The ACT government has threatened punitive legislative action against fuel retailers under the Fair Trading Act as average petrol prices across the territory remain dramatically out of step with tumbling national and international oil prices.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
In a strongly worded letter issued to retailers this week, Chief Minister Andrew Barr said that some are selling fuel for as much as $1.25 to $1.30 per litre "even though the same retail chains are selling fuel for less than $1 per litre in various parts of Sydney".
"I can see no justification for the current differences in prices between Sydney and Canberra," Mr Barr said in the letter.
"Any perceived exploitation of the community at a time of economic hardship for many is viewed very unfavourably by the ACT government."
Mr Barr noted in the correspondence that "despite wholesale prices reducing by around 40 per cent since the beginning of 2020, average retail price in the territory have only reduced by around 13 per cent over the same period".
"This compares adversely to the 33 per cent average reduction in retail prices in Sydney."
Some fuel retailers justified the higher Canberra price as an offset to transport costs but the Independent Competition and Regulatory Commission has fully dismissed this claim, showing that the difference in transport and operating costs between Sydney and Canberra was, at most, 7 cents per litre.
At the same time, Mr Barr has also written with the same concerns to Australian Competition and Consumer Commission chairman Rod Sims, who on Wednesday publicly warned retailers not to use the current pandemic "to further increase profits" and should "pass on the full benefits of falling oil prices to motorists".
Mr Sims identified that in "Hobart, Canberra and Darwin as well as many regional locations, retail prices have been much slower to come down and the extent of the falls has varied widely".
"We have previously found that the lack of vigorous and effective competition in some regional locations was a major reason for higher prices in those locations," Mr Sims said.
READ MORE:
The latest ACCC petrol industry report, which assesses the revenues, costs and profits in the Australian petroleum industry up to June 2018, found the retail sector generated a record high $333 million in net profits on petrol products.
Around 60 per cent of the profit - about $199 million - was found to be generated by premium grade fuels which make up 30 per cent of the volume sold. The ACCC also found retailers earn substantial profits from convenience store sales.
As a result of the COVID-19 pandemic, oil prices internationally have slumped to record industry lows.
Despite recent dramatic cuts in production by oil producers, onshore storage capacities in major ports are filling rapidly and the cost of acquiring "floating" storage - very large crude carriers (VLCC) and ultra large crude carriers (ULCC) - has increased 600 per cent.
The former head of BP, John Browne, told the BBC this week that the oil price is likely to remain depressed for a long time.
"This is very reminiscent of a time in the mid-[19]80s when exactly the same situation happened - too much supply, too little demand and prices of oil stayed low for 17 years," Mr Browne said.
One major Canberra service station franchisee, who refused to be identified because it may result in punitive action from his retail chain owners, said he was issued with daily instructions on how to price his fuel.
"The worst thing about this is that people are venting their anger about our pump pricing against me and my staff," he said.
"This isn't my call. I know what the company is buying fuel at. And it's a long, long way from what I'm being told to set at the bowser."
The ACT has the smallest proportion of independent retailers of any market in the nation, with the four major brands - Coles Express/Shell, Caltex, Caltex/Woolworths and BP - accounting for more than 75 per cent of the territory's 58 outlets.