Key points

• Shorter and flatter price cycles lead to lower retail margins.
• Fuel price cycles globally are asymmetrical (Edgeworth price cycles) – they increase quickly, and they decline slowly
• In the 2024 (year to 22 July) the average retail margin in Perth (weekly cycle) was 9.2 cpl
• In Brisbane (5.4 weeks per cycle) it was 22.5 cpl
• Globally (in competitive markets) weekly and 2 weekly fuel cycles are fairly common
• Longer price cycles are relatively rare AND they have larger price hikes – averaging 36.4 cpl in BNE in 2024

Regulation

• Regulating limits to price increase (to 5cpl per day increase in margin) will limit the rate of the initial price hike and reduce the length of the cycle by hastening the onset of the competition that leads to discounting
• A shorter price cycle will lead to lower average margins and prices over the longer-term
• A shorter price cycle means more frequent opportunities to buy cheap ULP (increasing competitive demand behaviour) giving price sensitive motorists more choice
• With long price cycles an average motorists that needs to fill every fortnight currently have limited choice other than to fill up on more expensive days
• If the cycle is eliminated (if we don’t see a shorter cycle) we will retain price variability with higher cost sites and lower cost sites (as all markets show this), but
• Existing cheaper sites will be easier to find, and
• Cheaper sites will be consistently cheap