Fuel

By Jason Gregory

Oil companies claiming to make only 2 cents for every litre of petrol they sell are simply not telling the truth.
Since the four major firms – announced an industry-wide loss of $160 million in 2000 they have turned selling petrol profitably into a “black art”.
Since 2002, the Caltex share price, for example, has increased from $1.86 to about $25. Last year the Australian arm of the company, declared a net profit of $467 million.
The Australian Competition and Consumer Commission early in 2007, threatened to publicly shame oil companies after finding petrol prices were, on average 7 cents a litre above the overseas benchmark.
The RACQ’s Gary Fites said the fuel business was “probably the best example of global VERTICAL INTERGRATION in the world”.
“The same companies own most of the oilfields, they own the ships, very often run the refineries, run the terminals, wholesale it and, increasingly, are selling it to the customers at the retail level,” Mr Fites said. “ It is a black art. There is potential for margin all along the way. Their claims of making very small amounts of money need to be considered along that context.”
Industry analysts say the turnaround was caused by two events.
The first was the closure of a refinery in Adelaide in 2001 which took 11 million litres a day out of the Australian market and dramatically restricted supply.

Then, two years later, the Howard Government introduced Australian Quality Standards which stopped independents from sourcing cheap fuel from Asia, spelling the end for marketplace competition.
FUELTRACS Geoff Trotter said a 2001 study commissioned by the Australian Petroleum Industry identified that the gross wholesale and retail margin was 12 cents a litre but “now, on certain days, the margin is 30 cents a litre”.
“The market is not stupid. Why are some idiots paying 13 times the price of the share now when the profit is the same as 2001?” Mr Trotter asked.
Mr Trotter performed a cost breakdown for unleaded petrol sold in Brisbane in June 2007 at 135.9 cents a litre and found a gross margin of 30.7 cents a litre.
“Tax accounts for 40.9 cents, crude cost 58.9 cents, and shipping, terminal and delivery costs were 5.4 cents,” he said.
Mr Trotter said companies did not declare that they extracted a margin of 9.82 cents a litre at the refinery and then a wholesale margin of 7.2 cents and then claimed it as part of the product cost.

Peter 0418 774 663
peter@petercampbellrealty.com

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