the Environment, Meeting
        our climate change commitments without wrecking the economy, media release, 25 February 2019, at: https://www.pm.gov.
        au/media/meeting-our-climate-commitments-without-wrecking-economy, accessed on 16 May 2019.
     16 Department of the Environment and Energy, Fuel quality standards, at: https://www.environment.gov.au/protection/fuel-
        quality/standards, accessed on 16 May 2019.
     17 Department of the Environment and Energy, Better fuel for cleaner air: Regulation impact statement, August 2018, p. xii, at:
        https://www.environment.gov.au/system/files/resources/0a047a41-f521-4f4f-8122-a114e2fb394d/files/better-fuel-cleaner-
        air-ris.pdf, accessed on 16 May 2019.



10   Report on the Australian petroleum market — March 2019
1.7            Increase in fuel excise
     In the 2014-15 Budget the Australian Government announced that it would reintroduce biannual
     indexation, by the Consumer Price Index, of excise and excise-equivalent customs duty for all fuels
     except aviation fuels. Under these arrangements excise is generally increased on 1 February and
     1 August each year. The announced excise changes took effect from 10 November 2014.

     On 4 February 2019, excise on petrol and diesel increased by 0.4 cpl to 41.6 cpl. Excise on automotive
     LPG increased by 0.2 cpl to 13.6 cpl.18




     18 Australian Taxation Office, Excise rates for fuel, at:https://www.ato.gov.au/business/excise-and-excise-equivalent-
        goods/fuel-excise/excise-rates-for-fuel/, accessed on 16 May 2019.


11   Report on the Australian petroleum market — March 2019
2.            ACCC activities
     2.1           ACCC and the petrol industry
     The 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 Oil Code.

     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 to 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 March quarter 2019
     2.2.1         ACT inquiries into fuel pricing
     On 11 February 2019, the Chief Minister of the ACT announced that there would be two inquiries into
     high petrol prices in the ACT: one undertaken by the ACT Legislative Assembly and the other by the
     ACT ICRC. Both inquiries are to report in June 2019.

     On 8 March 2019, the ACCC provided a submission to the ACT Legislative Assembly inquiry. A copy of
     the submission is at appendix C.

     On 28 March 2019, staff of the ACCC attended a public hearing of the ACT Legislative Assembly
     inquiry in Canberra. They noted that the major reason for higher retail prices in Canberra is weak retail
     competition and that fuel price transparency may help promote a more competitive outcome.19

     The ACCC has also provided assistance and advice to the inquiry being undertaken by the ACT ICRC.

     2.2.2         Variation to Woolworths fuel discount undertaking
     On 1 March 2019, the ACCC accepted a variation to an undertaking provided by Woolworths in 2013
     relating to its shopper docket fuel discount offers. The variation changes how Woolworths can fund the
     discounts.20

     The undertaking, as varied, continues to operate after the sale of Woolworths’ retail sites to EG Group
     and allows Woolworths to continue to fund the shopper docket fuel discounts it offers to supermarket
     customers. Of most importance, fuel discount offers linked to supermarket purchases remain limited to
     4.0 cpl.

     2.2.3         Stakeholder engagement and communications activity
     In the March quarter 2019, the ACCC responded to fuel-related media enquiries on price and
     competition issues. Responses were also prepared for Ministerial and other correspondence on
     consumer fuel-related price concerns, including: high fuel prices in the smaller capital cities and a



     19 ACT Legislative Assembly, Transcript of Evidence, available at: http://www.hansard.act.gov.au/hansard/2017/comms/
        fuel03a.pdf, accessed on 16 May 2019.
     20 ACCC, Woolworths fuel discount undertaking varied, media release, 1 March 2019, at: https://www.accc.gov.au/media-
        release/woolworths-fuel-discount-undertaking-varied.


12   Report on the Australian petroleum market — March 2019
number of regional locations; retail fuel price differentials between regional locations; and fuel price
     movements in the larger Australian cities.

     In the March quarter 2019, the fuel-related pages on the ACCC website received 110 889 page views, a
     decrease of 70 714 page views (around 39 per cent) from the December quarter (181 603 page views).
     Of this total, the petrol price cycle webpage received 108 557 page views, a decrease of 70 362 page
     views (around 39 per cent) from the December quarter (178 919 page views). The petrol price cycle
     webpage was the most viewed page on the ACCC website in the quarter.




