Australia is getting a lesson on what happens when "conpetition " disappears from commercial activity. Older Australians will remember the days when just about every street corner in a city had a "bank "- and we had more than a dozen banks competing for our custom. Mergers and acquisitions reduced that number to just four - and now they march in lockstep with fees and charges that reap them profits counted in billions.
The decade just after the end of the second world war saw a frenzy of new petrol stations. There were many more oil companies seeking market share and those were the days when attendants checked tyre pressure, oil levels and washed the windscreen as well as filled the gas tank. It seemed that in suburbia there was a petrol station on just about every street corner.
The number of oil companies reduced by way of mergers and acquisitions and the number of petrol outlets serving the public condensed and became "convenience stores "- that also sold petrol. It was a fast changing world and we were assured by the ecology people that the world oil supply was rapidly diminishing. The price of petrol was steadily rising.
In the past decade all that changed. An amazing number of countries have found new oil fields and America has gone from an importer to an exporter with the development of tar sands and fracking to revive old depleted oil fields. As a result, we have an oil glut and the price has dropped from well over a hundred dollars a barrel to more than half that figure.
Here in Sydney, motorists are having a petrol price bonanza. We have actually seen petrol sold as low as 99 c a litre. Competition is rife and discounting is widespread. Unfortunately, a totally different picture emerges in country areas.
Petrol has always been more expensive the further away from Sydney we travel and that is usually blamed on transport costs. Price analysis now shows a widely diverging margin on prices charged in the city as opposed to the country - and that has become evident the more the base price at the terminal falls.
The city of Tamworth in rural New South Wales gives a price picture that is duplicated in most other country areas. In July, when oil was more than a hundred dollars a barrel - the differential between Sydney and Tamworth prices was 6.3 c a litre. Today - that margin has expanded to 25.3 c a litre.
Filling a fifty litre gas tank will cost the average motorist an extra $9 in that city.
It seems that the smaller number of outlets in country areas has reduced the need for discounting and proprietors are enjoying a better profit margin. Petrol is not subjected to any form of price control and like all commercial goods the price charged is entirely a matter between the seller and the buyer.
Naturally, this price discrepancy is drawing flak in the media and there are calls for intervention from anti monopoly bodies, but it is hard to see where there is scope for action - short of imposing some sort of price control. Country petrol resellers serve a much smaller customer base and consequently sell much lower volumes of petrol - and yet their fixed costs for electricity, council rates and staffing must fit within their profit margin. There is no compunction to force them to lower prices when the price from their supplier delivers a profit bonanza.
On the other hand, country people are more reliant on their cars because there is usually a lack of public transport. They tend to have bigger vehicles and travel greater distances. This is an impost that seriously erodes the cost of living balance between city and country residents.
This poses a dilemma for the state government - and there is an election looming. The key to this puzzle is probably the groceries duopoly and their entry into the petrol market. If they are maintaining a huge profit deferential between city and country the authorities can point the finger and accuse them of profiteering and not serving the best interests of their customers - and if they lower the price their competitors will be forced to follow to remain competitive.
Country people will be watching with more than passing interest to see how this battle evolves. The duopoly seem stuck between a rock and a hard place. Having established petrol outlets to service their chain of supermarkets country wide they are now the element that dictates prices in most country towns.
An uncomfortable choice - between taking advantage of a profit opportunity or burnishing their public accountability credentials !
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