SmartCompany, August 23 2016:
Australian businesses are being shut out of the benefits of lower petrol prices because the big players aren’t passing on the benefits, according to the Australian Competition and Consumer Commission.
The ACCC’s latest report into the petroleum industry highlights that while the average price of fuel in our capital cities is the lowest it’s been in 14 years, gross margins in 2016 were the highest on average since the ACCC started monitoring them.
In the report ACCC chairman Rod Simms said the commission is “concerned about the petroleum industry’s high retail margins” and advocates the use of petrol tracking apps like MotorMouth to ensure that customers are at least getting the best deal on offer.
But the peak body representing petrol retailers, the Australasian Convenience and Petroleum Marketers Association (ACAPMA), says Australians don’t understand enough about the business models of petrol stations, and the burden of increased compliance costs on their operations.
“I have to say we’re a bit miffed with the furore – we’re talking about the lowest petrol prices in fifteen years,” ACAPMA chief executive Mark McKenzie told SmartCompany.
“On the one hand the government wants us to keep prices down, on the other hand they have made a number of changes to compliance and compliance costs are likely to stay very high for some time.”
Small businesses aim for efficiency
According to Richard Thame, chief executive of courier operator Fastway Couriers, petrol app technology has been key to managing the strain on his franchisees when it comes to fluctuating fuel costs.
“We have 800 franchisees and they’re basically man with a van operations,” Thame says.
“So it’s fantastic to see what’s happening in the app space, even though it can be really hard to even see what the best deal is.”
Petrol is among the top five costs that Fastway franchisees face on a daily basis and the fluctuating prices have meant that the business overall has had to become more nimble and develop its operations with fuel efficiency in mind, says Thame.
“From experience, we’ve got our franchisees to become experts in one particular delivery area, to make sure that they are more efficient overall,” he says.
“But what any increased costs also do is drive a level of innovation. We realised drivers were going to a lot of people’s homes and they weren’t there during the day, for instance,” Thame says. In response the company started Parcel Connect, allowing businesses to sign up and house deliveries so that workers had more convenient options for pick up.
Brisbane-based removals company The Van That Can has noticed lower petrol prices in the city.
“So far, petrol is probably our second or third biggest cost,” founder Tara-Jay Rimmer told SmartCompany. “But it has gone down a bit.”
“That said, with a fleet of 30 vehicles we really can’t play the cycle of lower prices. You have to just fill up whenever you can.”
While prices are lower, Rimmer says fuel deals with the big players make it difficult for businesses like hers to support to smaller petrol providers.
“We use fuel cards that include the four cent discount at Shell,” says Rimmer.
“Supporting the local guys is what you want to do in an area like mine, but with the fluctuations in price, it makes it very hard.”
While The Van that Can may have noticed some price relief, the ACCC have marked Brisbane as a market of interest. In the June quarter average petrol prices in Brisbane were 5.2% higher than other capital cities, which the ACCC said could be a result of “inadequate competition at the retail level”.
McKenzie still believes more work needs to be done in breaking down the business model of petrol operators and the pressures they face.
“If the ACCC is going to report on the industry it’s all very well to look at the macro, but what about the micro – what other costs there are, all businesses understand there are a variety of costs involved in running a business,” he says.