MTAA Warns that Motorists Will Face Higher Petrol Prices in the Future

With petrol prices at or near record highs, the Executive Director of the Motor Trades Association of Australia (MTAA), the representative body of all service station operators, Michael Delaney, today warned that the situation was unlikely to improve in the long-term if the Australian Government did not address the increasing dominance that the two supermarket joint ventures have in the retail petroleum market. “The supermarkets now have over 50 per cent, by volume, of the retail petroleum market and their market share is continuing to increase” Mr Delaney said.

“That increasing dominance is forcing more and more independent operators from the market and those who remain are struggling to survive. The demise of the independent and franchisee sector is not in the interests of Australian motorists as it is the independents and franchisees that drive price competition in the retail petroleum market and ensure that motorists pay the lowest possible price for petrol” Mr Delaney said. “Without a viable and vibrant independent and franchisee sector, there will be fewer competitors and less price competition and that means higher petrol prices for motorists. Therefore, while motorists may still be getting four cents a litre off their petrol price in the future, the key question at that point in time will be ‘four cents a litre off what price?’” Mr Delaney said. “Indeed”, he said, “it must presently be asked what the four cents is “off”? In fact for both the supermarkets and the oil companies, it is off the highest refinery margins seen as demonstrated by the NRMA.”

Mr Delaney also noted that the demise of independents and franchisees was also likely to be exacerbated by the Australian Government’s so-called ‘reform’ of the retail petroleum market. The Government’s proposals involve the repeal of two pieces of legislation, the Petroleum Retail Marketing Sites Act 1980 and the Petroleum Retail Marketing Franchise Act 1980 and the introduction of a mandatory code of conduct for the sector (‘the Oilcode’). The Acts currently restrict the number of retail sites that the oil majors can directly operate, thus permitting space in the market for independents and franchisees, and also regulate the relationship between the oil majors and their franchised service station operators.

“The Acts therefore act as one of the few constraints on the market power of the oil majors and the ability of those companies to dictate petrol prices. The proposed Oilcode does not contain similar restrictions nor does it provide an adequate regulatory framework to deal with the concerns that many service station operators have about anticompetitive behaviour in the market, including predatory pricing and the misuse of market power” Mr Delaney said. “Without the Acts, the oil majors will effectively be able to act without restraint and will increase their dominance of the retail petroleum market at the expense of the independent sector.”

MTAA therefore considers that the Government’s proposed package will not deliver a more competitive and efficient retail petroleum sector as the Government has claimed, but a less competitive market in which the oil majors and the supermarkets wield an even greater degree of influence and consumers pay higher petrol prices. MTAA also considers that the increased dominance of the oil majors and supermarkets may hinder the development of a viable ethanol industry in Australia.

For further information, please contact Michael Delaney, Executive Director of MTAA, on (02) 6273 4333.