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Regional Australia is being shafted at the bowser

Frank Zumbo

by Frank Zumbo

07 Dec 05:35am

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Filed under: Accc, Petrol, Regional Australia, Supermarkets

50 comments

Have you ever driven around regional Australia and found large discrepancies in the petrol prices at different regional centres? Do you ever wonder why petrol prices are different in different suburbs? And have you ever been annoyed that the price of the same item may be different at different Coles or Woolworths supermarkets in the same neighbourhood?

Even this far out you can't escape the greedy petrol kings. Photo:Road LessTravelled

Well, what you’re witnessing is the practice of geographic price discrimination. It’s common among our major supermarket chains and oil companies. At its simplest, geographic price discrimination means that consumers in some areas are paying a higher price for the same item than they would otherwise have paid elsewhere.

There are plenty of examples of geographic price discrimination. Petrol pricing is a well known example. Those who live in the city see it every day when they drive to work, school or the shops. Petrol prices will vary from suburb to suburb with the same petrol retailer charging a different price for the same petrol at their different outlets.

It’s even worse in regional areas. Here motorists will not only be hit with prices generally higher than those in metropolitan areas, but they are typically hit with prices higher than other comparable regional centres in the particular State or Territory. In fact, the prices in regional centres across a State or Territory can be up to 15 cents or more a litre higher than the cheapest regional centre in the particular State or Territory.

For many regional motorists there’s no such thing as everyday low petrol prices given that it’s more like an everyday rip off as compared to their city cousins and fellow motorists in the cheapest regional centres. And don’t be fooled by suggestions that it’s the cost of transport that inflates the price of petrol in regional areas. Transport is a tiny fraction of the price of petrol and, more importantly, doesn’t explain what can be significant discrepancies in the price of petrol in adjoining regional centres.

Also don’t be fooled into thinking that price discrepancies can be explained by differences in volumes of petrol sold in a regional centre as this doesn’t explain the significant discrepancies in petrol prices in regional centres where comparable volumes may be sold and which are comparable distances from terminals where petrol supplies are obtained.

There’s no disguising that geographic price discrimination is a blatant tactic to extract more money from some consumers. These consumers are being ripped off by a retailer every time they are charged a higher price for a product that other consumers can buy for a lower price from the same retailer at another location.

Why the difference in price? Quite simply it’s because the retailer can get away with charging a higher price in some locations. Here the free market theorist will get excited and say that the price differences are a reflection of “competition” and consumers should be pleased to be getting “cheaper” prices in some locations.

But what about those consumers who are getting ripped off? Interestingly, the free market theorists generally don’t have anything to say about the rip off in those locations where retail prices are higher.

As usual the free market theorists tend to be simplistic in their analysis. Could it be that the free market theorists consult for or are just apologists for the dominant players ripping off consumers at some locations? Or could it just be a case of the free market theorists failing to properly acknowledge market failures or distortions?

All too often market failures or distortions cost consumers dearly and geographic price discrimination is no different. A dominant player charging different prices in different local markets creates a market distortion because some consumers are being gouged as a result of a lack of true competition in a particular local market.

To fully understand the price gouging nature of geographic price discrimination we need to delve deeper into the price gouging tendencies of dominant market players. Put simply dominant players are there to raise prices and profit margins at the expense of consumers. Dominant players will only discount where they need to. Typically, it’s to take on a local competitor.

In the absence of a local competitor to take on the dominant player it’s clear that a dominant player will generally have no inclination to unilaterally reduce the price of products over a prolonged period as that would simply cut their profit margins.

Naturally, there may be sporadic or highly publicised price cuts on particular products by a dominant player, but these are just gimmicks to give the impression of a “competitive” player. Here the mindset of the dominant player is simply to hook the punters through a pricing gimmick on some products so as to fleece them on the other products they may buy while they are shopping at the dominant player’s outlets.

Apart from these gimmicks to lull consumers into a false sense of security, a dominant player will only lower the price of a product when it’s forced to by the competition in the marketplace. It’s the presence of independently minded competitors in the marketplace that keeps the dominant players honest.

Reduce the numbers of independently minded competitors in the marketplace and you reduce the level of real price discounting in the marketplace. Likewise, reduce the number of independently minded competitors in the marketplace and you reduce the depth and duration of any price discounting.