13   Report on the Australian petroleum market — March 2019
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 March 2019
     Chart 3.1 shows that seven-day rolling average retail petrol prices in the five largest cities in the year to
     March 2019 were very volatile.21

     Chart 3.1:               Seven-day rolling average retail petrol prices in the five largest cities: 1 April 2018 to
                              31 March 2019
            170



            160



            150
     cpl




            140



            130



            120



               110
                     Apr–18



                                   May–18




                                            Jun–18



                                                     Jul–18




                                                              Aug–18




                                                                       Sep–18



                                                                                Oct–18




                                                                                         Nov–18



                                                                                                   Dec–18




                                                                                                            Jan–19




                                                                                                                     Feb–19



                                                                                                                              Mar–19

     Source:         ACCC calculations based on FUELtrac data.

     Retail prices were at a low of 138.0 cpl in early-April 2018. They then increased to a high of 159.9 cpl at
     the end of October 2018. This was their highest level since July 2008.22 Prices subsequently decreased
     by over 40 cpl, albeit with a short-term increase during mid-December, to end the December quarter at
     119.2 cpl.

     In the March quarter 2019, prices decreased further to 115.4 cpl in early January 2019. This was their
     lowest level since September 2016.23 Prices subsequently trended upwards and reached 144.4 cpl in
     late-March 2019.

     Average prices in the March quarter 2019 were 130.3 cpl, a decrease of 11.8 cpl from the December
     quarter 2018 (142.1 cpl). In real terms, average prices in the March quarter 2019 were the lowest since
     the September quarter 2017.




     21 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.
     22 In real terms, seven-day rolling average prices were their highest since late-July 2014.
     23 In real terms, seven-day rolling average prices were their lowest since early-September 2016.



14   Report on the Australian petroleum market — March 2019
3.2                Retail prices compared with Mogas 95 prices
     Retail petrol prices in Australia are primarily determined by international refined petrol prices and the
     AUD–USD exchange rate. The relevant international 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 March 2019. 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: April 2018 to
                    March 2019
            160                                                                                                                   100


            150                                                                                                                   90


           140                                                                                                                    80


            130                                                                                                                   70
     cpl




                                                                                                                                        cpl
            120                                                                                                                   60


            110                                                                                                                   50


           100                                                                                                                    40
                    Apr–18



                             May–18



                                      Jun–18



                                               Jul–18



                                                         Aug–18



                                                                   Sep–18



                                                                            Oct–18



                                                                                     Nov–18



                                                                                              Dec–18



                                                                                                       Jan–19



                                                                                                                Feb–19



                                                                                                                         Mar–19
                                               Five largest cities (LHS)              Mogas 95 (RHS)

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

     In the year to March 2019:
     ƒƒmonthly 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
     ƒƒmonthly average retail prices in the five largest cities varied by 34.5 cpl, from a high of 157.9 cpl in
           October 2018 to a low of 123.4 cpl in January 2019.

     Quarterly average Mogas 95 prices were 59.0 cpl in the March quarter 2019, a decrease of 4.8 cpl from
     the previous quarter.

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


     3.3                Gross indicative retail differences
     Average gross indicative retail differences (GIRDs) in the five largest cities were 9.5 cpl in the March
     quarter 2019, a decrease of 4.4 cpl from the previous quarter (see table 3.1). This was their lowest level
     since the March quarter 2015, in both nominal and real terms.




15   Report on the Australian petroleum market — March 2019
Table 3.1:      Quarterly average retail petrol prices, TGPs and GIRDs in the five largest cities: June quarter 2018
                     to March quarter 2019

