Melbourne, Brisbane should brace for bowser hit, retailers warn

Elouise FowlerReporter

Apr 17, 2024 – 5.00am

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Viva Energy, the operator of Shell petrol stations, says Sydney fuel prices have peaked – but motorists in Brisbane and Melbourne should expect higher prices within a fortnight.

Sydney’s petrol prices are significantly higher than other major cities, NRMA data showed this week, and the motorist group’s spokesman, Peter Khoury, accused service station owners of “massively overcharging”. About 40 per cent of service stations were charging $2.35 per litre, the data showed, well above the $1.87 wholesale price.

The WestConnex in Saint Peters. Sydney motorists are currently paying much higher prices for petrol. Anna Kucera

The average price of regular unleaded petrol in Melbourne sits around $1.96.

But both Viva and Ampol have denied they are price-gouging, and say the higher prices are linked to operating costs and market cycles.

“Sydney is about one to two weeks ahead of Brisbane and Melbourne in the cycle and reached peak restoration at the weekend,” a Viva spokesman said. Restoration refers to the “true” price of fuel after a period of discounting, he added.

“The petrol price cycle reflects the competitive nature of the market as it swings from discounting to restoration and back.”

Fuel prices go through four to six-week price cycles, where prices drop 1¢ to 2¢ per litre per day until the end of the cycle, when they jump about 40¢ per litre, according to price data from the Australian Competition and Consumer Commission.

“These petrol price cycles are the result of pricing decisions made by some petrol retailers,” the competition regulator told The Australian Financial Review. “Not all retailers participate in price cycles. Price cycles only occur at the retail level; wholesale prices do not exhibit similar cyclical movements.”

Average petrol prices in Brisbane peaked at $2.26 per litre on March 13, while Melbourne prices climbed to the top of the cycle at $2.23 four days later.

In Adelaide, fuel fetched $2.17 per litre on April 7, ACCC price data shows.

Ampol said its Sydney petrol prices varied from site to site. “It depends on many factors, including supply chain costs, site operating costs, volume throughput, and shop offer,” a spokesman said. “Ampol prices each retail site independently.”

But the biggest driver of fuel prices is the global price of oil.

Brent crude is up about 17 per cent since the start of the year, driven by supply concerns and escalating tension in the Middle East that culminated with Iran launching more than 300 drones and missiles at Israel at the weekend.

Brent crude prices rose 20¢, or 0.2 per cent, to $90.30 a barrel on Tuesday. It briefly climbed above $US92 on Friday for the first time since October.

This did not bode well for Australian households, AMP chief economist Shane Oliver warned on Tuesday.

He estimated that higher petrol prices would dent hip pockets by a record $76 per week, adding that the rising price of oil and wider fuel refinery margins were to blame for the increase. This is despite the oil price still sitting well below the highs reached in 2022 following Russia’s invasion of Ukraine.

A spike in oil prices from around $US85 per barrel for West Texas Intermediate to about $US100 per barrel would add about 15¢ per litre to average Australian petrol prices, pushing the weekly household petrol bill to a record $76, Dr Oliver said.

That’s $10 a week from where it was a year ago, and translates to Australians having to spend about $500 more a year.

Elouise Fowler is a journalist for The Australian Financial Review based in the Melbourne office. Connect with Elouise on Twitter. Email Elouise at elouise.fowler@afr.com.au