Clearly, it’s the type of competitor in a local market that’s important. Since comparable competitors tend to compete or behave in a comparable way we need competitors in local markets that are independently minded.

So while Coles and Woolworths may be competitors in a general sense they are really just comparable competitors in that they generally copy one another’s pricing strategies. Ultimately they are like-minded competitors who will behave in a like-minded way. It’s only where there is an independently minded player in a local market that we see lower prices from Coles and Woolworths in that market.

It’s no surprise that the ACCC has found that grocery prices are lower at a Coles and Woolworths where there is a strong independent in the local market. Even with petrol it’s clear that prices are lower where there is a strong independent in the local market.

That’s why we need strong independents in local markets around Australia to keep Coles and Woolworths in check and that’s why the Federal Government and the ACCC need to toughen up our merger laws to stop Coles and Woolworths from acquiring independents where that lessens competition in a local market.

With the cost of living pressures almost certain to be a Federal election issue you would like to think that all political parties will make a big push to strengthen our competition laws during 2012 for the benefit of all consumers.

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50 comments

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    • acotrel says:

      05:55am | 07/12/11

      It is common practice in country towns that established businesses will undercut newcomers until they go under, then put their own prices back up again.  Also the local councils know they’ve got a monopoly so the rates in our town are effectively double those in a capitol city.  Freight charges are added to every item, and the phone bill is a major expense.  That’s the price we pay for a reasonably decent lifestyle.  In our town you leave when you want to get there, and we have a circle of real friends.  However there’s no work unless you are one of the ‘in crowd’.  But we always have a good feeling about the world.
      It is probably about time state and federal governments to take a positive approach to decentralisation, and remove the inequities.  We need much bigger populations in our country towns.-  A lot depends on economies of scale.

      Reply

    • laura says:

      11:35am | 07/12/11

      lol, ummmm, every council has a monopoly, even city residents can not decide to go to a different council if they don’t like the one they are in. Local government areas are spatially based, just like town borders.

      Rates are based on a set percentage of property value. This percentage is set by the councillors who you vote in. Rural Councils have alot more roads and bridges to maintain than city councils, where as city councils will have a lot more footpaths and parks.

      Rural councils also provide a lot of services that the metropolitan councils don’t have to provide. Our council runs the child care centres, senior citizens services as well as providing a clinic so that they can attract doctors etc.

      Melbourne city council, makes in one day of Parking fees the entire budget of alot of rural councils.

      You expect the same service as you would get in a city but then bitch and moan that you have to pay for it. Well, where else is the money going to come from?

    • Nathan says:

      06:01am | 07/12/11

      I get the point you are making in regard to competition and cost of living, whilst a good point the specific example of rural residents paying more for Petrol doesn’t really concern me a great deal. In the country allot of others things are cheaper, rent and property prices compensate nicely for petrol prices i would of thought.

      Reply

    • acotrel says:

      06:22am | 07/12/11

      @Nathan
      ‘In the country allot of others things are cheaper, rent and property prices compensate nicely for petrol prices i would of thought.’
      You mentioned the only two things that are cheaper.  In our town you can buy a house for about $300,000 compared with the same for about $450,000 in a capitol city.  For that you also get a hard time finding work, and doubled rates.  That alone would cut out the difference over about 15 years.  What is missing are jobs in manufacturing industry.  In our town we have a privatised defence factory which employs a few . There is also an electrical transformer manufacturer, and a spinning mill which is currently closing. There is a TAFE which mainly trains in things such as the hospitality industry, and small hospital which employs a few .  For a professional used to working in engineering businesses - forget it ! I am retired and self-funded.  That won’t last forever, then I’ll be at the mercy of C*ntlink, or I’ll have to think a lot differently, and find another avenue to maintain a vestige of a real life.

    • Nathan says:

      06:44am | 07/12/11

      @actorel
      I get your point that you made in particular manufacturing jobs, really that is down to the state and federal governments doing more to encourage businesses to regional Australia. But at the end of the day if a country town is suffering and no new companies are coming into replace the ones closing you have to move to where the work is.

      As far as professional work goes i don’t have any sympathy if the jobs are not there. I know that i would prefer to live some where else but i also know the work i want is not there and that dictates my decision.

