Petrol prices drop, but NSW squeezed by ethanol mandate

Petrol retailing margins appear to have squeezed tighter, with fuel prices having decreased by an average of 3.8 cpl in the quarter ending September 2016, according to the latest report from the Australian Competition and Consumer Commission (ACCC).

Despite price drop being good news for consumers across the board, ACCC chairman Rod Sims said the NSW Ethanol mandate had seen drivers in that state charged an extra $85 million in 2014-2015.

“While the use of E-10 may be better for the environment, the ethanol mandate has reduced consumer choice and cost Sydney motorists up to $85 million,” Mr Sims said.

Australia’s five largest cities (Sydney, Melbourne, Brisbane, Adelaide, and Perth) took the average price down to 114.2 cpl, a 7.5 cent drop on the 2015-16 average of 121.7 cpl, as outlined in the ACCC’s eighth Report on the Australian Petroleum Industry.

Mr Sims said the lower prices did not alter the watchdog’s advice to consumers to shop around and reward retailers with the lowest fuel prices.

“A global comparison has also shown that Australian prices have remained extremely competitive by international standards as a result of the relatively low rate of taxation on fuel,” he said.

“A drop in refiner margins in the last quarter has helped to push prices down locally.”

Based on gross indicative retail differences (GIRDs), retail margins were 0.6 cpl lower (10.4 cpl) than the June quarter average (11.0 cpl), and 2.0 cpl lower than the December 2015 average. However, the most recent GIRD quarterly average was 3.0 cpl higher than the average over the past 14 years (7.4 cpl).

The ACCC report flagged concerns from NSW retailers that higher regulatory and operating costs (such as clean air regulations, underground petroleum storage systems regulations, the ethanol mandate, FuelCheck, and fuel price board specifications) may have caused the drop in GIRDs.

“While the impact of these regulatory and other costs in 2015–16 was significant, it does not fully explain the large increase in GIRDs in 2015–16 (2.6 cpl),” the report said.

Refiner margins also decreased, with the average difference between refined petrol prices and the Brent Crude benchmark up to $17 USD per barrel, compared to a 20 year annual average of $8 USD per barrel.

Refiner margins in the September quarter 2016 were around $9 USD per barrel (7.3 cpl), which was $3 USD lower than the June quarter.

The city to country price differential rose 3.9 cpl to 6.2 cpl, however during September 2016 average prices at 67 regional locations were lower than prices in the top five cities.

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