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Motorists gouged on fuel prices

Motorists are paying more to petrol retailers in profits since prices were first tracked in early 2004.

Petrol retailers have been accused of increasing their margins, with Commsec economists finding that the average retail margin has surged to 15.1 cents a litre, its second highest level in 9 years. The margin is the difference between what petrol retailers buy and sell their fuel for.

And data from the Australian Institute of Petroleum (AIP) has confirmed the size of the margin, which is 5 cents a litre higher than the average over the past two years. AIP data shows that the national average petrol price was 149.9 cents a litre last week, with capital city prices rising 3 cents a litre to 148 cents.

Australian Automobile Association (AAA) CEO Andrew McKellar says there are concerns that motorists are being gouged, while service stations have blamed the higher margins on lower supplies, caused by the Cootes Transport fuel tankers being taken off the road, following a fatal crash in Sydney on October 1.

Mr McKellar says that is definitely not a satisfactory explanation, according to news.com.au. He went on to say that there had been a period of sustained higher petrol margins, even before the Cootes crash. Commsec chief economist Craig James has also questioned the plausibility of laying the blame on Cootes, saying there’s been a bit of time since the issues around Cootes had finished.

Petrol retailing is already under scrutiny with the Australian Competition and Consumer Commission (ACCC) investigating the role of supermarket shopper dockets from the likes of Woolworths (ASX: WOW) and Coles – owned by Wesfarmers (ASX: WES). ACCC chairman Rod Sims has in the past suggested that they were anti-competitive and had played a role in forcing independent petrol retailers out of the market.

In some cases, the supermarket retailers have offered deep discounts of between 15 and 45 cents per litre of petrol. ACCC chairman Rod Sims has previously stated that, “If Coles and Woolworths wish to offer their customers a discount, it should be off supermarket products, not petrol.”

Woolworths operates its petrol division under a supply partnership with Caltex (ASX: CTX), and Woolies and Coles sell close to 50% of all retail petrol in Australia between them.

Foolish takeaway

As usual it pays for motorists to shop around for cheaper petrol – and avoid Thursdays, Fridays and weekends to fill up.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. You can follow Mike on Twitter @TMFKinga

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