    • Budz says:

      07:56am | 07/12/11

      The reason manufacturing isn’t where you live is probably because there isn’t the talent pool required to start up there.
      And also Australian manufacturing is a struggling industry on its way out.

    • acotrel says:

      08:32am | 07/12/11

      @Budz
      It’s a chicken and egg situation.  The TAFEs up here don’t usually teach technical engineering or science type subjects because there is little call for that stuff in a rural economy.  So technology people are thin on the ground. The fundamentals such as project management are certainly not taught, even though infrastructure development is a priority.  But what can you expect when academics decide what is relevant to rural growth, and set the curriculum accordingly ? It is a job requiring government intervention, and a real will to develop regional centres. We should start by subsidising freight charges and communications. The biggest disincentive for businesses starting up in the regions, is the tyranny of distance.  The NBN will probably help - it cannot come quickly enough.

    • acotrel says:

      08:41am | 07/12/11

      @Nathan
      ‘I know that i would prefer to live some where else but i also know the work i want is not there and that dictates my decision. ‘

      I left Melbourne in 1999 after spending 57 years there.  I should have moved 50 years earlier.  In Benalla, I actually feel alive - Melbourne is a living death.  I’m certain that if I hadn’t moved I would have died about 8 years ago with my heart and stroke problems.  I’ve changed my life, remarried, retired, started a motorcycle club at Winton Motor Raceway.  These days I get up in the morning and decide what I WANT to do for the day.  I sometimes think about working again, but then I think I might rather starve.

    • Min says:

      05:06pm | 07/12/11

      @Acotrel: There is no way a $300K house in Benalla is $450K in the city. More like $600-$700K at least.  The mortgage differential on that $300K at 6% is $18K a year or about $350 a week, after tax, in hand.

      That’s a pretty big saving.  So if petrol is even 20c a litre more expensive in Benalla then you’re looking at 1750 litres of fuel a week to make up the difference….

    • I hate pies says:

      05:46pm | 07/12/11

      Min, you’re forgetting the real kicker - wage differentials. House prices may be cheaper in the country, but you get paid a heap less as well. Overall I’d say the wage/house price ratio would be fairly comparable.
      By the way, cheap housing isn’t an excuse for ripping you off at the bowser.

    • PW says:

      06:16am | 07/12/11

      If the price of fuel in the bush were such a huge problem, you’d see Corollas and smaller being driven in a frugal manner in order to consume less of it. But you don’t. You see large vehicles being driven in a maniacal manner, just like in the burbs. This tells me the price of petrol is not too high at all. People just love to whinge.

      Reply

    • acotrel says:

      06:47am | 07/12/11

      @PW
      The price of petrol in the bush is a minor factor, it just happens to be another disincentive to decentralisation.  My car is a Mazda 6,  which has a 6 speed box and cruise control.  I can get to Melbourne from Benalla, drive around a bit, and get back for $60.  It costs about $20 on the train but you have to put up with the public transport bullshit in Melbourne, and a $10 taxi both ways in Benalla, unless you are prepared to leave your car at the station. You wouldn’t do that if you wanted to stay overnight in the smoke. Many of the peole you see driving 4wd vehicles on country towns actually have a real need for them, and sometimes the mud on them even comes from really going off-road.

    • TS says:

      07:05am | 07/12/11

      Perhaps because actually ‘in the bush’ (ie beyond Dubbo), 4wds are a fact of life if you want and need to get around. Try driving to Walgett and tell me how your Corolla copes on the Kamilaroi highway during wheat season. Drive via Burren Junction, or better yet, go from Moree to Lightning Ridge via Collarenebri and see how anything not 4wd and miles off the ground copes with the black dirt.

      Wake up to yourself.

      Price gouging is ridiculous in the extreme. There are no Coles or Woolies for 100’s of kilometers in some of these regional centres (which is a good thing by and large), and no choice in fuel. 2 servos each with 4 bowsers maybe, you get what you get and don’t complain. It’s part of being out in whoop whoop. Same as overpriced milk with short expiry dates and ‘fresh’ fruit and vegetables (lol).

