The head of Australia’s competition watchdog has called out petrol stations for price-gouging customers after global oil prices tumbled to their lowest level since 2003.
Although some parts of the country are reporting bowser prices as low as $1.08 a litre, the nation’s average price is currently at a 12-month low of $1.294 per litre, according to the Australian Institute of Petroleum.
And despite the price of global benchmark Brent Crude falling overnight to its lowest level since 2003 ($US24.67 a barrel), some are charging even higher than the average – drawing strong criticism from Australian Competition and Consumer Commission chair Rod Sims.
“Prices now are way higher than they should be,” Mr Sims told Alan Jones on 2GB Radio.
“World oil prices are falling, really we should be seeing prices around $1.10 or less. The only answer we’ve got is, keep calling this out.”
Global oil prices nosedived on March 9 after Saudi Arabia failed to convince Russia to cut production in response to the coronavirus.
Saudi Arabia retaliated by starting a global ‘price war’ that has pushed prices off a cliff.
Given the disagreement is unlikely to be resolved anytime soon, that means domestic petrol prices should continue to fall.
“Last week we noted that – provided the Aussie dollar was reasonably stable – motorists may be able to look forward to filling up for near $1 a litre,” said CommSec chief economist Craig James.
“Of course there is also the discounting cycle to contend with in southern and eastern capital cities.
“But we have been surprised to see Adelaide bowser prices already as low as $1.08 a litre and pump prices near $1.10 a litre across Melbourne, Brisbane and Sydney.”
Dollar a litre unfeasible
Not everyone agrees prices will drop to $1 a litre, though.
Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), agreed that prices were likely to come down, but said a dollar a litre is “nonsense”.
“Typically, a $US1 change in the price of crude oil is a one cent change in the price at the pump [in Australia],” he told The New Daily.
“We use an indicator called the TAPIS oil price which is about $US47 a barrel at the moment, so if that dropped to completely zero the most I would get at the pump is a drop of 47 cents.
If it dropped to nothing, you’d still be paying close to a dollar a litre.
The additional expenses passed on to consumers include 61 cents per litre to federal taxes and retailers’ day-to-day operating costs.
Sales volumes dropping off
Under normal circumstances, lower petrol prices mean retailers sell fuel in greater volumes.
But Mr McKenzie said the coronavirus has started to hurt service stations as fewer people make the daily commute into the city for work.
“We’ve seen a drop in recent days – it’s not huge but it’s not great,” he said.
Although most service stations are taking extra precautions to minimise the risk of contagion (including cleaning pump handles more frequently), Mr McKenzie said it will be a tough time for many retailers.
But even as Australia edges closer to a national lockdown, he doubts the government will force any to close, as supplying petrol is considered an ‘essential service’.
Even in Italy, where more than 60 million people have been forced to self-isolate, petrol stations are still up and running.
Mr McKenzie noted, however, that the coronavirus had boosted revenue at some service stations – though not through petrol sales.
He said panicked shoppers had turned to fuel retailers to stock up on items their local shops had run out of.
“People don’t want go and try at the supermarket, so they drop into their service station to pick up things like pet food and drinks.”