Price gouging at petrol stations may not be illegal, experts warn, as PM considers supply chain tsar

Drivers fed up with massive price spikes at the bowser are being warned not to expect a wave of fuel company prosecutions over allegations of price gouging.

This morning, Prime Minister Anthony Albanese announced Anthea Harris, former head of the Australian Energy Regulator, will be appointed as the federal government's fuel supply task force coordinator.

Mr Albanese also warned fuel retailers the Australian Competition and Consumer Commission (ACCC) "will take action" against service stations that are overcharging.

In an unusual step, the competition watchdog announced today that it was investigating allegations of anti-competitive conduct by major fuel suppliers in regional and rural Australia.

Earlier this week, the ACCC called an emergency meeting with the industry asking it to justify its pricing.

But experts say price gouging in the fuel sector isn't illegal and successfully prosecuting companies for being misleading or acting in concert to raise prices — known as colluding — is rare.

Motorists in the country's five largest cities were paying on average around $2.19 a litre for regular unleaded last week — an increase of almost 49 per cent since February 20, according to ACCC figures.

Diesel was more than $2.40 per litre on average.

Victorian tow truck driver Trevor Oliver is one of the many being hit hard.

This week, he forked out $400 to fill up a truck with diesel at Bacchus Marsh, north-west of Melbourne at a price of $2.62 a litre.

Just a few weeks ago the cost was $250.

"It'll put a huge impost on the cost [of] towing."

Mr Oliver has questioned whether some companies were taking advantage of the Middle East conflict to super-charge profits — especially in the early days when retailers were selling fuel they'd purchased at prices unaffected by the war.

"I think there's some profiteering," he said.

The war between the US, Israel and Iran has created the largest supply shock ever in the global oil market and caused the cost of crude oil to skyrocket due to the crucial route through the Strait of Hormuz being crippled.

Panic buying has pushed prices up further, leading to pleas from the prime minister for people to stop.

"There has been, in some places, a doubling of demand. That shouldn't occur," Mr Albanese said.

Motoring organisations have also questioned large gaps between the wholesale price being paid by retailers, and the price they charge consumers.

RACQ's Ian Jeffreys said earlier this month it had reported many fuel retailers in Brisbane to the consumer watchdog for price increases during the first days of the Iran conflict.

"It was across the board and across many brands that this hike occurred and it all happened in a very short period of time," Mr Jeffreys said.

Mr Oliver is more than just an angry motorist.

He owned a petrol station in a small town in country Victoria for more than 20 years.

In 2000, he blew the whistle on the fuel industry after seeing a price spike he believed was unjustified.

Mr Oliver alleged he had been phoned by his supplier and told to lift his petrol price by 10 cents a litre at 10am that day.

It prompted a successful prosecution by the ACCC of a group of petrol companies and individuals in the Ballarat area who took part in price-fixing of petrol from June 1999 to December 2000.

They were fined more than $23 million and Mr Oliver's role was lauded by the watchdog.

"It was satisfying to think that a little garage in the middle of nowhere really, had to highlight it," Mr Oliver said.

Another price fixing case triggered by Mr Oliver in Geelong was unsuccessful, with the ACCC losing the case in 2007.

'No real power to do anything'

Price gouging could be happening in the fuel sector but it's not illegal, according to former head of the ACCC, Allan Fels.

"There's no real power to do anything about price gouging and very little scope to use powers of investigation," Mr Fels said.

It was also the worst possible time for the competition watchdog to try to prove excessive prices were unjustifiable because the global oil shock and panic buying meant there could be other plausible explanations.

In the early 2000's with Fels in charge, the ACCC investigated serious allegations of price fixing in the fuel sector which ultimately couldn't be proven.

One area the watchdog has flagged is companies misleading the public about the reasons for price increases, which could breach consumer law.

The Albanese Government announced plans to double the penalty for misleading conduct and cartel behaviour to $100 million.

But Mr Fels believed that would be of limited use because retailers didn't have to give a reason for raising their prices and cartel conduct was difficult to prove without explicit evidence companies were acting together.

"They will be more careful now not to attribute their price increase to the war if they are not due to that because they'll be aware of an ACCC campaign," he said.

Mobil was fined $16 million earlier this year for making false or misleading claims to consumers about fuel sold at nine petrol stations in north and central Queensland.

Customers were shown signage about "Mobil Synergy Fuel and Synergy" technology which the ACCC said was a "total falsehood" because the petrol wasn't available at the sites.

Consumer group Choice has called on the Albanese Government to extend a ban on "excessive pricing of groceries" to other sectors like the fuel industry.

From July 1, the ACCC will be able to prosecute large retailers in the supermarket sector if they charge prices that exceed the cost of supply plus a reasonable margin.

Mr Fels said that should be considered.

When asked yesterday about whether the ACCC needed further powers, Mr Albanese was non-committal but pointed to the government's plan to double fines.

Pressure from government may help

David Byrne is a Professor of Economics from the University of Melbourne has studied Australian petrol prices and believes it is possible to identify problematic pricing.

In one research paper, he analysed more than a decade of petrol prices in Perth and discovered the dominant retailer, BP, had set new pricing patterns that its competitors had followed.

The stand-out feature was regular price jumps on Thursday's followed by price cuts.

"Raising prices basically every Thursday, and making those price increases larger over time," he said.

"By our estimates there, it would have increased price cost margins around three to four cents per litre."

For an average motorist who filled up once a week, that would mean paying about $100 extra over a year, Mr Byrne said.

He said there was evidence politicians and the watchdog talking tough had pushed prices down slightly in the past.

He also encouraged motorists to use fuel watch websites and apps to ensure they were getting the cheapest price.

Mr Fels warned consumers not to expect petrol prices to drop quickly when the Iran war ends.

"We have the rockets and feathers phenomenon. When costs go up, prices go up like a rocket top speed. When cost fall, prices tend to fall very slowly like a feather to the ground," he said.

In a statement, the ACCC said, "it has all the powers it needs to enforce the Competition and Consumer Act and engage with the fuel industry in the current situation."

It said in addition to the case involving Mr Oliver's allegations about price fixing in the Ballarat region, it had taken enforcement against the fuel sector for competition breaches.

This included:

• A 2014 case against Informed Sources and petrol retailers over a service which allowed them to communicate about prices which was settled.
• A 2005 case against two petrol retailers from Woodridge in South East Queensland over price-fixing which resulted in fines of $470,000.
• A 2003 case alleging eight companies and 10 individuals in Geelong area had engaged in price fixing but the case was unsuccessful.

Rowan Lee, the chief executive of peak body, the Australasian Convenience and Petroleum Marketers Association said it welcomed scrutiny from the competition regulator which included attending its emergency meeting.

"We are in uncharted waters — the current situation is unprecedented," he said.

"While the price of crude oil has increased, the price of refined fuels (such as petrol and diesel) has increased significantly more, which has affected retail fuel prices."

BP has been contacted for comment.