I live in the Southern Highlands, NSW. How come the price of petrol at BP & Shell in Bowral is always far in excess of that charged in Sydney (Sydney is about 100kms away)?- Yet the price at independent petrol retailers in locations nearby always matches the Sydney price. Can we have an investigative report on this subject in a future issue of CHOICE, please?
I doubt any investigation is needed because it is not secret. It is called capitalism with pretend competition whereby government believes businesses can be trusted to do the right thing so no regulation needed. This leads to maximising profit (and dividends and executive compensation and especially political donations) by charging what the market will bear, which is what unbridled unregulated capitalism is about.
Seems like those nearby independents deserve your business!
Don’t forget Government on all levels do not want to interfere with Petrol Prices as it will affect their GST take. If petrol sells at $1.40 per litre the GST is 1/11 th of that, $0.129 /litre, and if it is only $0.90 per litre they only receive 1/11 th of that, $0.082 /litre which is a 50% drop in revenue, so guess which price they like more? Remembering in all this that most of the Multinational Oil companies pay no or very little income tax to Australia (due to Business Tax laws that favour them) so the Government feeds their coffers off the everyday users. No cynicism was required to write this opinion, but much was felt.
Queensland tried regulating petrol prices by having outlets report the sell price 24 hours in advance and then listing that on a website. It didn’t work. The small town I lived in had a Roadhouse on the highway and two small vendors (motel & caravan park) within 2 blocks of it. The motel owner would drop his price by 0.1 cents on the Roadhouse advertised price each day to pick up some business, but the system then meant he had to nominate a price without knowing what the Big Boys had nominated. Some days he was dearer.
Using a fuel card generally means getting your fuel at a standard or cheaper price than advertised bowser price. That’s why some fuel outlets on major highways appear to be very popular (lots of trucks, cars etc) when the advertised price is higher, but there are other compensations - good food, for example.
Our local TV news shows a graphic, each night, on fuel prices in the region - where the lowest bowser price is in each town / area. We buy our fuel from the Depot, rather than the Servo or Roadhouse, as it is cheaper, but there’s no food, toilets etc.
A dated government report reinforces it is deja vu while everybody watches, wrings their hands, and government goes on to the next opportunity to spin how good they are and how bad their opposition is.
Yes please and diesel too. How come when I went on holiday recently that nearly all petrol stations ALWAYS post the same price for diesel (to the nearest 0.1c) then as soon as you get out of metro area (SW and E of WA) price invariably much lower. Transportation cost must be much higher for these regional stations yet the retail price is much lower. Price collusion in metro area seems to be only explanation I can come up with.
Your cynicism is well justified, even if your maths are a bit out.
There’ve been ~50 inquiries into fuel prices over the years, and Big Oil has walked away whistling from all of them.
The problem in some regional areas is that while there appear to be local fuel distributors, it seems they are part-owned or controlled by the companies, which may affect their pricing policies.
I’m working from memory here when I was a young driver in Victoria around 48 years ago. I seem to remember that the government had a rule that there was a maximum price for petrol anywhere in the state and it had to be within a certain number of cents of the city price. In other words, you knew the maximum allowable price of petrol not a price that a local petrol seller determined.
Sorry if my maths were out, I roughly rounded some figures so there will be a little difference but if you meant dividing by 11 to figure out the included GST it is in fact the correct way. It isn’t the same when GST is indicated after the cost when it is the 1/10 of the value such as when you see Cost $20 + $2 GST in a bill. Some businesses are lazy and work out that the GST for you by dividing the total by 10 rather than the 11.
From the GST Calculator site comes this:
How to calculate GST in Australia? When adding 10% to the price it is relatively easy (just multiply the amount by 1.1), reverse GST calculations are quite tricky:
To figure out how much GST was included in the price you have to divide the price by 11 ($220/11=$20);
To work out the price without GST you have to divide the amount by 1.1 ($220/1.1=$200)
Avoid most common mistakes when using percentages:
$200 + 10% = $220, however $220 - 10% is NOT equal $200, actually it’s $198!"
Reality is that we live in a free market economy. Any retailer can charge whatever they like, be it the corner store or your plastic surgeon. Do you want to revert to retail price maintenance (made illegal in the sixties, though it does seem to be alive and well in some industries, think Stihl and Swarovski) and have no competition at all?
While arguable, some contend a small market like Australia cannot support a functional free market with US or EU style competition. There are not enough players. The faux competition within various segments, such as petrol, makes headlines, but. The headline prices for 91 moves in lockstep and in sales regions. Even in suburban Melbourne my area is always $0.01-.02 higher than 5 km down the road, and when I head out of the metro area it goes down by about $0.02 from the metro area, as I enter the same rural shire each time - each being a different sales region.