    • Lexi says:

      07:06am | 07/12/11

      Or maybe people drive utes and 4WDs because, unlike the people of Mosman, we actually need them for our jobs (driving on lose gravel roads at mine sites, long dirt driveways of farms, carrying materials for trades) and the diabolical state of our roads? Because when you’re driving home at sunset in Bondi you’re not likely to come into contact with a kangaroo, but let me tell you, I wouldn’t want to be driving a corolla in Holbrook or Moree when a big red bounds out in front of you.  So easy, when you live in a city, to make these judgements of regional living. And to make regional and rural Australians,who produce more of our nation’s GDP per capita, seem like whingers.

    • pw says:

      07:21am | 07/12/11

      So if you really need a vehicle that consumes fuel at a prodigious rate, you pay for it. If I really need something, I pay for it. What is wrong with that?

      Fuel is never going to cost less than it does now. It is always going to cost more, eventually much much more. Every one of us, wherever we live, is then going to have to think seriously about whether we really need to do every trip we do. The more it costs you, the sooner this time comes about.

      You can whinge all you like, it won’t help. Fuel is already considerably cheaper than it should be.

    • marley says:

      07:39am | 07/12/11

      @PW - if you re-read the article, you will see that Frank is making the point that the rural regions are being gouged on petrol prices because the differential between city and bush costs are less than the difference in the price at the bowser.

      And though this may not have occurred to you, that means that you, the city dweller, will end up paying inequitable prices for food because of the associated transportation costs arising from the petrol companies’ profiteering.

    • PW says:

      08:10am | 07/12/11

      Yes I know what Frank is saying. He is saying what he always says. THis or that costs too much. Then he explains exactly why it is this way. It’s all about competition and the price the consumer is willing to pay. So the price of a litre of fuel is not the same in different places.

      This is all basic economics. The only real solution is for Government to subsidise some areas at the expense of others, but like the First Home Owners Grant, this will then skew the market further and prices will be adjusted accordingly. There is nothing you can do about fuel prices. Face the fact. You may, however, be able to do something about your own consumption. In due course, you will have to.

    • ibast says:

      09:11am | 07/12/11

      Agree and disagree PW.  Small cars don’t offer the big fuel advantage in the country, that you see in the city.  For the bigger distances you’ll take the big car.  Petrol would have to be about $3 to influence that.

      Still the number of 4wd in regional areas is a want rather than a need.  I spent a lot of my youth in these areas and can confirm the 4wd in these numbers is a relatively new thing.

      And I agree, petrol is too cheap.  It does need to be dearer so it becomes a true factor in buying a car.  At the moment it’s not.  At least not for anyone that can use a calculator.

    • PW says:

      02:05pm | 07/12/11

      ibast

      There is certainly some truth in this, however I drove from Sydney to Cobar and back last year and achieved 16.5km per litre in a Lancer (2007 manual). It’s not even that small, more like medium sized. It’s how you drive too, and especially the speed you do. If you can sit on 90km/h and not go crazy you’ll typically save 25% as against 120km/h, due entirely to the exponential increase in wind drag as speed rises. But of course it will, take 25% longer to get there. The vast majority seem to choose the time saving over the fuel saving, which brings me back to my original point that the majority of motorists consider that the price of fuel is not really too high, despite all the whinging. If it were more drivers would be sitting on 90km/h, no matter what the vehicle.

    • Don says:

      02:56pm | 07/12/11

      Amen to the replies. Try living in a place like Cobar where there is effectively a curfew on the major roads leading out at night if you don’t have a decent roo bar. Sure you might make it a few times but eventually you will end up a big bugger in your passenger seat….if you are lucky. Seriously, if you don’t know what you are writing about try and learn better yeah?

    • peter says:

      06:53am | 07/12/11

      We must be talking aboout white towns here!

      Reply

    • Nafe says:

      07:45am | 07/12/11

      I didn’t know Towns were segrigated….. Gee it really has been a long time since i have been to the bush then. When did this happen? Had to have been in the last 3 days.

    • acotrel says:

      08:46am | 07/12/11

      I had to laugh when I was buying my house in Benalla.  The agent proudly told me there were no aborigines in the town - it was a selling point.  He looked me sort of strangely when I burst out laughing at him - so politically incorrect - don’t you just love ‘em ?

