An increasingly hairy-eyed TERRY McGEE finds more questions than answers as he delves into petrol Terminal Gate Pricing.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
In recent weeks, we’ve talked a lot about mark-ups: what’s reasonable, what’s unreasonable, what they were (gasp!) and what they are now (whew!).
When you talk retail markups, you’re working with an assumption of a base or wholesale price on which the mark-up is applied.
In the fuel industry, this is called the Terminal Gate Price - the price of the fuel as it leaves the terminals dotted around Botany.
We’ve been taking it as the price provided on the Australian Institute of Petroleum website under the label “Terminal Gate Prices (wholesale)”.
The site further describes it as the “Wholesale price for bulk purchase at the terminal”, but one more word in the following sentence caught my eye: “Prices shown are the average TGP for unleaded petrol and diesel across each of these companies for the day.”
The word is “average”, and I admit, at first, I didn’t pay much attention to it.
I mean, they couldn’t vary much, could they, because they’re all locked in deadly competition, aren’t they?
If the “average” is given as 120.7 cents per litre, then surely we’re talking figures within half a cent of each other?
But, as we have progressed through this series, the Hairy Eye has become more hairy, not less, and I thought to delve. The graph on this page shows what I found.
The blue bars give us the cost of the fuel leaving the terminals for the four suppliers, measured over four weeks this month.
The red line gives their average.
We can confine our interest to the right-hand pair, as they provide almost all the fuel to our region - and we see an extraordinary difference.
Caltex fuel apparently costs more than 5.5 cents per litre more than Shell, even as their trucks groan out of the terminal gates.
Now 5.5 cents per litre may not seem much, until you remember the Sydney retail mark-up is only 2 cents more than that.
Two questions immediately form:
Why does Caltex fuel cost 5.5 cents per litre more than Shell fuel, when it comes from the same place and they have to compete in the same market?
And why doesn’t Shell fuel cost 5.5 cents per litre less than Caltex when it leaves the pumps in the Eurobodalla?
Perhaps it suits the companies to shift their profit-taking between their wholesale and retail arms? Is that legitimate?
As we dig even deeper, we find this tantalising tidbit in the Caltex page’s fine print:
(These prices) do not apply to customers (including franchisees) with a current term supply contract with Caltex that is not a TGP-based supply contract.
Aha! So if you or I rock up to the terminal with our minimum 35,000 litre tanker, waving $42,000 out the window, we pay those prices, but franchisees and other regular customers pay a different, unpublished, unknowable price.
So what’s the point of publishing a price that probably nobody pays? And to the AIP, what’s the point of averaging a price probably nobody pays and then publishing a meaningless or indeed misleading average figure?
It does go someway towards answering another question that has bothered me.
The two large supermarket chains now control about half the fuel market between them.
We’ve seen in other markets (just think milk) how they disdain to take the going wholesale price, and beat the suppliers down. Why would we think they would be bound by formalities such as published Terminal Gate Prices in the lucrative fuel-retailing industry?
I’ll leave you with this final thought: I’ll bet the real figure Caltex franchisees pay isn’t far from the Shell figure (unless they both have some undisclosed wiggle-room).
Which means that the real average TGP is 2 cents or more lower than the AIP published figure we’ve been using.
So that’s another 2 cents or more we should shave off local prices.
Related coverage: Hairy Eye on fuel prices