The competition regulator, the Australian Competition and Consumer Commission (ACCC) has asked Australia's major petrol retailers to explain why motorists are still being charged so much, despite oil prices plunging by 70% in the past 18 months.
The Brent Crude oil price has dropped from above US$100 a barrel in 2014, to just above US$32 a barrel currently and 11-year lows, thanks to a massive global oversupply.
The ACCC says prices have decreased in its latest quarterly report to the end of December 2015, but prices are not as low as expected. Chairman Rod Sims said, "The decrease in prices over the quarter was welcome news for motorists", (at an average of 124.4 cents per litre across the five largest cities).
As the following chart shows, despite crude oil prices at the same level as in 2004-05, Australians are still paying more for their petrol.
Mr Sims also noted that motorists are not fully benefitting from low crude oil prices and that the difference between crude oil prices and international refined petrol prices (the refiner margin) in 2015 was high. He also added that these refiner margins are outside Australian control, but stated that higher gross retail margins in Australia were also a factor in higher petrol prices.
Free instant petrol price information
The ACCC took court action against five petrol retailers and petrol price information exchange service Informed Sources last year, which was resolved in December 2015. As a result, Informed Sources will make petrol price information available free for consumers on a near real-time basis at the same time as the retailers.
The five retailers were 7-Eleven, BP, Caltex Australia Limited (ASX: CTX), Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Ltd (ASX: WES).
Tax and refiner's margin
However, the action by the ACCC may still not resolve the issue of Australians paying too much for their petrol. For one, Australians are still paying nearly 50 cents a litre in tax, and secondly, as previously stated, we have no control over the refiner's margins – which the ACCC estimates are double their long-term averages.
As we've previously reported, Caltex expects to report a record full-year profit this financial year (FY15) – which includes $400 million in earnings before interest and tax (EBIT) from its Lytton refinery, compared to $218 million in 2014 and just $134 million for the first half of 2015. Caltex also says its refiner margin is around US$16 per barrel. If that's not a part explanation of why we are still paying more for petrol than we should, I don't know what is.
Foolish takeaway
There's no doubt petrol prices are falling, but it still seems as though we are being ripped off. The Australian Institute of Petroleum says around 20% of our petrol is imported, mostly from Singapore – but if 80% of our petrol is produced in Australia why are our petrol prices based on Singapore fuel prices?
