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Aussie petrol price cycles are data driven not a cartel, ACCC finds.

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Editorial Staff

The Australian Consumer and Competition Commission has been looking at how prices at petrol pumps move, with changes taking place in what, on the face of it, seems in concert. But, the ACCC says, there is in fact no evidence of collusion: it's simply price-watching and price-matching between operators. And if consumers take advantage of hints, there could be an enormous injection of discretionary spending from disposable income or a reduction in credit card debt across the country.

The news, then, is that what might have been suspected as a crime is not a crime at all.

According to the ACCC "Price cycles have been a longstanding feature of retail petrol prices in Australia’s five largest cities. They involve sudden, sharp increase in petrol prices, usually led by one or more retail sites, with other retail sites subsequently raising their prices. This is followed by a much slower decline back to lower price levels.

“While they are not illegal, the retailers’ use of price cycles to maximise profits really infuriates drivers as they can see no reason for them to exist,” ACCC Commissioner Mick Keogh said.

“It’s not uncommon for drivers to notice prices jumping 20 cents or more in a very short period of time, and the price you see being charged on the way to work can be very different to the one on the way home.”

The ACCC says that it's conducted "research" as distinct from an investigation and it's concluded that the changes are a reaction to the behaviour of other outlets rather than price changes agreed in advance.

“There’s a common perception that all retailers put their prices up or down at exactly the same time, but our research shows isn’t the case, so if you see prices going up at one retailer, use an app to find another who hasn’t yet raised their price,” Mr Keogh said.

But, says ACCC, some drivers might be able to benefit from the cycles (although the explanation of this defies logic and might be a linguistic cock-up).

“For drivers who don’t use their cars that often, or drive as far, it is possible to time purchases at the low point of the cycle and pay below what it costs retailers,” said Keogh. Quite how that works isn't clear, unless he's suggesting that pump operators are sometimes selling at a loss. Presumably, what he means is that there are times when retailers, who may buy at spot prices, are paying more today than they sold for two weeks ago.

But equally, he's adamant that it's worth topping up the tank when prices are low. "The estimated yearly savings made by buying at the low point of the cycle are around AUD175 in Sydney, AUD150 in Melbourne and Brisbane, and AUD200 in Adelaide. Perth motorists can save up to AUD520 per year. Savings are higher in Perth because of its regular weekly cycles. The length of price cycles are much longer in the other cities, meaning there are less low points of the cycle." That, of course, depends on how fuel consumption which in turn feeds back into engine size, efficiency, type of journey, how many journeys and how long those journeys are which means that there are so many assumptions in those figures that they cannot be considered typical. Even so.. if there are savings to be had, they might as well be had.

And there's more: “Many people don’t realise there is also a significant difference between the cheapest and most expensive service stations throughout the price cycle, so purchasing petrol from those retailers that are consistently among the lowest-priced will save you money,” Mr Keogh said.

The ACCC estimates that if all motorists took advantage of the ‘where’ and ‘when’ to buy petrol, total potential yearly savings would be around AUD260 million in Sydney, AUD220 million in Melbourne, AUD105 million in Brisbane and AUD75 million in Adelaide." That's a massive injection of disposable income (or reduced credit card debt) across the country, a benefit that ACCC does not point out.

But reality does set in: “We know not all people have the luxury of choosing when to buy petrol, particularly if you’re on the road a lot. The price cycles are hard to predict, meaning the cheap days come at irregular times. This can make it difficult to consistently fill up at the bottom of the cycle,” Keogh said.

Further reading:
http://www.accc.gov.au/publica...
http://www.accc.gov.au/consume...