July 17, 2012
Drivers should brace for higher petrol prices in the weeks ahead amid renewed concerns oil prices may have been manipulated by reporting agencies in recent years.
“Motorists in mainland capital cities should expect to see pump prices between $1.30-1.50 a litre rather than $1.15-$1.35 in (the) coming fortnight,” said CommSec chief economist Craig James late yesterday via Twitter.
The forecast for higher prices comes after global growth worries had sent average petrol prices lower for nine weeks straight from $1.52 per litre on May 13 to $1.34 last week, according to data from the Australian Institute of Petroleum.
Mr James said the current stability in the European debt crisis and hopes for stronger Chinese economic growth may underpin rising petrol prices in the weeks to come.
Motorists are often left puzzled how fuel prices can shift uniformly 10 per cent in a day without obvious price triggers such as supply restrictions or massive moves in global oil prices and the Australian dollar.
Some of those doubts about the underlying competitiveness of the fuel markets are now spreading to global markets.
While international attention has fixed on how a group of banks manipulated the global benchmark lending rate – Libor – similar market distortions may also have taken place in energy markets. Barclays, a major UK bank has already been fined heavily for its role in setting the London Interbank Offered Rate (Libor) artificially low, and other fines and lawsuits are expected to follow for banks involved.
Suspicion about similar manipulation on the fuel market by oil price reporting agencies such as Argus Media and Platts has also grown after it emerged that a watchdog’s report released in June suggested that the global petrol market is open to “manipulation or distortion” in much the same way as the Libor market.
The risk of manipulation “might arise from the market’s structure itself or, in the context of a price reporting agencies-developed price referenced by an oil derivatives contract,” according to the International Organisation of Securities Commissions report to the Group of 20 major economies.
In Australia, former Australian Competition and Consumer Commission chairman Alan Fels has also waded into the issue. He has told Fairfax Media’s The Australian Financial Review that petrol prices should be probed to ensure their fairness.
“It seems obvious that needs looking at to make sure it is ‘dinkum’,” Mr Fels said, according to today’s AFR report.
He also lamented the ACCC’s decision to allow Coles and Shell, through ColesExpress and Woolworths and Caltex to function together as joint ventures “causing a sharp increase in concentration” in market power.
The ACCC already opened a formal investigation into petrol price sharing information between petrol companies in Australia in May.
“The ACCC is concerned that this allows petrol retailers to quickly signal price movements, monitor competitors’ responses, and react to them,” it said in May.
“The ACCC is concerned that these arrangements lessen price competition in petrol retailing to the detriment of consumers.”
The watchdog is investigating to see whether the arrangements breach the Competition and Consumer Act 2010.
The average price of a litre of unleaded petrol in Melbourne is currently $1.24, according to price tracking group Motormouth, while in Sydney the same amount of unleaded petrol can be found as low as $1.30 in the CBD.
Michael Case, manager of vehicle engineering at the RACV, said the motorist lobby group is keeping a close watch on the outcome of the ACCC’s inquiry into pricing.
“We’re looking for a significant outcome from the inquiry into the sharing of pricing information,” said Mr Case. “We’re mindful that a number of inquiries in the past have been held without a whole lot of result,” he said.
Beyond the investigation, the RACV supports the use of standardised pricing boards in front of petrol stations, which would prevent customers from being “sucked in” by discounted prices only to have to pay more for the products they need, he said.
The RACV also wants consumers to have access to the real-time petrol pricing information that the petrol sellers have access to.
“It should be level-playing field,” he said. “If that’s going to happen, then the consumer should have the same information.”