Cairns petrol stations make 38 percent more profit on fuel sales than the national average, according to an Australian Competition and Consumer Commission (ACCC) report.
ACCC Chairman, Rod Sims, said the reason was the lack of “vigorous and effective competitors”. He said he hoped the release of the long-awaited report analysing the petrol market in Cairns would put pressure on retailers to reduce prices.
The study found that since 2012-13 petrol prices in Cairns have consistently been about 11 cents per litre higher than in the five largest cities in Australia, including Sydney, Brisbane and Melbourne. The study found that the average net profit per petrol station in Cairns was about 38 percent higher than the average net profit across other (190) sites around Australia in 2015-16.
The ACCC estimates that if competition existed in Cairns prices should be 4-5c a litre less and, collectively, motorists would save $3.5 million a year.
Just 100km away, in the much smaller Innisfail, prices have generally been lower than in Cairns, which Mr Sims attributed to the competition caused by the presence of a United retail petrol site.
“This is significant given that Cairns is around 20 times the size of Innisfail. Other towns in North Queensland, such as Mareeba, Atherton and Ayr, have also had lower petrol prices than Cairns in recent years,” Mr Sims said.
“The ACCC’s Cairns petrol market report confirms what motorists have suspected for a long time: they are paying too much for fuel and contributing to very high profits for retailers in the area. Competition in the Cairns fuel market is weak and, unfortunately, it is consumers who are paying for this at the bowser.”
Mr Sims said the study found that, despite the poor competition, there was no breach of competition or consumer laws. “The report found that the main reasons for the higher prices in Cairns were higher retail profit margins on petrol, higher wholesale prices and higher retail operating costs per litre.
“Compared with historical retail margins and profits and those of similar-sized towns, retail margins and profits in Cairns are currently very high.”
Mr Sims said three steps that could be taken to promote more competition in Cairns were: increased petrol price transparency; regular reporting on wholesale petrol prices and retail margins, and new competitively-priced retailers entering the market.
“Close scrutiny of pricing behaviour may give retailers less incentive to increase and maintain high prices,” he said.
ACCC study key findings
Cairns service station owners are making 38 percent more in net profits than the Australian average.
Motorists are paying about 11 percent per litre more than in capital cities.
Main reason is lack of competition.
If there was competition the ACCC estimated prices should be 4-5 cpl lower than current levels.
The study covered 35 retail petrol sites in Cairns, in a 15km radius from the post office in Sheridan Street.