Money Your Budget Promise to end petrol gouging based on myths
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Promise to end petrol gouging based on myths

Scott Morrison's promise to stamp out bowser gouging rests on shaky premises.
Scott Morrison's promise to stamp out bowser gouging rests on shaky premises.
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Treasurer Scott Morrison is unlikely to come good on his promise to stamp out Christmas petrol price gouging because it is not illegal and there is no evidence it even happens, experts have told The New Daily.

This week Mr Morrison announced the government had granted the Australian Competition and Consumer Commission new powers to scrutinise the entire petrol supply chain in order to better understand how prices were set.

The purpose of this was to stop petrol retailers hiking prices over the holiday season.

“Australian motorists become acutely aware of the variabilities of petrol prices heading into the Christmas holiday period,” the Treasurer said.

“They need to be assured that petrol companies are playing fair and not hiking prices simply because it is the holidays.”

Channel 9’s A Current Affair got the drop on Mr Morrison’s announcement and ran a segment on it on Wednesday night.

The segment painted the government’s initiative in a highly favourable light, cutting between Mr Morrison, ACCC chair Rod Sims and disgruntled motorists at the bowser welcoming the Treasurer’s initiative.

But after investigating the issue, The New Daily found the measure is unlikely to result in lower prices, because petrol retailers and wholesalers operate in a free market, meaning they can charge as much as they like.

In Mr Sim’s words: “Price gouging on petrol … is not against the law.”

When contacted by The New Daily, the ACCC confirmed it does not have the power to force petrol companies to lower petrol prices.

That means, assuming no company in the petrol supply chain is engaging in cartel price fixing or any other illegal behaviour, the best that can come out of the measure is increased transparency and more active consumer choice.

Chris Huth, a petrol price expert and spokesperson for comparison site MotorMouth, told The New Daily it was unlikely anything illegal was going on.

“If they find some systemic problem then they might be able to do something about it. Do I think that’s likely? Probably not,” he said.

“Petrol retail is a free market, and it’s been looked at again and again, and there’s nothing going on.”

While the wholesale market and overseas supply has not been scrutinised to the same extent, Mr Huth pointed out it too was a free market.

But Mr Huth said, while little could be done about price gouging, it would nevertheless be “very interesting” to see what came out of the ACCC’s first quarterly report, due in early 2018.

On the subject of seasonal price gouging, Mr Huth said he had seen no evidence that petrol retailers lift prices at Christmas.

He said petrol prices are constantly fluctuating as a result of the “price cycle”, an economic phenomenon that affects retailers whose products are necessarily identical.

The price cycle sees competing retailers push prices down lower and lower in an effort to undercut one another. Eventually they can go no lower without hurting their business, at which point the prices rise again.

Mr Huth said a single cycle typically lasts around two or three weeks, though it can be longer or shorter.

“Christmas price gouging is a bit of a myth. If you look at the end of a price cycle, and you look at a holiday period, the likelihood is there will be a peak at some point,” he said, pointing out this could be misread as a seasonal price hike.

This year he said the peak came a week before Christmas.

Comparison website comparethemarket.com.au has predicted that the next peak will come around New Year’s Eve.

Comparethemarket.com.au spokesperson Abigail Koch said prices were currently easing across most of Australia, and advised motorists to hold off filling up their tank until as close to Christmas Day as possible.

But she added: “Even with petrol prices on their way down, the average price of petrol is still sitting at 134.2 cents per litre over the last quarter – the highest of any quarter this year, and 11.5 cents per litre higher than the last quarter [June 24 to September 24].

“I would strongly advise motorists to keep checking prices before filling up this Christmas.”

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