Petrol prices in Tasmania explained and why drivers hold the key to cheaper fuel
Why is petrol so much more expensive in Tasmania than it is on the mainland?
What is a petrol price cycle?
- A petrol price cycle is a movement in retail price from a low point (or trough) to a high point (or peak) to a subsequent low point
- Price cycles are the result of deliberate pricing policies of petrol retailers, and are not directly related to changes in wholesale costs
- In these cycles, prices steadily go down for a period followed by a sharp increase
The answer is complicated and depends on various factors.
To breakdown the question, ABC Hobart hit the road to compare prices at bowsers and spoke to industry experts.
How inflated are fuel prices across Tasmania?
Tasmania has faced the most unfair fuel prices in the country for some time.
Harvey Lennon, the RACT chief executive, described the margin between capital cities as “nonsensical and illogical”.
He estimated that in the last two months, 80 per cent of fuel sold in the state was at an inflated price and that Tasmanians collectively pay $2 million more each month than they should be paying.
“You cannot explain logically the prices having stayed in the high $1.50s for as long as they have,” he said.
Drivers should actively chase the best price, which would encourage retailer competition. (ABC News)
“The reality is there are a lot of retailers charging way too much and Tasmanian motorists are footing the bill.”
Mr Lennon said his organisation fields daily phone calls from motorists complaining about the disparity in prices.
He said the wholesale price of fuel in Tasmania is $1.20 and “if you’re paying above $1.40 per litre, you’re paying too much”.
“If you’re paying above $1.50 per litre, you’re paying way too much.”
Motorists on average have been paying “at least 20 cents per litre too much” in Tasmania, Mr Lennon said.
Smaller retailers do not have economy of scale, yet regularly sell for less per litre. (AAP: Lukas Coch)
What makes Tasmania different from the mainland?
There are several complex factors that impact the cost of fuel in Tasmania.
Malcolm Little, the general manager of the Tasmanian Automobile Chamber of Commerce (TACC), said the key things Tasmania was missing to make prices more affordable was competition and the price cycle that cities such as Melbourne and Sydney enjoy.
“Service stations in Sydney and Melbourne have higher volume and much more of an economy of scale,” he said.
“Whereas service stations in Tasmania are smaller, yet more numerous and often family owned, meaning they do not have the same economy of scale and have to absorb more costs.”
Mr Little said the international price of crude oil, its reprocessing in Asia and transport to Australia and Tasmania were some of the other components that swell prices at the bowser.
The shopper docket discount scheme was also adding “distortion to the problem, creating irrational consumer behaviour”, he said.
Mr Little said a lack of independent service stations, which are disappearing across the state, also adds to a concentrated market in Tasmania.
To add to the mix, Hobart, which is considered a regional city, does not have a capital city price cycle.
Fuel is an unregulated commodity that relies on petroleum and oil companies to set price strategies that allow for natural peaks and troughs in prices.
Why do prices vary around the state?
Prices at the pump vary widely and dramatically across the state.
Generally, regional areas enjoy cheaper prices than urban centres in Tasmania — which indicates urban retailers have high margins in place.
Mr Lennon said the discrepancy in prices across the state was “inexplicable”.
“You cannot justify the price in metropolitan areas being substantially higher than in regional outlets, it just doesn’t make sense,” he said.
As of today, the average cost of unleaded fuel per litre across Tasmania was $1.45. The prices were as follows in Tasmania’s main urban centres:
- Launceston 1.45
- Burnie 1.39
- Devonport 1.45
- Hobart 1.53
The cheapest unleaded fuel, per litre, was found in these regional centres:
- Dunalley 1.32
- Lauderdale 1.34
- Triabunna 1.32
The ACCC explained that fuel prices are generally higher in regional Australian areas due to:
- Lower population and demand resulting in fewer outlets, leading to less competition;
- Higher costs for transport and storage of fuel;
- Less demand for convenience sales like drinks, food and newspapers that can enable retailers to add to overall profits and keep fuel prices lower;
- The location of outlets; whether or not they are on a highway and likely to get a high number of customers.
Mainland cities have the advantage of larger volume and economy of scale to moderate fuel prices. (ABC)
What can motorists do?
Both the RACT and the TACC said where motorists choose to fill up is the best lever of change.
“We’re calling on motorists to support retailers who are doing the right thing,” Mr Lennon said.
While the RACT is planning to talk with the Australian Competition and Consumer Commission (ACCC) and the relevant state minister, fuel prices can ultimately be driven by consumers, Mr Lennon said.
“Please have a look at the price you’re paying, if you’re paying more than 1.40 pre-discount you’re paying too much.”
“Support the retailers doing the right thing and charging a fair price.”
Mr Lennon said that would increase competition and encourage other retailers to drop their prices in order to maintain their market share.
Mr Little encouraged motorists to download the RACT fuel app that compares current fuel prices across Tasmania.