In the metro areas we still “enjoy” the price cycles that have questionable relationship to anything excepting a game to increase the average price paid per litre. One station goes up they all magically go up the same day, the same amount. Sure there are minor +/- variations, and sure sometimes one goes up and nobody follows, but it does not pass the pub test that it is coincidental, unless every company is running to an identical business plan with identical costs and identical decision making. Maybe they are, but what are the odds? As you wrote, they can charge what they like, and with unbridled unregulated capitalism it is about maximising profit any way one can within the law. Whether the law should have a part in pricing for critical services (utilities, petrol, medical care, et al) is a difference in personal values and thus ideology.
No problem with your GST methodology, it was spot on.
It was just the use of 50% reduction (actually 35%) that varied. Companies tend to highlight small things like that, because it helps divert attention away from the core issues.
You were absolutely right to refer to the government angle; their take from fuel excise duty and GST is huge.
Nice to have some faith in Petrol pricing being transparent, fair, and accountable particularly around School Holidays and Christmas…helps your money go further…right overseas as far away from our shores as it can get. Read this nice story about how they don’t gouge:
BTW if my sarcasm wasn’t evident please feel free to add as much as you want to ensure it does stand out.
But isn’t the ACCC on top of this? They are up front with valuable help and advice although there is supposedly nothing to see here.
Drum roll [paraphrase]:
“The ACCC urges motorists to fill up before the petrol price rise on the next cycle”.
I never would have guessed that was a good thing to do! Thanks Rod Sims. You have helped 100,000s of us who might not have understood that, and who have also accepted the cycles are a normal part of the price fluctuation, no collusion, no profiteering, just good honest business.
You can’t even guess when it will rise. It takes weeks to fall then some random overnight event and the price shoots up 20 or more cents a litre. It’s not tied to any event that I can account for other than avarice and that amount of avarice almost beggars belief, almost.
As a 20 year old I used to work for a service station in outer metro Melbourne. Although illegal I remember getting phone calls to change the price to match other servos so it was competitive and relatively fair. At about that time I have a memory of the top city price being fixed and the top country price being fixed at so many cents above the city price. This kept prices reasonable. Five years later I worked in a country town for ten years. I have a feeling the regulated price had been removed. There was collusion between the servos in the town and the price of petrol was always higher than surrounding towns.
Coming forward to the present, I have travelled the East Coast fairly extensively as well as inland. There is no doubt in my mind that petrol prices are the result of collusion in many towns. Why can I see a servo on the open road with a price let’s say 136 cents a litre but not too far away I drive into a town where the lowest price might be 139 centres/lt. Since there are usually 3 to 5 servos in a town that shows that the competition is not allowed to work. Drive 20 km out of the town and petrol is down to 136 cents. The ‘lonely’ servos are the ones who could charge more because there is no competition but they don’t. Why? I live in Coffs Harbour where the price of petrol is quite often higher than surrounding towns and single servos. The locals know the prices have been fixed but what can you do except buy petrol out of town if you want to get a competitive price. Petrol is too important to leave the pricing up to the petrol companies who will gouge whenever possible. It’s time for some government price fixing.
I detest the capital city price cycles that are so contrived and unavoidable. I’ll throw my suggested solution out here again for comment:
A legislated solution whereby retailers still have the freedom to set prices.
Prices can be adjusted downwards at any time by any amount.
Prices can be adjusted upwards no more often than once daily, and the maximum increase per day is 1c per litre.
So, if a retailer chooses to increase prices by 25c, it will take them 25 days to get there, as opposed to one day as they do now.
We know that the retailers are making large profits in comparison to wholesale fuel pricing. At the top of each cycle they are laughing all the way to the bank, especially when they employ staff on lower-than-minimum wage rates.
There’s often plenty of appearance of price-fixing, exactly as you’ve suggested, and particularly so in regional areas. The difficulty from the ACCC position is proving it, since the regional suppliers will all swear on a copy of the ACL that they never, ever collude on price fixing.
The fact they’re all often charging the same price, and that price appears excessive, is mere coincidence. Apparently.
Why not combine a campaign with NRMA, RACQ etc on getting an action going on petrol pricing?
I can’t comment specifically on NRMA or RACQ - but maybe also time for a Choice test on the effectiveness/usefulness of motoring organisations - in my experience they seem to have become very mainstream, quite expensive, tailored to the core mass market not the whole motoring community and seem almost to be a travel agency with an insurance arm who spend their spare time being government apologists for so-called ‘road safety’ (correctly pronounced as ‘revenue raising’) … Which is the long way of saying I don’t think they have done squat for petrol prices or anything else motorists really care about with regard to motoring itself …
phew … sorry …