Regional fuel prices average 2c/l cheaper than capital cities

Australian petrol prices continue to track well below their 15-year real average of 151.6 cents per litre, despite making a monthly recovery in September, which then retreated back to June levels in October.

This was also despite some service station gross margins being at record highs as fuel retailers tried to extract the most profit from the reduced volumes going through their pumps since the coronavirus pandemic hit.

For the first time since quarterly fuel price monitoring started five years ago, the Australian Competition and Consumer Commission reported regional bowser prices averaged less than those in the five largest cities.

Average prices across 190 regional locations fell to 120c/litre in the September quarter, or 2.1c lower than average prices in Sydney, Brisbane, Melbourne Adelaide and Perth.

In the previous June quarter regional prices had averaged 7.5c more than the five largest cities.

Australian capital city average prices hit recent decade lows in late April, falling to almost 90c a litre as motorists stayed at home during the height of the coronavirus pandemic.

The ACCC's latest petrol monitoring report shows the average retail price across Sydney, Melbourne, Brisbane, Adelaide and Perth was 122.1c/litre in the September quarter - up 13.1c from the June quarter.

However, weekly prices in the five largest cities have seen a volatile year, hitting 159.1c/litre at the end of 2019, then dropping to 92.4c in April, although they settled to between 129c and 118c last quarter.

Darwin had the lowest average retail petrol prices of the eight capital cities in the September quarter at 118c - or 4.1c less than the five largest metropolitan markets.

ACCC chairman Rod Sims said regional prices were slower to come down when consumers abruptly stopped travelling earlier in the year.

"But fortunately they are also slower to go back up, so drivers in regional locations on average paid less than their big city counterparts in the September quarter," he said.

However regional consumers noted prices in remote areas were less responsive to the cheaper trends than coastal centres.

Interestingly, he noted some petrol retailers' gross margins were well up.

"Petrol retailing is a high-volume low-margin business with fixed costs," Mr Sims said.

"We understand some businesses have had to increase their margins to offset sales volumes that were 17 per cent lower in the September quarter compared to last year's average."

Australian retail prices were largely determined by international refined petrol values, based on the Asia-Pacific benchmark price for Mogas 95 regular unleaded petrol.

The Mogas 95 price slump turned around in July after the initial shock of the pandemic sent demand crashing.

However, the recovery in local fuel demand was not uniform across all states and territories.

September petrol sales volumes Australia-wide were 19pc lower than monthly average sales in 2019, with Victorian demand down 44pc because of the state's second wave of COVID-19 restrictions being one key factor.

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"As economic activity in Australia picks up again and sales volumes return to normal, the ACCC expects to see gross retail margins fall," Mr Sims said.

He noted, however Darwin's run of relatively low prices in recent years may have been influenced by the opening of new retail sites which have become vigorous competitors, and the introduction of the Northern Territory Government's fuel price transparency scheme, MyFuel NT.

"Increased competition between petrol retailers brings down prices, and fuel price data apps and websites empower consumers," he said

"Darwin motorists are currently enjoying the benefits of both these factors.

"Motorists in NSW, Queensland, Western Australia, and now Tasmania, which introduced FuelCeck TAS can also access real-time petrol prices through transparency schemes."

Meanwhile, Mr Sims predicted the closure of Australia's largest oil refinery at Kwinana in Western Australia was unlikely to create shortages or impact on fuel prices.

Energy giant BP recently announced would convert its Kwinana refinery to an import terminal because regional oversupply and sustained low refining margins no longer made fuel production viable in WA.

"As retail petrol prices in Australia are set according to international prices, and refineries in the Asia-pacific region are not operating to capacity, Kwinana's conversion is unlikely to have an impact on petrol prices in Australia," Mr Sims said.

Kwinana has a refining capacity of 8.8 billion litres a year, or almost a third of Australia's refining capacity, which has reduced notably in the past decade.

Fuel refining costs as a percentage of the total price for a litre of petrol actually amounted to less of the total taxes paid by motorists both the September and June quarters.

Taxes totalled 44pc of the average price of unleaded fuel, while refining represented 34pc.

Other retail and wholesale costs and margins represented 22pc of the price of a litre of petrol.

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