                                                                    Retail prices                  TGPs          GIRDs
      Location                    Quarter
                                                                              cpl                    cpl            cpl
      Five largest cities         Jun-18                                   145.2                  132.4           12.8
                                  Sep-18                                   146.7                  136.3           10.4
                                  Dec-18                                   142.1                  128.2           13.9
                                  Mar-19                                   130.3                  120.8             9.5
                                  Year to Mar-19                           141.1                  129.4           11.7
      Sydney                      Jun-18                                   143.3                  131.2           12.1
                                  Sep-18                                   145.3                  135.2            10.1
                                  Dec-18                                   137.9                   127.0          10.9
                                  Mar-19                                   126.3                  119.8             6.5
                                  Year to Mar-19                           138.3                  128.4             9.9
      Melbourne                   Jun-18                                   146.0                  132.4           13.6
                                  Sep-18                                   148.0                  136.3           11.7
                                  Dec-18                                   143.3                  128.3           15.0
                                  Mar-19                                   130.4                  120.8             9.6
                                  Year to Mar-19                           142.0                  129.5           12.5
      Brisbane                    Jun-18                                   148.4                  132.9           15.5
                                  Sep-18                                   148.8                  136.7           12.1
                                  Dec-18                                   142.9                  128.6           14.3
                                  Mar-19                                   131.9                  121.1           10.8
                                  Year to Mar-19                           143.1                  129.8           13.3
      Adelaide                    Jun-18                                   142.7                  132.7            10.0
                                  Sep-18                                   145.1                  136.6             8.5
                                  Dec-18                                   142.1                  128.5           13.6
                                  Mar-19                                   130.7                  121.1             9.6
                                  Year to Mar-19                           140.2                  129.8           10.4
      Perth                       Jun-18                                   145.3                  132.7           12.6
                                  Sep-18                                   146.5                  136.7             9.8
                                  Dec-18                                   144.4                  128.5           15.9
                                  Mar-19                                   131.9                  121.0           10.9
                                  Year to Mar-19                           142.1                  129.7           12.4

     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.

     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.



16   Report on the Australian petroleum market — March 2019
Average GIRDs decreased in all five largest cities in the March quarter 2019. In nominal terms, they
     were their lowest since the March quarter 2015 in Sydney and Brisbane, since the March quarter 2016 in
     Melbourne, and since the September quarter 2018 in Adelaide and Perth.

     Table 3.1 shows that, in the five largest cities over the year to March 2019, quarterly average GIRDs:
     ƒƒdecreased in all five largest cities in the March quarter 2019
     ƒƒwere highest in Brisbane and lowest in Adelaide in the June and September quarters 2018
     ƒƒwere highest in Perth and lowest in Sydney in the December quarter 2018 and the March quarter
         2019
     ƒƒvaried 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 6.5 cpl (in Sydney in the March quarter 2019).

     When TGPs increase by large amounts in a short period (as occurred in the September quarter 2018
     and the March quarter 2019) lags between changes in TGPs and changes in retail prices 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.

     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.24 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 quarter
     There 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 3.3 shows the change in these components across the five largest cities between the December
     quarter 2018 and the March quarter 2019. 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).




     24 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/publications/quarterly-reports-on-the-australian-petroleum-industry/quarterly-report-on-
         the-australian-petroleum-market-%E2%80%93-september-quarter-2016.


17   Report on the Australian petroleum market — March 2019
Chart 3.3:     Changes in the components of average retail petrol prices in the five largest cities:
                    December quarter 2018 to March quarter 2019
           180
                                                                            -11.8 cpl

           160
                     142.1 cpl         -5.2 cpl
                                                             +0.4 cpl       -2.1 cpl        -0.5 cpl     -4.4 cpl    130.3 cpl
           140
                       13.9
                                                                                                                        9.5
           120

           100         52.9
                                                                                                                       52.4
                                                  -4.8 cpl
     cpl




           80
                       11.5
                                                                                                                        9.4
           60

           40         63.8                                                                                             59.0

           20

            0
                     Dec–18           Mogas 95          Exchange rate    Other wholesale     Taxes        GIRDs       Mar–19
                                                                        costs and margins

                                 Mogas 95          Other wholesale costs and margins             Taxes   GIRDs

     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 11.8 cpl in the March quarter 2019
     was largely driven by the decrease in Mogas 95 prices and GIRDs.

     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. 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 5.2 cpl in the quarter. However, the decrease in the AUD-USD
     exchange rate offset the influence of the decrease in Mogas 95 prices by 0.4 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 4.8 cpl.

