Petrol retailers should not use the current pandemic to further increase profits, which the latest ACCC petrol industry report shows have risen in recent years, and should pass on the full benefit of falling oil prices to motorists, the ACCC has said.

Weekly average international crude oil prices have decreased by around US$ 50 per barrel since the beginning of the year and this has largely flowed through to Australian wholesale petrol prices, which have decreased by around 50 cents per litre (cpl) in the same period.

Over the same period, seven-day rolling average petrol prices across the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth) have decreased by around 45 cpl. These cities have regular petrol price cycles, which makes it difficult to assess the exact flow through of falls in international crude oil and refined petrol prices in the short term.

“The drop in the crude oil price is good news for the Australian motorists. At this time the Australian economy needs all the assistance it can get, and lower world crude oil prices are one of the few positives from current world events,” ACCC Chair Rod Sims said.

“In the larger Australian capital cities, petrol retailers took too long to pass on the savings from the rapid drop in international oil prices, and this did not reflect well on them.”

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.

Fuel prices are generally higher in regional Australia due to a number of factors, including lower population and demand, meaning there are fewer petrol stations, which often leads to less competition. There are also higher costs for transport and storage of fuel, and less convenience sales which can support the operation costs of petrol retailers when fuel prices are low.

Price changes in regional centres can lag up to six weeks behind changes in the larger capital cities, because the turnover of stock is generally lower in the country. The reduction in demand for petrol due to current travel restrictions may have further exacerbated the lag.

“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.

“Where there is competition, you tend to see lower prices. Giving your business to outlets that are pricing competitively sends a strong message to those that have high prices that they will lose your business. We recommend motorists compare prices on fuel price apps and websites, such as MotorMouth and the government schemes in NSW, WA and the NT, which also provide information on retail prices in regional locations.”

“Especially at this difficult time, retailers must not take advantage of the situation to increase their profits, but should pass on savings to motorists,” Mr Sims said.

“The ACCC’s role is to monitor the market closely, and we will continue to do this, particularly to keep the pressure on the petrol retailers at this time.”

New ACCC report shows retail profits increased over time

The latest ACCC petrol industry report reports on the revenues, costs and profits in the Australian petroleum industry up to June 2018. It includes financial results for the retail and wholesale sectors as well as for refining and across the total downstream industry.

Retail sector net profits across all fuel products, convenience store and non-fuel services were $616 million in 2017-18, the last year covered by this report.

The sector generated a record high $333 million in net profits on petrol products – regular unleaded petrol (RULP), premium unleaded petrol (PULP) and ethanol blended petrol (EBP). This equates to a record net profit of 3.0 cpl on petrol products, which was almost double the average in the period 2008-09 to 2013-14 of 1.6 cpl.

About 60 per cent of petrol net profits ($199 million) were made on premium fuels, which only accounted for about a third of petrol sales by volume.

“Much of the increase in net profits on petrol products was driven by sales of PULP, which has a significantly higher profit margin for retailers,” Mr Sims said.

Net profits on PULP 95 and PULP 98 were 5.8 cpl and 5.9 cpl respectively, while net profits on regular unleaded were 1.5 cpl in 2017-18.

PULP 95 and PULP 98 have become more expensive relative to the retail price of RULP. The annual average price differential between RULP and PULP 98, for instance, increased to 20.4 cpl in 2017-18, an increase of 3.9 cpl since 2009-10. Profits were also influenced by higher sales volumes of PULP (particularly PULP 98).

Retailers also earn substantial profits from convenience store sales. Convenience and other non-fuel sales contributed around 37 per cent of total retail sector net profits (or $226 million) in 2017-18, illustrating their importance to petrol retailers’ businesses as the profit margins on these products are significant.

“Petrol stations make most of their profits from convenience sales and premium fuel. The average net profits on regular unleaded, at about 1.5 cpl are only a small part of the price motorists pay,” Mr Sims said.

The annual average retail price of RULP in the five largest cities in 2017-18 was 134.5 cpl.

“Drivers who have the option, can save money by resisting the temptation of convenience foods at petrol stations and using regular unleaded petrol, although motorists should follow their car manufacturers’ advice,” Mr Sims said.

Net profits in 2017-18 were stronger for refining and across the total downstream industry

The number of refineries halved from eight in 2002-03 to four in 2017-18, significantly rationalising operations. The financial performance of the refining sector fluctuated over the same period.

Refining net profits however recovered following several years of net losses after the Global Financial Crisis. Net profits reached $845 million in 2017-18, the highest since 2007-08. Overall profits for the total supply sector (which comprises refining, importing and transactions between refiners) were $1.19 billion in 2017-18.

Wholesale sector net profits were about $976 million in 2017-18 across all products and services. They have fluctuated over time but have been relatively consistent since 2008-09.

Net profits for the total downstream industry across all products and services were $2.78 billion (or 2.9 cpl), the highest recorded since 2007-08 and more than double the figure recorded for 2013-14 ($1.24 billion, or 1.4 cpl).

For petrol products, total industry net profits were $1.44 billion in 2017-18, or 4.2 cpl, the highest recorded by the ACCC. They were around double the profits on petrol products across the industry in 2013-14 ($723 million, or 2.0 cpl).

Notes to editors

On 16 December 2019, the Treasurer issued a new direction to the ACCC to monitor the prices, costs and profits relating to the supply of petroleum products in the petroleum industry in Australia. As part of this direction, the ACCC produces industry reports that focus on particular aspects of consumer interest in the fuel market in relation to prices, costs and profits.

