A Touch Of Reality Called For In Petrol Price Argument

A Touch Of Reality Called For In Petrol Price Argument

Publication date
06 Jul 2001
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The Australian Institute of Petroleum today suggested a touch of reality was required in the current debate on petrol prices.

"The attached table published by the International Energy Agency (IEA) clearly shows that the Australian petroleum industry is intensely competitive and is recognised as delivering petrol prices among the lowest in the western world" the Executive Director of the Australian Institute of Petroleum, Mr Bryan Nye, said today.

"Continually attacking oil companies and interfering in the wholesale and retail markets through regulation can only lead to higher prices. There are many examples where countries or governments have interfered in the market and higher prices have resulted!" Mr Nye said. If any government is serious about petroleum market reform they should look at the current industry structures and regulatory framework.

"If any government is serious about petrol prices, it should defend the market and reject ill-founded calls for regulation."

"The latest call is to limit the discounting that drives price volatility. Regulation may reduce the volatility of price cycles but the average price of petrol will rise"

The Australian Institute of Petroleum year 2000 survey of the number and ownership of service station sites around Australia shows that of 8730 service stations only 2757 sites were owned or leased by the major oil companies or their equity distributors, and of these only 315 were directly operated by a major oil company.

The other 5500 independent retailers are free to set whatever prices they want and they are able to discount at any time. Despite frequent claims to the contrary, wholesale pricing to independents is very competitive.

"It is true that intense competition in the industry sees oil companies offer support to their franchisees which are mainly located in capital cities, to allow them to discount their product in order to protect market share, but it is this pricing competition that delivers Australian motorists among the cheapest petrol in the world."

"It is this vigorous competition among all players - both refiner marketers and the independents - which yields the low comparative prices that Australian consumers enjoy."

It has been claimed that the independents are the key to keeping prices down. They certainly are a contributor to competition. But they are no more important to a competitive market and keeping prices down than each of the refiner marketers who also compete vigorously and have done so for years. This is clear from the IEA comparisons over many years."

"We already have a very competitive petroleum market. Regulation will mean less competition and higher prices." Mr Nye concluded.