    • Nafe says:

      09:52am | 07/12/11

      acotrel, very interesting, I never actually thought about that being a selling point, nor have i ever thought about that within my scope of wants or needs when purchasing a property, obviously it is for some…. which is kind of disapointing really.

      Being a city boy there may be reasons for country folk to actually be concerned about it, as i know there have been sporadic problems is some areas but never actually realised it would be bad enough to use as a selling point.

    • acotrel says:

      10:21am | 07/12/11

      @nafe
      I was talking to one of the local cockies a while back, and asked him whether he liked Vietnamese.  He said ‘No, I don’t’.  Then I asked him had he ever met one.  He said ‘No I haven’t’ !
      I know I’ve got a strange sense of humour, but I find this stuff funny. It really shits me however, when the pollies play with it.  The asylum seeker stuff was disgraceful.

    • acotrel says:

      10:59am | 07/12/11

      In our social gatherings, there is an unwritten rule tha t we never discuss politics.  We recently had a rabbitt come into the group who started the crap off, and his lady warned him off.  He’s gone, but he left another behind him.  The latest effort was a snide remark about ‘do gooders’, at our christmas party.  It was relevant to people who show common decency towards aborigines, and newcomers !  In the bush there seems to be more of that sort of ignorant idiocy.  It’s where the Pauline Hansons come from. It is not really that common, most people are very reserved.

    • Paul M says:

      01:49am | 08/12/11

      I also am a city leftie. Unlike a lot of city lefties, however, I have at least driven through Katherine and Cobar and seen the boongs just hanging around. There are an enormous number of things that people like me don’t get, not least the cultural differences between aboriginies and whites with regards to property (they basically don’t get the idea of it).
      Only people who are all hippie about regional aboriginies are people who don’t have to deal with them on a day-to-day basis: urban office workers, mainly. Heck: even the hippies who live out a woop-woop don’t like ‘em.

    • Tim says:

      07:04am | 07/12/11

      Yes I agree,
      The number one form of geographic price discrimination being property prices.
      It’s ridiculous, surely the government should do something?

      Reply

    • Lexi says:

      07:31am | 07/12/11

      Property prices are not set by multinationals (like petrol). They are set by the idiots who will pay a million bucks for a run down semi that’s in a trendy location.

      Remember also that wages in regional areas are much, much lower on average than in cities. We also pay more for the fresh produce we grow (because it’s sent from point of origin, to city markets, where supermarkets buy it, then send it to their warehouses, where they send it back to where it was grown). 

      Every time the government “does something” on property prices, it only makes them higher - eg first home owners’ grant. Until supply outstrips demand, then the cycle continues. When supply does outstrip demand, city people will be crying poor because they’re not getting the capital growth on their property they expected.  Once you’re in the market, you don’t want anything to change - so what would you like the government to do about the vested interests of millions of homeowners?

      Try telling your property woes to people who own residential property in regional towns that are affcted by the MDB plan, whose property prices have already plummeted. And the plan hasn’t yet been enacted. How much worse can it get for those people? They will probably owe the bank more than the property is worth if they can find a buyer when their job is axed.

    • Sam says:

      09:22am | 09/12/11

      @paul m
      Aboriginals laugh at your type of ignorance, who would want to be like you, whites can live in each others shit, the most sucessful mammal colinisers are rodents, no wonder the citys smell like a rat cage, so called civilisation my ass, no wonder you lot had diseases and shit, to stay in one place on top of each other like a bunch of mice struck with fear is not smart and obviously your not either

    • Mahhrat says:

      07:33am | 07/12/11

      To me the argument could be resolved very simply.

      The interest rates is a great example.  Whenever RBA raises the rates, it gets passed on.  This is explained very simply as “Costs have gone up.”

      When the RBA lowers their rates however, we get all kinds of complicated jargon about international monetary rates and a bunch of other excuses for why rates can’t come down as simply.

      That’s just one of many examples.

      All the ACCC needs to do is call BS on the BS.  They won’t though, because keeping us genuinely afraid for our own security is a great way for government to promote it’s own worth to us, so they hobble the ACCC.

      Here’s the rub though:  We’re actually in a pretty good place.  Why the government would allow things to become as bad as they’re getting is really shortsighted.  What I don’t get is why we aren’t wiser to it; that’s the failing of humanity here is Oz that’s really upsetting.

