Monitoring of the Australian Petroleum Industry
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Monitoring of the Australian petroleum industry: Monitoring of the Australian petroleum Report of the ACCC into the prices, costs and prots of unleaded petrol in Australia of unleaded petrol Report of the ACCC into prices, costs and prots Monitoring of the Australian petroleum industry Report of the ACCC into the prices, costs and prots of unleaded petrol in Australia DECEMBER 2009 www.accc.gov.au December 2009 Monitoring of the Australian petroleum industry Report of the ACCC into the prices, costs and profi ts of unleaded petrol in Australia DECEMBER 2009 Australian Competition and Consumer Commission 23 Marcus Clarke Street, Canberra, Australian Capital Territory 2601 First published by the ACCC 2009 10 9 8 7 6 5 4 3 2 1 © Commonwealth of Australia 2009 This work is copyright. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced without prior written permission from the Australian Competition and Consumer Commission. Requests and inquiries concerning reproduction and rights should be addressed to the Director Publishing, ACCC, GPO Box 3131, Canberra ACT 2601, or [email protected]. Important notice The information in this publication is for general guidance only. It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. Because it is intended only as a general guide, it may contain generalisations. You should obtain professional advice if you have any specifi c concern. The ACCC has made every reasonable effort to provide current and accurate information, but it does not make any guarantees regarding the accuracy, currency or completeness of that information. ISBN 978 1 921581 46 5 ACCC 12/09_35224 www.accc.gov.au Contents Shortened terms vii Glossary xi Key fi ndings xvii Summary xviii 1 Framework and approach 1 1.1 The minister’s direction 1 1.2 Objectives of the monitoring report 1 1.3 Data collection and approach 3 1.4 Role of the ACCC in the petrol industry 5 2 ACCC petrol-related activities 7 2.1 Monitoring 7 2.2 Informing consumers 9 2.3 Enforcement of the Trade Practices Act 10 3 Structure of the Australian petroleum industry 19 3.1 Overview 19 3.2 Crude oil production 21 3.3 Refi ning in Australia 24 3.4 Ethanol production infrastructure in Australia 35 3.5 Importing of refi ned petroleum products 37 3.6 Exporting refi ned product 42 3.7 Wholesaling 43 3.8 Retailing 44 4 Import infrastructure 47 4.1 Terminals 47 4.2 Constraints at ports 57 4.3 Access to spare capacity by independent importers 59 4.4 Map and schematics of major oil infrastructure and fl ows 59 5. International context 65 5.1 Global crude oil supply 65 5.2 Global crude oil demand 68 5.3 Asia-Pacifi c crude oil supply and demand 70 5.4 Global crude oil refi ning capacity 72 5.5 Asia-Pacifi c refi ning capacity 74 5.6 Recent oil price history 75 5.7 Short-term oil price outlook 78 5.8 Longer term oil price outlook 79 5.9 Observations 81 6 Import parity prices 83 6.1 Relevance of IPP 83 6.2 Components of IPP 84 6.3 The IPP and import costs 91 6.4 Observations on IPP 92 7 Buy–sell arrangements 93 7.1 Purpose and operation of the buy–sell arrangements 93 7.2 Potential concerns 96 7.3 The counterfactual 100 7.4 Buy–sell prices and IPP 100 7.5 Conclusion 101 8 Wholesale prices 103 8.1 Determination of wholesale prices 104 8.2 Terminal gate prices 104 8.3 Wholesale prices 109 8.4 Observations on wholesale prices 113 9 Retail pricing 115 9.1 Retail prices and the infl uence of international factors 116 9.2 Retail price movements in the fi ve largest cities 129 9.3 Retail price movements in the three smaller capital cities and in regional centres and country towns 132 9.4 Other petrol grades 133 9.5 E10 petrol price differential 135 9.6 Diesel and automotive LPG 136 10 Retail prices in regional centres and country towns 145 10.1 Price differentials over the past seven years 145 10.2 Petrol prices in regional centres and country towns 146 10.3 Factors infl uencing petrol prices in regional centres and country towns 153 10.4 Price changes in regional centres and country towns 154 11 Retail price analysis 157 11.1 Petrol price cycles 157 11.2 Consumer buying patterns over the price cycle 172 11.3 Petrol price cycles and public holidays 173 12 Financial performance of the downstream petroleum sector 177 12.1 Total downstream revenues and costs 179 12.2 Total downstream petrol revenues and costs 182 12.3 Total downstream profi ts 184 12.4 Profi tability from a motorist’s perspective 185 12.5 Total downstream profi tability from a shareholder’s perspective 187 12.6 Profi ts by sector 191 12.7 Petrol profi ts by sector 196 12.8 Downstream profi tability in perspective 