     Taxes decreased slightly during the March quarter 2019, due to a decrease in the GST component as
     retail prices fell. Other wholesale costs and margins decreased by 2.1 cpl in the quarter, and GIRDs
     decreased by 4.4 cpl. Other wholesale costs and margins usually do not vary much between quarters,
     and the relatively large change in the March quarter 2019 is likely to have been influenced by the
     relatively large change in Mogas 95 prices in the December 2018 and March 2019 quarters.

     The two largest components of the average retail price—Mogas 95 and taxes—accounted for around
     85 per cent of the average price of petrol in the March quarter 2019.


     3.5              Retail prices in Brisbane and Perth were higher than
                      the other three largest cities
     In the March quarter 2019, prices in both Brisbane and Perth were the highest of the five largest cities.
     Quarterly average retail petrol prices in Brisbane and Perth were 131.9 cpl, which was 5.6 cpl higher
     than in Sydney (126.3 cpl), 1.5 cpl higher than in Melbourne (130.4 cpl) and 1.2 cpl higher than in
     Adelaide (130.7 cpl).

     Historically, Brisbane retail prices have generally been the highest among the five largest cities. Chart
     3.4 shows quarterly average retail prices in Brisbane and average prices across the other four largest
     cities (i.e. Sydney, Melbourne, Adelaide and Perth) over the two years to March 2019. Over this period
     Brisbane retail prices were on average 3.0 cpl higher than the average across the other four largest


18   Report on the Australian petroleum market — March 2019
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 3.4:           Quarterly average retail prices in Brisbane and the other four largest cities: June quarter 2017 to
                          March quarter 2019
           155




           145




           135
     cpl




           125




           115
                 Jun–17




                                     Sep–17




                                                   Dec–17




                                                                       Mar–18




                                                                                         Jun–18




                                                                                                            Sep–18




                                                                                                                     Dec–18




                                                                                                                              Mar–19
                                                            Brisbane            Other four largest cities

     Source:     ACCC calculations based on FUELtrac data.

     In the March quarter 2019, average retail prices in Brisbane were 2.1 cpl higher than the other four
     largest cities in aggregate (129.8 cpl). This was 1.2 cpl higher than the differential in the December
     quarter 2018 (0.9 cpl).

     The ACCC released its report on the Brisbane petrol market in October 2017.25 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).

     On 3 December 2018, the Queensland Government announced the commencement of its two-year
     fuel price reporting trial.26 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, Fuel Price Australia, FuelMap, Fuelify, Pumped,
     Vroom Fuel Price Compare and ServoTrack.27


     25 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.
     26 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 16 May 2019.
     27 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 16 May 2019.


19   Report on the Australian petroleum market — March 2019
3.6            Price cycles in the five largest cities
     Retail 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 March 2019, the number of price cycles in each quarter varied in
     Sydney, Melbourne, Brisbane and Adelaide. In the March quarter 2019, the number of price cycles in
     all four eastern capital cities increased from the previous quarter by one price cycle. Brisbane had the
     fewest price cycles over the year, 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: June quarter 2018 to March
                       quarter 2019

      Quarter                               Sydney          Melbourne         Brisbane          Adelaide             Perth
      Jun-18                                      4                 3                 3                4                   13
      Sep-18                                      4                 4                 3                5                   13
      Dec-18                                      2                 2                 2                4                   13
      Mar-19                                      3                 3                 3                5                   13
      Year to Mar–19                             13                12                11                18                  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.28


     3.7            Prices in the three smaller capital cities
     The differential between retail petrol prices in the three smaller capital cities (Canberra, Hobart and
     Darwin) and the five largest cities decreased in the March quarter 2019 to 9.1 cpl, compared with the
     previous quarter (15.8 cpl).

     Chart 3.5 shows that in the year to March 2019, monthly average retail prices:
     ƒƒwere highest in Hobart in 11 months, and in Canberra in the remaining month
     ƒƒin Canberra and Hobart were always higher than in the five largest cities
     ƒƒin Darwin were lower than in the five largest cities in February and March 2019, and higher in the
        preceding 10 months
        –– February 2019 was the first month since September 2016 when monthly average Darwin prices
           were below those in the five largest cities.




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


20   Report on the Australian petroleum market — March 2019
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