This is the first industry report under the new direction. It reports on the revenues, costs and profits for the total downstream petroleum industry as well as for the following industry sectors: retail, wholesale, and total supply (which comprises refining, importing and transactions between refiners).

The focus of this report is to provide transparency around the financial performance and the profitability of the downstream petroleum industry. It presents results from analysis of this data.

The ACCC analysed the financial data of 11 companies:

• refiner–wholesalers – BP, Caltex, Mobil and Viva Energy
• independent wholesalers – Liberty, Puma Energy and United
• supermarket chains – Coles Express and Woolworths
• large independent retailers – 7-Eleven and On The Run.

The ACCC previously reported on financial results to the end of 2013-14.

This report includes data from 2002-03 to 2017-18 (the latest data analysed), but excludes results for 2014-15 and 2015-16, which was a period when the ACCC conducted other financial analysis of the industry as part of its regional market study reports.

All results in this report are in real terms in 2017-18 dollars.

Nearly 200,000 vehicles fitted with potentially deadly airbags are still on the roads, and more than 8,000 of these are considered so dangerous they should not be driven at all, according to the latest ACCC figures on the compulsory recall of Takata airbags.

In addition, a significant number of vehicles fitted with a different type of faulty Takata airbag are yet to be remedied. These vehicles, which are fitted with Takata NADI airbags, are considered so dangerous that manufacturers are offering to buy back the vehicles or to provide a loan vehicle until replacement parts are available. We are aware that there have been two deaths and two injuries in Australia resulting from misdeployments of Takata NADI airbags. 

Motorists are being urged to check now if their vehicles are fitted with these recalled Takata airbags, as car dealerships are still operating and providing replacement airbags free of charge. 

“Even during this pandemic, replacing faulty airbags is an essential and potentially life-saving task, especially as vehicles may be being used by essential workers and care-givers,” ACCC Deputy Chair Delia Rickard said.

“It will also be more important than ever that as more people start to use their cars again, they check that their airbags are safe. Affected Takata airbags can misdeploy and send sharp metal fragments into the vehicle at high speed, and cause serious injury or death to its occupants.”

“Drivers should check online or with their dealer or manufacturer whether their vehicles are subject to this compulsory recall or the voluntary recall of Takata NADI airbags, and never ignore a notice of recall from your car’s manufacturer,” Ms Rickard said.

Globally there have been 29 deaths and over 320 serious injuries reported, including one death and one serious injury in Australia relating to airbags affected by the compulsory recall.

Over four million airbags in more than three million vehicles in Australia were originally affected by the Takata compulsory recall due to these potentially deadly airbags.

More than 88 per cent of airbags have now been rectified, and about six per cent have been reported by suppliers as written-off, stolen, unregistered, exported or modified and unable to be replaced.

Figures from the ACCC’s latest quarterly update on the compulsory recall show that about five per cent (over 228,000) of faulty airbags remain in more than 196,000 vehicles.

In particular, motorists are in danger if they have a critical vehicle containing an airbag that poses a heightened risk of causing injury or death. There still more than 8,000 of these vehicles remaining on the roads, and drivers can check the Product Safety Australia website if their vehicle is affected.

“Vehicles with critical airbags should not be driven. Please contact your dealer to arrange for your vehicle to be towed to the place of repair free of charge so you do not have to drive it,” Ms Rickard said.

The ACCC is also conscious of the impact COVID-19 is having on Australian consumers and businesses.

“We understand dealerships are still operating and are offering the services outlined in the compulsory and voluntary recall notices. Both the ACCC and the Department of Infrastructure, Transport, Regional Development and Communications will be closely monitoring any changes to these arrangements,” Ms Rickard said.

Consumers can also search for vehicles affected by the Takata compulsory recall by entering their number plate and state or territory at: IsMyAirbagSafe.com.au or by texting 'Takata' to 0487 AIRBAG (247224).

A list of vehicle manufacturer helplines and contact details is available at: Vehicle manufacturer helplines & contact details.

Takata fast facts

• In total about 3.62 million airbag inflators (88.1%) have now been rectified in about 2.64 million vehicles.
• This excludes 259,025 airbag inflators (6.3%) in 216,138 vehicles reported by suppliers as unrepairable (written off, scrapped, stolen, or modified and unable to have the airbag replaced). 
• There remains 228,764 airbag inflators (5.6%) in 196,299 vehicles outstanding for replacement.
• As at 31 March 2020, there are 1,895 vehicles with critical-alpha airbags and 6,471 vehicles with critical non-alpha airbags outstanding for replacement.
• Vehicles with critical airbags should not be driven, and drivers are entitled to have their vehicles towed to the dealership to have the airbag replaced for free. 

Notes to editors:

• The Takata airbag recall is the world’s largest automotive recall, affecting an estimated 100 million vehicles globally.
• It is the most significant compulsory recall in Australia’s history, with over four million affected Takata airbag inflators and involving more than three million vehicle recalls.
• Takata airbags affected by the compulsory recall use a chemical called phase-stabilised ammonium nitrate (PSAN). The ACCC’s investigation concluded that certain types of Takata PSAN airbags have a design defect. The defect may cause the airbag to deploy with too much explosive force so that sharp metal fragments shoot out and hit vehicle occupants, potentially injuring or killing them.
• In addition to the compulsory recall of vehicles fitted with Takata PSAN airbags, eight vehicle manufacturers have also issued voluntary recalls for some vehicles manufactured between 1996 and 2000, which may have been fitted with a different type of faulty Takata airbag, being a NADI airbag.