The Australian Competition and Consumer Commission (ACCC) says petrol prices are still high, as petroleum companies enjoyed solid profits this year.
In its annual review of the petrol industry, the ACCC says the switch by motorists from cheaper regular unleaded petrol to premium unleaded has helped to push up profits. According to the ACCC, total profits in the retail sector rose 18.9% in the 12 months to June 2013, to $534.9 million. Retailers earn 2.4 cents of profit on each litre of petrol they sell, four times more than they did in 2009.
Service station retailers, such as Woolworths (ASX: WOW) and Coles – owned by Wesfarmers (ASX: WES) – also enjoyed a big jump in sales at their convenience stores, up 17% over the previous year. Both retailers recently agreed with the ACCC to limit their petrol discounts to 4 cents a litre from next year. Had they not, they could have faced stronger action from the regulator. The ACCC is still investigating how petrol companies share their petrol prices over the course of the week, leading to sharp jumps in prices on certain days, such as Thursdays, Fridays and over the weekend.
The ACCC report also notes that wholesalers saw a whopping rise in profit over the previous year, with net profits of $775 million, up from $417 million the previous year. 2013 result was a significant improvement thanks in the main to lower losses on refinery operations. Refineries lost $106.8 million last year, compared to a loss of $609 million in 2012.
That partly explains why Caltex (ASX: CTX) has moved to close its Kurnell refinery in Sydney, transforming it into an import facility. The company reported a profit of $57 million in the 2013 financial year, compared to a loss of $714 million the previous year. Kurnell was designed to process 'sweet' light crude oil, but was increasingly handling heavier crude oil imports, putting it at a major disadvantage to the super-refineries in Asia.
Foolish takeaway
89% of the price we pay for our petrol is directly attributable to the international price of fuel and fuel taxes, with 11% going to the wholesale distributors and retailers. If the Australian dollar continues to fall, petrol prices could be set to rise even higher.
