Australian petrol boss claims ‘discount leapfrog’ to blame for higher prices at the bowser

The boss of the Australia’s peak petroleum retailer has hit back at calls for an inquiry by the consumer watchdog into “artificially inflated” fuel prices.

Australasian Convenience and Petroleum Marketers Association boss, Mark McKenzie, says the industry already gives its most sensitive data to the consumer watchdog while asserting media reports about average prices fail to take into account the savviness with which modern consumers shop around.

Last week, the National Roads and Motorists Association issued a call for a consumer watchdog inquiry into “artificially inflated” fuel prices.

“There is no justifiable reason for our biggest cities to be among the most expensive - it just doesn’t pass the pub test - and the NRMA wants the Australian Competition and Consumer Commission (ACCC) to dive into these longer price cycles and the fact that they have resulted in higher prices for Australian families,” spokesman Peter Khoury said.

But the petroleum marketers’ boss says competition for a finite pool of fuel in the big cities puts a squeeze on retailers’ margins.

“Petrol price cycles are not the product of collusion. Instead, they arise naturally from competition between retailers,” Mr McKenzie said.

“Discount operators seeking to attract customers lower prices aggressively, prompting competitors to follow suit.

“This ‘discount leapfrog’ drives prices below cost, forcing retailers to eventually move their prices upward to recover these losses.

“The cycle then repeats, driven by competitive market dynamics.”

The price for a litre of regular unleaded fell by about 20c across Australia in 2020.

Those savings for consumers were swallowed up and then-some in every state except South Australia the following year.

In 2022, there was another even bigger national spike in the average price, followed by mostly small increases in 2023 and then a mixed bag of marginal losses and gains across the states and territories last year.

ACCC data shows the use of fuel price apps has risen considerably in the past decade.

Use of fuel apps has overtaken the price boards outside service stations, loyalty programs and supermarket discount vouchers, to become the main way consumers find a deal.

The NRMA analysis shows an average litre of unleaded has gone up more than 50 cents in Sydney and Brisbane in the space of five years. Canberra is the most expensive.

But the petroleum marketers’ boss says the average cost-per-litre is a nominal number; it does not take into account the volume which retailers are selling, which would show how much motorists actually seek out the best prices.

“Australian governments require fuel retailers to publicly notify price changes, ensuring consumers and competitors alike can access this information through various apps,” Mr McKenzie said.

“This engineered transparency fosters robust competition.”

He argues the NRMA’s claim of “artificial inflation” ignores the localised nature of pricing.

“Sydney’s patterns differ from Melbourne’s due to differences in competition and consumer response. These variations are evidence of competitive market forces at work, not collusion.”

Mr McKenzie also argued fuel retailers are under the most scrutiny from the ACCC, handing over sensitive data on-par only with the stevedores.

Despite a huge spike in oil prices in 2020 and 2021, prices fell about 3 per cent in 2024, slipping for a second straight year.

The US reached record barrels-per-day-production in October, while the struggling Chinese economy means flatter demand.

In New Zealand however, regular unleaded hit NZ$3 in April ($2.70).

Though for the whole of 2024, petrol prices dropped 13 per cent and diesel fell 23 per cent.

Predictions for oil prices in 2025 are clear as mud, due to the OPEC+ cartel losing global confidence after delayed output increases.

The price shock after Russia invaded Ukraine has mostly evaporated, but naturally Middle Eastern conflicts cast a cloud over production, demand and transportation.