The value chain shows in broad terms the elements of the price of a litre of petrol from the imported refined petrol price through to the pump. Analysis of the value chain in Cairns and Brisbane in 2015–16, for those companies that operate in both markets, indicates that there are four main influences which explain the higher prices in Cairns. These are:
• higher costs of getting petrol to Cairns (accounting for around 1 cpl)
• higher wholesale costs and margins (around 2 cpl)
• higher operating costs at the retail level (around 2 cpl)
• higher retail margins and profits (around 3 cpl).
The Cairns Post front page splash has claimed the ACCC found that petrol prices in Cairns were 11c per litre too high. That is not accurate reporting of what they found. The 11c is the historical differential above the average for the 5 largest cities. As demonstrated above from the report costs in Cairns are going to be higher than those cities. The ACCC also found that prices in Brisbane were above the capital city average which will be subject of a further report.
The introduction of new players into the market, particularly those that price competitively, could lead to increased competition. Local governments may wish to consider promoting new entry into the market and ensuring that unnecessary planning or infrastructure barriers do not restrict or impede new entrants. As discussed above, the entry of the United site in the Innisfail market in February 2016 has had a downward effect on petrol prices in Innisfail. In the first nine months of 2016–17 Innisfail prices were on average 2.3 cpl lower than Cairns prices.