Nationals MP for Page Kevin Hogan makes a bit of a dill of himself over NSW North Coast petrol prices

On 23 January 2016 Nationals MP for Page Kevin Hogan was in The Northern Star newspaper crying foul with regard to a 20 cent difference in unleaded petrol prices between Ballina and Casino on the NSW Far North Coast.

He also complained that: while crude oil prices had fallen 20% this year to about $28 a barrel and were almost at a 15-year low, the cost wasn't being passed on to consumers.

Hinting at local collusion Hogan stated he had written to the Australian Competition & Consumer Commission (ACCC) seeking an official inquiry.

The first point to remember is that by June 2015 there were only an est. 6,000 service stations across Australia, down from 20,000 in 1970, and the average customer base per service station is around 2,000 people in regional areas (and well below in many towns) whereas metro/city sites have a customer base of around 4,000 to 5,000.

The second point to remember about the oil industry in Australia is that between 2014-2015 three of the nation’s seven refineries have closed or are in the process of doing so, creating Asia’s biggest fuel-import market in this country.

In its December 2015 petrol report the ACCC tells us that:

Price movements in regional locations generally lag behind movements in the five largest cities. 

This is due in part to a lower volume of sales in these locations, and hence slower replenishment of fuel stocks by wholesalers and retailers....

Retail petrol prices in the five largest cities in Australia move in cycles. These price cycles generally do not occur in Canberra, Hobart and Darwin, or in most regional locations....

As in the five largest cities, movements in retail petrol prices in regional locations are largely driven by changes in international refined petrol prices and the AUD–USD exchange rate.

However, prices are generally higher in regional locations.

A number of factors may contribute to these higher prices: a lower level of local competition; lower volumes of fuel sold; distance/ location factors; and lower convenience store sales.

The influence of these factors varies significantly from location to location.

This means that there may be substantial differences in prices between specific regional locations...... 

On Friday 22 January 2016 the crude oil price closed at US$32.19 a barrel.

However, given that Australia is now a significant importer of refined petrol it is the Singapore MOGAS 95 price of unleaded petrol per barrel (volume approx. 159 litres as the unit of measurement) which directly influences local unleaded retail prices not the price of crude oil. 

On Thursday 21 January 2016 the market price of unleaded petrol was est. A$68 per barrel (US$47.77) and, the distribution (terminal) cost per litre (inclusive of GST) was 102.4c (Sydney & Brisbane) and 101.9c (Melbourne) on Friday 22 January.

http://www.aip.com.au/pricing/marketwatch.htm

On Saturday 23 January the retail price per litre price of unleaded petrol at the bowser (based on 7 day rolling averages) was:

Casino – 108.6c

Tweed Heads South – 114.7c

Grafton – 119.9c

Lismore – 121.6c

Murrwillumbah – 128.5c

Ballina – 129.4c

[https://motormouth.com.au/ &  http://www.mynrma.com.au/motoring-services/petrol-watch/average-petrol-price.htm for Tweed Heads South & Murwillumbah].

One other thing to remember about retail petrol prices is that unleaded petrol (regular or premium grades) and diesel the price you pay includes Australian Government excise of 38.60 cents per litre (effective10 November 2014) as well as a consumption tax (GST) of 10 per cent.

Which results in this price breakdown per litre of unleaded petrol on 23 January 2016:

Casino – $1.08 (includes 49.46c in federal government taxes)

Tweed Heads South – $1.14 (includes 50.07c in federal government taxes)

Grafton – $1.19 (includes 50.59c in federal government taxes)

Lismore – $1.21 (includes 50.76c in federal government taxes)

Murrwillumbah – $1.28 (includes 51.45c in federal government taxes)

Ballina – $1.29 (includes 51.54c in federal government taxes).

So on 23 January as Kevin Hogan looked for a service station conspiracy this was the actual situation:

* up to 45.45% of the price of a litre of unleaded petrol in these six regional centres was

made up of federal taxes, probably making tax the biggest single individual component of

the bowser price;

* both taxes and refined petrol market price are beyond the control of the retailer; and 

* as only 5% on average of the retail price per litre is allowed to cover road freight costs, 

admin and marketing costs, and service station running costs like wages, rent and utilities and a retail profit margin it is unlikely that even a Ballina service station owner/operator or franchisee will die inordinately wealthy.

As for Kevin Hogan's request for an ACCC inquiry into petrol pricing on the NSW Far North Coast - he appears to have forgotten that Ballina, Murwillumbah, Lismore, Grafton, Tweed Heads South and Casino are six of the 190 Australian regional centres that it already monitors regularly, with price observations on at least 75 per cent of days in the month/year in 2014-2015 [ACCC, Quarterly report on the Australian petroleum industry—December 2015, pp.25-26]

When ACCC staff read Mr. Hogan's letter I suspect that they are going to have to stifle an urge to laugh out loud.