Source: Australian Ministers for Regional Development
The ACCC has granted an urgent interim authorisation to the Australian Institute of Petroleum (AIP), its members, and other relevant industry participants to coordinate in managing impacts to Australia’s fuel supply chain stemming from the conflict in the Middle East.
The interim authorisation means the companies can discuss, exchange information about, and coordinate on the supply of fuel in locations across Australia to alleviate shortages without risking a breach of competition laws.
Authorisation has not been sought, or been granted, for fuel suppliers to share information about or reach agreement on price.
“We have urgently assessed and granted this interim authorisation, received late Wednesday, because we recognise the impact of the current situation on consumers, businesses, and farmers,” ACCC Chair Gina Cass-Gottlieb said.
“We recognise how critical it is that industry is able to quickly and efficiently coordinate and respond to the supply chain disruptions we are experiencing.”
“However, allowing the major fuel companies to coordinate raises real risk of harm to competition. We are granting the urgent interim authorisation with conditions to mitigate this risk,” Ms Cass-Gottlieb said.
It is a condition of the authorisation that each applicant must take actions consistent with direction or advice of the Commonwealth, states and territories in relation to prioritising and facilitating the supply of Fuel Products to independent distributors and wholesalers.
In addition, the ACCC has imposed conditions to the authorisation that seek to maintain independent fuel distribution.
“We note that independent suppliers are part of their local, regional communities and have established relationships in their areas. They are a crucial part of supply chains in this market and need to be part of the solution to the fuel supply issues, including by receiving adequate allocations from the major suppliers,” Ms Cass-Gottlieb said.
The ACCC will shortly commence public consultation on the application for a final authorisation.
More information, including a copy of the application for authorisation, and the ACCC’s interim authorisation decision, will be available on the ACCC’s public register.
Fuel prices rise as international price volatility continues
Today, the ACCC also published its second weekly petrol and diesel price monitoring update which showed petrol and diesel prices continued to rise in the past week but less sharply than at the start of the current Middle East conflict. Consumers continued to experience shortages in some locations as demand increased.
The ACCC has increased its monitoring of the fuel industry from its usual quarterly reporting to weekly reporting.
In last week’s update, we observed average retail petrol prices in many cities increasing as fast as indicative wholesale prices. Some fuel businesses have told the ACCC that, rather than setting retail prices based on the cost of fuel in their storage, they have moved to prices based on what it will cost them to restock at current prices, given the risk and volatility in international markets.
“Our latest analysis shows that while retail prices continued to rise, very sharply in some areas, the size of the increases has reduced during the past week,” ACCC Commissioner Anna Brakey said.
“In many cities, over the last week the difference between daily average retail petrol and diesel prices and indicative wholesale prices (terminal gate prices) narrowed.”
“We know that households and businesses are feeling the impact of these disrupted and volatile market conditions. We urge fuel retailers to be honest and fair with their customers. Consumers can access information on our website, and we encourage them to use fuel apps to find retailers with lower prices and reward them for offering a better deal,” Ms Brakey said.
International crude oil and refined fuel prices continued to move higher, particularly benchmark prices for refined diesel (Singapore Gasoil 10 ppm). The benchmark price is up 18 per cent from the previous week, influenced by tighter diesel supply and reduced availability of suitable Middle Eastern crude oil.
Weekly average international crude oil and refined fuel benchmark prices
Source: ACCC calculations based on data from Argus Media.
The international benchmark price for refined petrol, Singapore Mogas 95, was around 127 Australian cents per litre (cpl) in the week to 18 March, an increase of around 21 cpl from the previous week.
In the week to 18 March, weekly average Gasoil 10 ppm prices, in Australian cents per litre, were around 165 cpl, an increase of around 25 cpl from the previous week.
Capital city petrol and diesel price movements
Across the five largest cities, daily average retail petrol prices on 18 March were 234.1 cpl, an increase of 14.4 cpl from the previous week.
On 18 March, Perth had the highest daily average retail petrol prices among the eight cities (240.1 cpl) and Canberra had the lowest (232.0 cpl).
For diesel, retail prices across the five cities were 275.7 cpl on 18 March, an increase of 35.4 cpl from the previous week.
On 18 March, Melbourne had the highest daily average retail diesel prices among the eight cities (277.6 cpl), and Perth had the lowest (273.0 cpl).
Fuel prices in regional locations
The new weekly report also includes retail regular unleaded petrol and diesel prices in over 190 regional locations giving a more comprehensive picture of fuel prices across Australia.
Most regional locations across Australia have also experienced sharp retail price increases. The size of increases in regional locations has varied, due likely to a range of factors, including local supply stability and unexpected demand.
The ACCC’s first report covering the period since the start of the conflict is available on the ACCC website. The next weekly fuel price monitoring report is due to be published next Friday.
The ACCC also this week met with executives from major fuel companies to set out its expectations and to discuss the impact of price spikes and supply issues for consumers and businesses.
Note to editors – Authorisation
ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act (CCA).
Section 91 of the CCA allows the ACCC to grant interim authorisation when it considers it is appropriate. This allows the parties to engage in the proposed conduct while the ACCC is considering the merits of the substantive CCA authorisation application.
The ACCC may review a decision on interim authorisation at any time, including in response to feedback raised following interim authorisation.
Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
Notes to editors – Fuel monitoring
The international benchmark price for refined fuel is the largest component of retail fuel prices. The international benchmark for Australian retail petrol prices is Singapore Mogas 95 (Mogas 95). The international benchmark for Australian retail diesel prices is Singapore Gasoil 10 with 10 parts per million sulphur content (Gasoil 10 ppm).
Both petrol and diesel are refined from crude oil, and their prices generally tend to follow similar movements over the long term. However, the different fuels have their own supply and demand characteristics (for example, compared with petrol, diesel also has remote energy generation and industrial uses) and the different refined fuels have their own international benchmark prices. It is these benchmarks that drive retail diesel and retail petrol prices.
Australian retail fuel prices are largely determined by movements in international benchmark refined fuel prices (which are driven by international crude oil prices), and the AUD-USD exchange rate. International benchmark prices movements drive domestic wholesale prices, which then influence retail fuel prices.
Additionally, in the five largest capital cities (Sydney, Melbourne, Brisbane, Adelaide and Perth), retail petrol prices move up and down in regular patterns, known as petrol price cycles. The ACCC website has more information on these price cycles. Retail diesel prices do not move in cycles.
Terminal gate prices are prices that wholesalers charge for petrol and diesel in the spot market. The major wholesalers post these prices on their websites on a regular basis. Although few wholesale transactions occur at terminal gate prices and actual costs can vary across brands and cities, they are typically indicative of average wholesale prices. Terminal gate prices are indicative of the wholesale price of petrol or diesel only, and exclude transport and other retail operating costs. The ACCC recently heard from market participants that some transactions have been quite different to published terminal gate prices.
Background
The ACCC is an independent statutory government authority and Australia’s peak consumer protection and competition agency.
The ACCC uses a range of tools to promote compliance with the Competition and Consumer Act and the Australian Consumer Law.
The AIP is a representative body of the Australian petroleum industry. Its members are the largest four oil companies, Ampol Limited, BP Australia Pty Ltd, Mobil Oil Australia Pty Ltd, and Viva Energy Australia Pty Ltd.