Cairns drivers hit by high petrol profits

The average net profit per petrol station in Cairns was around 38 per cent higher than the average net profit across other sites around Australia in 2015–16, according to a new petrol market study published by the ACCC today (May 30).

"The ACCC's Cairns petrol market report confirms what motorists have suspected for a long time: they are paying too much for fuel and contributing to very high profits for retailers in the area," ACCC Chairman Rod Sims said.

"Competition in the Cairns fuel market is weak and unfortunately it is consumers who are paying for this at the bowser. While weak competition sees higher prices for consumers, of itself this does not reflect any breach of competition or consumer laws."

The report found since 2012–13, petrol prices in Cairns have been significantly higher than those in the five largest cities in Australia (Sydney, Melbourne, Brisbane, Adelaide and Perth).

Between 2012–13 and the first half of 2016–17, motorists in Cairns paid on average around 11 cents per litre (cpl) more for petrol than motorists in the five largest cities.

"The report found that the main reasons for the higher prices in Cairns were higher retail profit margins on petrol, higher wholesale prices, and higher retail operating costs per litre," Mr Sims said.

"Compared with historical retail margins and profits, and those of similar sized towns, retail margins and profits in Cairns are currently very high."

Small towns cheaper
A key finding of the report is that the Cairns market lacks vigorous and effective competitors. This is in contrast to Innisfail, a much smaller town less than 100 kilometres from Cairns.

Since a United retail site with a competitive pricing strategy commenced operating in February 2016, retail petrol prices in Innisfail have generally been lower than those in Cairns.

"This is significant given that Cairns is around 20 times the size of Innisfail. Other towns in North Queensland such as Mareeba, Atherton, and Ayr have also had lower petrol prices than Cairns in recent years," Mr Sims said.

While the results of the study focussed mainly on petrol prices, the price of diesel was also closely monitored. In 2014-15 diesel in Cairns was priced 7.1 cents per litres higher than in Brisbane, while in the same period diesel was, on average, 2.8 cents per litre cheaper in Innisfail than in Cairns.

In 2015-16 the retail price of diesel in Cairns was 3.4 cents per litre less in Innisfail than in Cairns. It was 5.6 cents per litre less in Brisbane, and compared to the five biggest cities in Australia, Diesel was on average 8.2 cents per litre more expensive in Cairns.

Brisbane fuel profits also high
The Cairns report also examined retail margins and profits in Brisbane and found them to be very high. These profits were driven by relatively high fuel prices compared with other major Australian cities; in recent years, average retail petrol prices in Brisbane have been around 3-4 cpl higher than in the other large cities.

"We will be examining the high retail prices, margins and profits in Brisbane in more detail in a separate, short, dedicated ACCC report," Mr Sims said.

"The ACCC intends to release the report on Brisbane prices in late-July," he concluded.

Picture courtesy of Frances76/Wikimedia Commons