Average petrol prices in the June quarter of 2020 fell to their lowest level in 21 years as a result of the COVID-19 pandemic, but gross retail margins remain at record highs.
The ACCC’s latest petrol monitoring report shows that the average retail price for petrol in the June quarter across Sydney, Melbourne, Brisbane, Adelaide and Perth was 109.0 cents per litre, a decrease of 28.8 cents per litre from the March quarter 2020.
However gross retail margins in the five largest cities remained high in the June quarter, and annual average gross retail margins in 2019-20 increased to the highest level since the ACCC began calculating them in 2002.
Gross indicative retail differences (GIRDs) are the difference between retail prices and terminal gate prices, and are a broad indicator of gross retail margins. As GIRDs do not account for retail operating costs, they should not be interpreted as actual retail profits; however, ACCC analysis has found that increasing GIRDs in recent years are a result of increases in both operating costs and profit margins.
Across the five largest cities, annual average GIRDs in 2019-20 were 14.7 cpl, 2.7 cpl higher than last year’s average. Brisbane had the highest annual average GIRDs at 16.8 cpl and Perth had the lowest at 12.3 cpl.
The level of prices, costs and profits vary significantly between retail operations and not all retail petrol sites will be achieving these gross margins.
“Many Australian motorists benefited from lower petrol prices over the first half of this year, but we have some concerns about the higher gross margins that petrol retailers seem to be holding on to,” ACCC Chair Rod Sims said.
The ACCC’s report shows the COVID-19 pandemic’s hit to economic activity has decreased demand for petrol, and sales volumes were 27 per cent lower in the June quarter 2020 compared with the same period last year.
“There are some fixed costs involved in petrol retailing and it’s likely that businesses have increased gross retail margins, to some degree, to offset lower sales volumes,” Mr Sims said.
“While less petrol being sold during COVID-19 restrictions may be a contributing factor to the record high gross retail margins, we’re not convinced that this fully explains the levels we’re seeing.”
“Owning and operating a car is a major expense at the best of times, let along during the current economic crisis, and Australian drivers want to see lower global oil prices passed on to them in a timely manner.”