How low will petrol prices go?

Lisa Martin 2 January 2015 77
P1080582

Canberra motorists have been treated to a drastic reduction in the price of fuel since the opening of Costco’s petrol station in early December.

On a trip to the Majura Park precinct just before Christmas, I was surprised to see unleaded fuel down to $1.17 a litre at both the Costco and the nearby Woolworths petrol station. I don’t remember the last time I saw petrol that cheap.

This was surprisingly even lower than the price of $1.29 I saw in the Canberra Times on the day the Costco petrol station opened. I didn’t really need to fill up but the offer was too good to drive past seeing as I was there. I don’t have a Costco membership (I simply don’t have room to store bulk quantities in my house so don’t see a need to shop there) so I instead took advantage of Woolworths’ lower prices.

Both outlets had a steady stream of traffic coming through with queues at least three cars deep at each bowser when I was there.

Saving more than 30 cents a litre on usual prices (I usually pay around $1.50 a litre) is a particularly good saving and certainly adds up. But I have to wonder if Woolworths can adjust their prices that dramatically – the mark up on fuel must be substantial.

At the opening of the Costco service station, the NRMA was reported as saying said this was the lowest petrol had been in Canberra in five years. It will be interesting to see if Costco can maintain the low prices in the long term – and if Woolworths will continue to be just as competitive to get the motorist dollar.

Also, as Sydney petrol prices started to fall dramatically recently – with prices touted to go possibly as low as a dollar – it will be interesting to see if the price drop will make it south to Canberra and if the Majura Park outlets will continue to offer substantial savings compared to other outlets.

I’m curious if this has been successful in getting new customers for Costco – or if Woolworths customers (who don’t need a membership but just a free rewards card to get the lowest price) are the real winners.

I’ve become accustomed to paying around the usual $1.40-$1.50 a litre and haven’t previously shopped around. Even using the Woolworths or Coles vouchers only saves you a dollar or two and it doesn’t seem worth it to drive especially to use my voucher. If a Woolworths or Coles service station is located where I’m driving and I need to fill up, then I fill up.

The Majura Park precinct is about a 10 minute drive from my house and I go there every now and then to do grocery shipping. It’s not my closest supermarket but I like it because it’s quieter than Dickson and easier to get a park. Certainly if the price continues to be substantially cheaper than the outlets I usually frequent, I would consider especially making the drive out if I was sitting near empty and getting groceries at the same time.

At least in the short term, the introduction of the Costco petrol station sounds like it is a win for Canberra motorists who frequent the Majura Park precinct, and will likely attract more customers to the centre.

No doubt the highly anticipated opening of Ikea – opening late 2015 according to their website – will also attract more Canberrans to Majura Park.

Do you shop around to get the best fuel price?


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77 Responses to How low will petrol prices go?
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JimCharles JimCharles 9:43 pm 11 Jan 15

wildturkeycanoe said :

I heard an interesting story about the cheap Costco fuel. The adjacent Woolworths servo drops its price to match Costco, but after the Costco shuts down for the night the Woolworths price goes back up to regular pricing again. Can anyone else verify this and if it is the case, how can it be legal to change your prices twice a day, simply because your competition is either open or closed? That, in my opinion, is a totally extortionist raping of Canberra drivers.

That’s been well covered in the Canberra Times if you google.
There’s a place in Dickson that has changed prices 4 times in a day previously. To and from work, then a holiday weekend?

I’ve seen Unleaded at 107 up on the Central Coast this week, but the really interesting thing is that the cheapest diesel I’ve seen has been 133.9 and the most expensive at 151.9
That’s not much different to Canberra….so why is unleaded so much cheaper up there not diesel?
Or alternatively, why is Canberra diesel seemingly good value but petrol an absolute rip off ?

wildturkeycanoe wildturkeycanoe 6:28 pm 11 Jan 15

I heard an interesting story about the cheap Costco fuel. The adjacent Woolworths servo drops its price to match Costco, but after the Costco shuts down for the night the Woolworths price goes back up to regular pricing again. Can anyone else verify this and if it is the case, how can it be legal to change your prices twice a day, simply because your competition is either open or closed? That, in my opinion, is a totally extortionist raping of Canberra drivers.

MERC600 MERC600 10:29 am 06 Jan 15

dungfungus said :

MERC600 said :

switch said :

dungfungus said :

Is the cheap price in the USA the result of them becoming independent on supplying their own energy now?

Don’t we also have vast reserves of oil rich shale…

Shale oil used to be mined at Joadja, a very little joint near Mittagong. It was mined from around 1870 till 1911. The shale was used to manufacture kerosene , but the kero manufacture became cheaper by other methods and it folded. I still have somewhere a video of the place, made for sale at a reunion held by former descendants.

Also mined years ago at Newnes Junction near Lithgow. There are great stories about the rise and fall of these ventures. That video sound great – is it available on-line somewhere?
The current glut of oil could create another financial crisis as the new shale oil mines in the USA, that were created with trillions of dollars of debt, start to fold.
What happened to the doomsday peak-oilers?