      Reply

    • Dr.Bob says:

      07:49am | 07/12/11

      I’ve done most of my shopping on-line for years, since living in North America for a while and being shocked at Aussie prices on my return. The largest item was a new gear-box for my yacht, air-freighted to my doorstep from England for under $1000, after I was quoted over $2200 plus freight from Sydney.
      I just wish I could fill my car and import fresh groceries on-line, too!

      Reply

    • Nafe says:

      08:37am | 07/12/11

      Try Aussie Farmers Direct mate, Cheaper and better quality than the supermarkets.

    • Debbie says:

      08:22am | 07/12/11

      We live in Darwin where we are constantly price gouged by the petrol companies. We pay on average 10-15cents a litre more than every one else does. Plus we need a 4 WD up here as good luck driving around in a Corolla in the wet season or if you have to go out bush.

      The argument that living is cheaper is nonsense. We have some of the most expensive housing in the country and groceries etc are way more expensive than down south. Everything is. Yet I can drive inland to Katherine 4 hours away and pay less for my petrol there than in Darwin. Go figure??

      Reply

    • PW says:

      02:08pm | 07/12/11

      Darwin is one of the most isolated cities on Earth. What do you honestly expect?

    • marley says:

      05:48pm | 07/12/11

      @PW - isolated? Depends on your definition.  It’s one helluva lot closer to Singapore than Sydney or Melbourne are.

      By the way, the cost at the terminal of crude in Darwin is a whole 3 cents higher than in other CBDs.  Isolation isn’t the factor here.

    • Chris says:

      08:29am | 07/12/11

      There has been one inquiry after another into the pricing of petrol in regional areas. Nothing ever gets done. Nothing CAN be done, short of the government regulating the price, which would be restrictive of trade.
      Best just deal with it and stop using the car as much as possible.

      Reply

    • persephone says:

      08:53am | 07/12/11

      Did a lot of research into this over some years.

      Ultimately the difference between a suburban petrol station and one in a regional town is this:

      The suburban centre is operated by ONE person on the minimum wage, stuck behind bullet proof glass. All he does all day is take money.

      The regional centre is run by a family, who make a good living. If you’ve got a problem, they help you out.

      I know how we could reduce the cost of petrol locally. We have five petrol stations, either family run or employing half a dozen people.

      We don’t need five. We could do just as well with one. Might have to wait in a queue now and again, but that’s what happens everywhere else.

      So put the other four petrol stations and the workers who work there out of work. Sack at least four of the employees at the remaining one. Replace them with one person a shift (so max two employees a day, given a 6 am - 10 pm service).

      The flow on effects would be bad for the town, of course - at least twenty five people out of work, and their pay packets no longer going into the community, but the petrol companies would save about $1 million a year, all of which could be passed on to local consumers through cheaper petrol.

      I’m happy to pay higher prices for the sake of my community.

      (Oh, and btw - the cheapest place to buy petrol in regional centres is Shell, even before you factor in the Coles discount).

      Reply

    • RED says:

      09:11am | 07/12/11

      It’s a good point.
      What people need to think about is turnover, the city servo may have 10 customers for every one customer out in the bush. At its simplest form they could afford to have a 1c markup whereas out west it would be 10c for parity.

    • acotrel says:

      10:49am | 07/12/11

      I mostly buy my petrol at the independent.  I’ve got a discount card from Safeway, but I rarely use it.  Same when I buy fruit and vege, and bread.  If you don’t support the little guy, he won’t be there, and the prices will go up in the supermarkets. If I need petrol while I’m away from Benalla, I buy a little more than I just need to get home.

    • ibast says:

      09:04am | 07/12/11

      It’s just not true.  At lest in the region up to 4 hours drive from the capitals.  I drive a lot in these areas and I find that the prices are similar to city prices, thanks to government subsidies.  It’s only further out that they start to rise and that is understandable given transport and turnover.

      Reply

    • The Badger says:

      10:08am | 07/12/11

      Highest and Lowest prices in Perth today
      (North of the River)

      Highest price - 149.9 ULP Northbridge
      And less than a kilometre away we have the
      Lowest price - 130.7 North Perth

      Guess fuelwatch wasn’t such a dumb idea after all.

      http://www.fuelwatch.wa.gov.au/fuelwatch/pages/home.jspx

      Reply

    • Paul M says:

      01:55am | 08/12/11

      I think XKCD did a comic on this: if you spend 15 minutes of your time to save $5, then you are working for less than the minimum wage.

