It’s not Singapore slinging us at the petrol pump
Are you sick of being ripped off at the petrol pump? Are you annoyed that despite ample oil supplies on the market to meet current demand the speculators persist in trying to push up world oil prices? And don’t forget that the Singapore benchmark for refined petrol used to calculate local petrol prices remains one of the highest in the world.
A rip off is a rip off. The fact is that despite consistently being an inflated benchmark the Singapore benchmark for unleaded petrol has fallen dramatically since May 6. Despite valiant efforts by the speculators to try and prop up world oil prices, the Singapore benchmark price has fallen signifcantly.
As the Singapore benchmark price falls so should the local wholesale and retail petrol prices. The problem is that falls take forever to be passed through to motorists at the pump. We are given the usual “reasons” for the time lag. We are told that it takes time for the oil companies and major retailers to clear out old stock bought at the old, higher price.
There are a number of problems with that “explanation.” To begin with, the same logic doesn’t seem to work in reverse. Rises in the Singapore benchmark price are consistently passed on very quickly at the wholesale and retail levels. This occurred on June 6 where there was a slight upward rally of the Singapore benchmark price and on June 12 the national average retail price started to climb.
Here the rises in the Singapore benchmark price started to come through at the petrol pump within a week. Industry experience suggests that a time lag of 7 to 10 days is the usual time lag.
But what about when the Singapore benchmark price is on the way down? Well, it should ordinarily be the same or a comparable time lag. The harsh reality, however, is that when the Singapore benchmark price fell dramatically on May 6 it took up to four weeks for the falls to come through in any significant way at the pump and even then the retail price didn’t fully reflect the falls in the Singapore benchmark price.
In some place like the Northern Territory average retail prices even went up after May 6. Where was the ACCC Petrol Commissioner? No doubt he was actively watching petrol prices at all times, but we saw very little of him in public. Why weren’t the oil companies and major petrol retailers like Coles and Woolworths being told to do the right thing and drop retail prices in line with the falls with the Singapore benchmark price?
Well, there are a number of possibilities. First, the ACCC Petrol Commissioner was not given any new specific powers to tackle the rip off. It’s a bit hard for any regulator to politely ask the oil companies and supermarket chains to drop their prices when the regulator knows it could politely be told to get lost. Second, the ACCC Petrol Commissioner can’t compel the oil companies and major oil companies to drop their prices even where the rip off is obvious.
The real problem therefore, is that when the Federal Labor Government appointed the ACCC Petrol Commissioner it should have given him new specific powers to bring the oil companies and major retailers into line if they were ripping off motorists. The fact the Government didn’t do that simply points to the Petrol Commissioner’s appointment being another gimmick, much like the Fuelwatch and GroceryChoice debacles.
Can the Federal Government do anything about tackling the oil companies and Coles and Woolworths? For starters, it’s time to ensure that regional petrol pricing discrepancies are fully exposed.
In regional centres the petrol rip off can occur at both the retail and wholesale level. We know that motorists are currently being ripped off at the retail level in regional areas, but we also need to know if the rip off extends to the wholesale level.
That’s why we need full pricing transparency at the wholesale level in regional areas.
We know the terminal gate price or notional wholesale price in metropolitan centres as that’s publicly available, but we don’t know the wholesale prices being charged by the oil companies in regional areas. The wholesale price is the key piece of information needed to determine how much of a rip off there is in a particular regional centre.
The oil companies can easily inflate the wholesale price in regional areas causing independent petrol retailers to pay more at the wholesale level than they should. Inflated wholesale petrol prices mean that independent petrol retailers can’t compete as aggressively as they could with the major retailers like Coles and Woolworths.
In those regional centres where there are only petrol stations operated by the oil companies or Coles and Woolworths the rip off can be much higher as the absence of independents results in retail petrol prices staying at higher levels. That explains why in many regional centres retail prices have been stuck at higher levels despite the recent large falls in world oil prices and the Singapore benchmark price.
Requiring the industry or ACCC to publish the average wholesale price in each regional centre would clearly reveal those regional centres where wholesale prices and retail prices are inflated to the detriment of motorists.
Pricing discrepancies at the wholesale level clearly distort retail prices and lead to motorists paying much more than they need to in regional centres.
Full transparency at the wholesale level is achievable as demonstrated by the ACCC back in 2008 when it published a graph showing the pricing disparities at the wholesale level. A similar graph could be produced for each regional centre on a weekly basis showing the average wholesale and retail price in that regional centre.
Motorists in regional centres are continuing to be ripped off and full wholesale pricing transparency would reveal the true extent of the regional petrol price rip off.
So while there are doubts about the long term quantities of world oil supplies with repeated references to “peak oil,” the reality is that at the moment there are ample supplies of oil on the world market to satisfy current demand. With the United States working towards reining in OPEC and the speculators, the Federal Government should do its bit to bring the cosy petrol retailers’ club into line.
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