After persistent NRMA lobbying for fair and transparent fuel pricing, Australian motorists now have more firepower in their battle with the big four oil companies.

According to conservative media commentator Terry McCrann, NRMA President Alan Evans is a “hyperbolic know-nothing”. Writing in Melbourne’s Herald Sun last September, McCrann accused the “completely ignorant” NRMA and Evans of “chasing non-existent rabbits down populist burrows”. Why? Because Evans is the most vocal critic of the way petrol is priced in Australia and lays much of the blame at the gilded doors of the big four oil companies - Caltex, BP, Shell and Mobil.

Petrol prices inflame public opinion like nothing else - talkback lines become clogged, internet forums go into meltdown and, inevitably, politicians get in on the act.

In June 2007, the Labor Party announced that, if elected, it would appoint a petrol commissioner to oversee pricing. John Howard’s Coalition government responded by asking the Australian Competition and Consumer Commission (ACCC) to hold an inquiry into the price of unleaded petrol. The Commission’s findings were handed down last December and make for interesting - if contradictory - reading.

At first glance, the ACCC report seems to back the oil companies, stating at the start: “We are able to conclude that the unleaded petrol industry in Australia is fundamentally competitive. There is no obvious evidence of price fixing or collusion between the major participants in the industry.” This quote now takes pride of place in oil industry propaganda.

Yet the remainder of the report points out how the industry could actually be made more competitive (to the benefit of motorists) and draws attention to how the major participants work with each other and benefit from information that only they can readily access.

“It’s what I’ve said for some time,” says Evans. “They don’t need to sit in smoke-filled rooms. They put a lot of resources into trying to make sure they manipulate the market other than by directly engaging in collusion and price fixing. They do it by much more sophisticated means...”

Central to this market manipulation are the buy-sell arrangements that exist between the ‘big four’. By monopolising Australia’s refineries and limited terminal space, and by selling petrol to each other where necessary, they can freeze any would-be independent competitors out of the all-important wholesale market.

The ACCC report speculates that the introduction of a fifth player into the Australian market is likely to make the industry more competitive, ultimately leading to a price reduction, but it will never happen while the existing companies control the available terminal space. Alan Evans believes government intervention is required to establish a terminal where independent retailers can import their own fuel, thereby threatening what the ACCC calls the “comfortable oligopoly” - not to mention the profits - enjoyed by the big four.

Last year Exxon-Mobil made a $50 billion profit, while Shell has just announced record profits of $36 billion. Which clearly makes a mockery of the Australian Institute of Petroleum’s (AIP) assertion that the “average oil company profit over the last 10 years is around one cent per litre sold”.

As Evans says, “That’s at the retail end. The key [profit margin] we look at is what we call the refinery margin - the difference between the cost of crude versus the cost of refining and the Terminal Gate Price… It varies between four to seventeen cents a litre… At four cents they’re making a modest profit. At seventeen… they’re into profiteering.”

The AIP refused to talk to Open Road, instead referring us to its website. Shell adopted the same approach, while Caltex and Mobil didn’t even have the courtesy to respond. A BP spokesperson did talk, but simply parroted the standard line that Australia has “the fourth-lowest petrol prices in the OECD” (which is true, but as the AIP’s own figures show, this is largely due to the relatively low tax component, not the actual cost of petrol).

The BP spokesperson also stated “there’s no other product in the country that is as transparent” as petrol in terms of pricing. It’s an astonishing claim considering the contradictory information the oil companies feed the public. For example, which of these statements do you think is accurate?

   a) “Fuel prices… are strongly influenced by the price of crude oil” - Shell;
   b) “There is obviously a strong link to the crude oil price… [for] petrol at the pump” - BP;
   c) “The landed price of crude oil does not determine the retail price of petrol in Australia” - Caltex.

For the record, the answer is ‘c’.

The true determining price is known as Mogas95, which is the average daily price of unleaded petrol from refineries traded in Singapore. So, despite what the apologists say, if the price of crude goes up, the price of petrol doesn’t necessarily have to follow.

Furthermore, Mogas95 is 95 RON fuel, whereas the bulk of petrol sold in here is the cheaper 91 RON. As Alan Evans points out, this gives the oil companies another “nice little margin”.

Evans is also furious that the big four are allowed to base their transportation costs (passed on to consumers) on 30,000-tonne tankers when “the minimum-size tanker carting oil in Australia would be 88-90,000 tonnes.”

But above all, it’s the fundamental lack of pricing transparency that concerns Evans, particularly regarding price cycles. The oil industry claims weekly price cycles benefit motorists by allowing them to buy heavily discounted fuel. Unfortunately, it’s difficult to pick the cheapest day, especially when, says Evans, the oil companies “play the game” and move it. Even the ACCC report calls price cycles an “enigma” - so, queries Evans, “what chance has the poor punter got?”

Such tactics are maximising the oil industry’s already unfair advantage gained by their use of price-monitoring website Informed Sources. This site, which the industry controls, allows petrol station operators to know within minutes what their competitors are doing, enabling them to respond almost immediately. Evans (and the ACCC) would like to see Informed Sources become a public site, automatically levelling the playing field and mirroring the situation in Western Australia where, thanks to FuelWatch, the oil companies have to let motorists know about price changes in advance.

Alan Evans is convinced consumer anger will eventually force the big four to be less opaque in their dealings. “I don’t mind the oil companies making a fair profit,” he explains. “But what I hate is the exploitation.”

Evans is, however, encouraged that the new Labor government is showing signs of being tougher on the oil companies and has already delivered on an election promise by appointing Pat Walker to the role of Petrol Commissioner. Western Australia’s Commissioner for Consumer Protection for the past decade, Walker’s sole focus will be petrol when he becomes a full-time Australian Competition and Consumer Commissioner.

“After three years of hard work by the NRMA, Australia now has a full-time Petrol Commissioner and that’s a good first step to getting fairer prices in Australia,” Evans acknowledges. “Motorists are expecting [Mr Walker] to make the most of his powers to deliver transparency and fairness in the market.”

The NRMA wants the Commissioner to be able to order oil companies to adjust their prices if they are too high and issue fines if oil companies do not comply. It urges the Commissioner to force oil companies to compensate motorists if overcharging occurs and suggests he should issue weekly reports to the public on the price of petrol.

Mr Walker is clearly receiving an equal measure of support and pressure from the NRMA but Alan Evans suggests the last thing Australia needs is “for there to be no change to the status quo”.

“Monitoring fuel prices is one thing,” he asserts, “but the real task for the Commissioner will be to act when oil companies are caught ripping Australians off, as they were over the Christmas holiday period.”

Pat Walker’s appointment is the culmination of constant NRMA campaigning on petrol pricing which led to the influential 2006 Fuel Summit and later to the ACCC inquiry.

Now, as the big four oil companies scramble to justify their petrol price hikes in the glare of increased scrutiny, Alan Evans has no intention of easing the pressure.

“I am sceptical of criticism from media commentators who support the oil companies,” he says.

“By insulting the NRMA, they are attacking everyday motorists who are struggling to make every dollar count in the face of exorbitant prices imposed by the oil giants.

“For each cent we can stop them increasing the price of petrol, and for each cent we can get them to reduce it, we will save Australian motorists $240 million. That’s a worthwhile battle in my book.”

FOR EVERYDAY TIPS on how you can save money on petrol, go to the NRMA website. Go to the NRMA home page to find out the lowest and highest fuel prices in your area.

Open Road March/April 2008