    • Robert S McCormick says:

      10:55am | 07/12/11

      Aren’t we all being shafted when it comes to fuel prices in Australia/
      I must admit I don’t really know how this World Parity Pricing caper really works!
      When it was introduced all those years ago we were told that this was being done so that the Price at the Bowser, in countries with similar econonmies to our own: the UK, USA, & the, now, EU countries etc. would all be paying , within a few cents, the same price for fuels. This would mean that those of our countries which had their own oil fields were not advantaged over others. All very egalitarian, all very fair, all those nice things we are supposed to be to each other.
      A barrel of oil is, I Think, 250 gallons or roughly 1137 litres.
      West Texas Crude is priced around $US 91 a barrell which I make is 0.08 cents per litre. That is the base price, prior to refining, of a litre in the USA.
      TAPIS Crude is priced at $US117 a barrel + 0.103 cents per litre. That is the base price, before refining costs etc, we pay here in Australia.
      Why is a barrel of oil in the US almost 30% (29%) cheaper than ours?
      I have on a number of occasions sent emails to various organisations asking for an explanation. They all seem incapable of giving an explanation.
      Maybe some Puncher can answer what I think is a very simple question.
      Yes, we have got to take into account the Exorbitant TAX our Federal Government slaps on fuel at the bowse. (Isn’t something like 48cents per litre?), the oil companies refining costs & mark-up but that does not explain why in this oh-so-equal-world we pay almost 30% more for fuels tha the USA, which, just like us, has to import most of their crude.
      All that fuel has tobe transported across Australia, passing through countless country/rural/Bush cities & towns. So why is fuel in those country.rural/Bush cities & towns so much more bloody expensive than in the State capitals?

      Reply

    • PW says:

      02:33pm | 07/12/11

      A barrel of oil is in fact 42 US gallons. A US gallon is 3.8 litres. Thus a barrel of oil is just under 159 litres. The current TAPIS price is $US119.41 per barrel. Thus crude oil costs about 75 cents (US) per litre.

      West Texas Crude is a different market to TAPIS. Each is subject to its own market forces. Just like Sydney has a different housing market to Melbourne.

    • Eva says:

      11:47am | 07/12/11

      It is not always the city that wins. Last summer I was stunned to discover that the petrol price in my bush holiday destination was significantly cheaper than Melbourne prices the whole time. It didn’t vary from day to day like it does here but stayed at a constant price that was as low as the low Melbourne price.

      I have found it wiser to fill up in Bendigo as well before returning to Melbourne on forays west. Price gouging appears to take place in the bigger markets rather than the smaller ones when it comes to petrol.

      Reply

    • David says:

      02:26pm | 07/12/11

      It is not a market failure it is just how markets work - the price is set by what the market will bear. If you live in a more affluent suburb then your groceries are likely to be more expensive locally, so hop elsewhere (I go down to the markets). If you live in regional australia then a few things come to bear, firstly regional Australians are more dependant on their vehicles, they are more demand inelastic and will wear higher prices. Secondly petrol refineries tend to be located at ports where the oil comes in - in the cities, so fuel in regional Australia is transported further distances. Finally there is simply lower levels of competition in regional Australia, the market is a bit more cornered so to speak. All of this is certainly unfortunate, but is simply a fact of how markets work - if you want the freedom to purchase what you want, with your money, where you want and when you want, then these are side-effects.

      Reply

    • Itchy Ritchie says:

      04:46pm | 07/12/11

      Rural and Regional Australia makes up 17% of Australia’s land mass but only 8% of Australia’s population !! The National Party does nothing for them.
      Ripoff prices for everything and everyone are rife everywhere ~!

      Reply

    • Paul M says:

      01:34am | 08/12/11

      Clearly, what we need is government-mandated price fixing at all levels.

      Wait ... hasn’t that been tried?

      Reply

    • Sam says:

      09:25am | 09/12/11

      Clearly we need to get rid of racist tools like this fool and we will all have more

 
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