196 12.9 Themes arising from total downstream revenues, costs and profi ts 201 13 Refi ning and supply revenues,costs and profi ts 203 13.1 Refi ning revenues and costs 203 13.2 Refi ning petrol revenues and costs 204 13.3 Refi nery profi tability from a motorist’s perspective 205 13.4 Refi nery profi tability from a shareholder’s perspective 206 13.5 Refi nery sector profi tability in perspective 208 13.6 Refi ning in detail 211 13.7 Refi ning and supply 213 13.8 Refi ning and supply revenues and costs 214 13.9 Refi ning and supply petrol revenues and costs 215 13.10 Refi ning and supply profi tability from a motorist’s perspective 215 13.11 Refi ning and supply profi tability from a shareholder’s perspective 216 13.12 Refi ning and supply profi tability in perspective 218 13.13 Refi ning and supply in detail 220 13.14 Themes in this chapter 224 14 Wholesaling and retailing revenues, costs and profi ts 225 14.1 Wholesale revenues and costs 225 14.2 Wholesale petrol revenues and costs 227 14.3 Wholesale profi tability from a motorist’s perspective 228 14.4 Wholesale profi tability from a shareholder’s perspective 229 14.5 Wholesale profi tability in perspective 231 14.6 Wholesale in detail 235 14.7 Retail revenues and costs 237 14.8 Retail petrol revenues and costs 238 14.9 Retail petrol profi tability from a motorist’s perspective 241 14.10 Retail profi tability from a shareholder’s perspective 242 14.11 Retail sector in perspective 244 14.12 Retail in detail 247 14.13 Themes in wholesale and retail 250 15 Emerging trends in the Australian petrol industry 251 15.1 Evolving structure of the retail industry 252 15.2 Increasing reliance on imports of crude oil and refi ned product 254 15.3 Price pressure from growing international demand for crude oil and refi ned products 257 15.4 Supply response to higher prices 259 15.5 Demand response to higher petrol prices 261 15.6 Final observations 267 Appendix A 269 Appendix B 271 Appendix C 277 Appendix D 293 Appendix E 295 Appendix F 319 Appendix G 325 Shortened terms ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission $A Australian dollars AIP Australian Institute of Petroleum Allens Allen Consulting Group ASX Australian Securities Exchange avg. average $b billion Australian dollars bl barrel BP BP Australia Pty Ltd CBA Commonwealth Bank of Australia CIA Central Intelligence Agency Caltex Caltex Australia Ltd Coles Express Coles Express Pty Ltd Coogee Chemicals Coogee Chemicals Pty Ltd cpl Australian cents per litre CSIRO Commonwealth Scientifi c and Industrial Research Organisation diesel automotive distillate E10 see EBP EBIT earnings before interest and tax EBP ethanol blended petroleum, of which E10 (unleaded petrol with 10 per cent ethanol) is a popular blend EPP export parity price/pricing excl. excluding FOB free on board GST goods and services tax Gull Gull Petroleum Group IEA International Energy Agency Informed Sources Informed Sources (Australia) Pty Ltd IPP import parity price/pricing JTA joint terminal arrangement JV joint venture KBD thousand barrels per day Monitoring of the Australian petroleum industry December 2009 vii LHS left-hand side Liberty Liberty Oil Pty Ltd LPG automotive liquefi ed petroleum gas $m million Australian dollars mbpd million barrels per day mbpy million barrels per year MMA McLennan Magasanik Associates Pty Ltd Marstel Marstel Terminals Pty Ltd ML megalitre Mobil Mobil Oil Australia Pty Ltd Mogas motor gasoline MOPS mean of Platts Singapore Neumann Neumann Petroleum Terminals Pty Ltd na not applicable OECD Organisation for Economic Co-operation and Development OPEC Organization of the Petroleum Exporting Countries OGJ Oil and Gas Journal pa per annum PSA Prices Surveillance Authority PULP premium unleaded petrol RBA Reserve Bank of Australia RET Department of Resources, Energy and Tourism RHS right-hand side Rio Tinto Rio Tinto Ltd RON research octane number RULP regular unleaded petrol Saudi CP Saudi contract price SEP Strasburger Enterprises (Properties) Pty Ltd Shell Shell Company of Australia Ltd SMP Sydney Metropolitan Pipeline Pty Ltd TGP terminal gate price the Act Trade Practices Act 1974 Trafi gura Trafi gura Services Australia Pty Ltd United United Petroleum Pty Ltd viii Monitoring of the Australian petroleum industry December 2009 $US United States dollars $US/bl United States dollars per barrel US EIA United States Energy Information Administration Vopak Vopak Terminals Australia Pty Ltd Woolworths Woolworths Ltd WSFR Worldscale Flat Rate WTI West Texas Intermediate 7-Eleven 7-Eleven Stores Pty Ltd Monitoring of the Australian petroleum industry December 2009 ix Glossary automotive fuel includes petrol, diesel and automotive LPG.