Steven Secker

Candidate for the Minnawarra ward in Armadale

Fuel Pricing

Published / by Steven / Leave a Comment

Background

In the 60s, 70s and early 80s fuel prices were fixed for all outlets, but with international oil prices varying considerably there were moves to allow the pump price for fuel to be set by the refineries and retail outlets. Up until 2000 fuel prices around Western Australia could be varied at will by the petrol stations, and significant changes were often made in an attempt to undermine competitors and gain more business for the operator concerned. Many independent fuel retailers went out of business because they couldn’t compete with larger operations run by the oil companies, and by retailers such as Coles and Woolworths. That prompted a parliamentary inquiry and recommendations to stabilise pricing.

Since 2001 Western Australia has been the sole provider of a service which stops intra-day fuel price variations, and gives consumers an opportunity to check the price of fuel at various outlets across a large part of WA at least 15 hours before those prices come into effect, and with a stipulation that prices cannot be varied except at 6am, and must be as nominated by the outlet the previous afternoon. Though a multiple outlet business can nominate one price for as many of its outlets as it desires, retail price maintenance laws are supposed to prevent collusion between businesses, and thus promote competition. WA has, for more than 16 years now, provided an example of how governments across Australia should be dealing with fuel price variations.

The Fuelwatch service is, however, seriously flawed in a number of ways.

First, when Coles Express, Caltex Woolworths, Puma, Liberty, Vibe, and BP outlets nearly all put up their prices on the same day, and to prices which differ by only a few cents, there must be some form of collusion on those prices, despite retail price maintenance rules outlawing such an activity. Indeed, Coles Express admitted openly that it was involved in a price sharing service, yet it was not prosecuted because Fuelwatch doesn’t have the legal clout to do that. According to information provided directly to me from one major outlet, Fuelwatch allows up to three outlets in the large operations to price their fuel well below the price for the other outlets. That allows operators such as Coles and Woolworths to sell fuel below cost at some outlets because it can afford to subsidise them from the price of fuel at other outlets. To me that is predatory pricing as it has been used quite obviously with the aim of pricing a competitor out of the market. I have heard talk of a price support system operated by the oil companies so that, if a nearby fuel outlet intends selling fuel at a price lower than another’s buying price then the oil company will provide a support payment to allow for competitive pricing. That’s just another form of retail price maintenance – and it depends on the company providing that support knowing what the retail price of fuel will be at other outlets, either because it effectively sets those prices or is part of an illegal system sharing prices.

Second, in normal business operations, retail outlets buy their products at a price agreed either on the day of purchase or on the day of order. Provided they can still make a working profit they can sell all of those goods at whatever price they want. Only when a retailer is trying to get established, or to get rid of non-selling stock, will the selling price be lower than the buying price. In the fuel market, however, we often see prices increase at an outlet by as much as 33c per litre from one day to another. In such cases the fuel outlet is selling below cost price before the rise, is selling unconscionably higher than the cost price after the rise, is engaging in a combination of both those situations, or is receiving some form of retail price support. None of those options should be acceptable. Further, there will not be an example of a fuel outlet trying to sell off non-selling fuel unless a particular type of fuel is to be phased out, and that would affect all outlets.

The Policy

I will push strongly for:

● each fuel outlet to be required to sell its fuel at or above its own cost, and not to be subsidised in any form;
● evidence showing relatively consistent prices rises across separate business entities to be investigated for some form of price collusion or retail price maintenance, and offending companies to be charged and face hefty penalties for such action;
● a maximum of 15% penetration of the metropolitan market by any one fuel outlet business, to ensure that there is real competition and independent outlets can survive.

Authorised by Steven Secker, 4 Dower Court, Armadale.

Leave a Reply

Your email address will not be published. Required fields are marked *