The video I have is ‘JOADJA CREEK.. The shale oil town & its people 1870’s – 1990’s.’

Copyright Greg & Leonie Knapman. 59 Regent St Mittagong 2575

switch switch 6:54 pm 05 Jan 15

MERC600 said :

Shale oil used to be mined at Joadja, a very little joint near Mittagong. It was mined from around 1870 till 1911. The shale was used to manufacture kerosene , but the kero manufacture became cheaper by other methods and it folded. I still have somewhere a video of the place, made for sale at a reunion held by former descendants.

I wasn’t thinking of Joadja, or Newnes or Glen Davis or Hartley Vale or Torbane etc (see, I have read the Eardley book), whose combined output over all the years they operated would now meet Australia’s oil thirst for maybe a month. I was thinking of:

Oil shale deposits, varying by age and origin, are located in Queensland, New South Wales, South Australia, Victoria and Tasmania. As of 2012 the total amount of the demonstrated resource is estimated at 58 billion tonnes. Of this about 25 billion barrels (4.0×10^9 m3) is recoverable, equating to the world’s 8th largest resource.

– from the wikipedia article, “Oil shale in Australia” http://en.wikipedia.org/wiki/Oil_shale_in_Australia

dungfungus dungfungus 5:40 pm 05 Jan 15

MERC600 said :

switch said :

dungfungus said :

Is the cheap price in the USA the result of them becoming independent on supplying their own energy now?

Don’t we also have vast reserves of oil rich shale…

Shale oil used to be mined at Joadja, a very little joint near Mittagong. It was mined from around 1870 till 1911. The shale was used to manufacture kerosene , but the kero manufacture became cheaper by other methods and it folded. I still have somewhere a video of the place, made for sale at a reunion held by former descendants.

Also mined years ago at Newnes Junction near Lithgow. There are great stories about the rise and fall of these ventures. That video sound great – is it available on-line somewhere?
The current glut of oil could create another financial crisis as the new shale oil mines in the USA, that were created with trillions of dollars of debt, start to fold.
What happened to the doomsday peak-oilers?

shirty_bear shirty_bear 5:05 pm 05 Jan 15

watto23 said :

I’ve taken fuel prices and parking fees into my own hands and got my motorcycle license.

Fuel prices, parking fees, and your life in your hands.
I used to get around this town on a motorbike. No more. Seen one too many riders get smashed doing nothing wrong, and had one too many close calls of my own.

ftr, I’m fine with schlepping out to CostCo for cheap fuel. But this whole malarkey does make it clear just how hard we’ve been screwed by the oil companies for as long as anyone can remember; I have no doubt they’re still making money at $1.17/L … anyone charging $1.35 (or $1.50) is having a laugh.

watto23 watto23 4:19 pm 05 Jan 15

JC said :

watto23 said :

Which to me looks like competition is there but the prices were not coming down. We don’t even have a cycle (which would make sense if prices high on pay day and low a few days before).
Its been shown that people seem to drive to Majura to get cheap petrol (probably because its really cheap). I did notice I paid $1.37 last week which is at least 10-15c less than normal in Tuggeranong.

I’m not sure why prices are high in Canberra, but I suspect everyone knows if they lower prices every other servo will do the same so they won’t gain much more business except in the short term, so why bother, keep rolling in the profits of the higher price in Canberra.

Wait and see as maybe the costco servo has started to drop prices around Canberra a little bit, due to the fact people have worked out they if they go to costco once a week to save 20c a litre is actually saving them a lot of money. Even the cost of fuel to get there is offset easily, and easy enough to combine a visit to the hardware store or do groceries or even when you visit say the bus depot market/ fyshwick markets, its not that much further to Costco for the cheap fuel.

We’ll see, I won’t be surprised if this is short term only.

What it shows is there is a variety in branding and ownership in Canberra that reflects prety much the national market. There is still a lack of competition, but it is not between the brands, rather, it is, as I said in one of my first posts a geographical issue that many of the stations are off main roads and few located together, so each is a virtual monopoly.

Your hope that Costco will drive prices down is to be admired but reality is most people in Canberra fill up when they need to, except for a few hard cores they won’t drive to the airport to save a few bucks. Indeed just look at the supermarket market to see that whilst there are many going to Costoc, there is still no shortage of customers in the other supermarkets and the prices have not changed due to Costco.

Your right its hopeful and even any ACCC enquiry will be short term pressure on lower prices. I’ve taken fuel prices and parking fees into my own hands and got my motorcycle license. The other day it cost me $9 to fill up for a weeks worth of commuting!

MERC600 MERC600 3:27 pm 05 Jan 15

switch said :

dungfungus said :

Is the cheap price in the USA the result of them becoming independent on supplying their own energy now?

Don’t we also have vast reserves of oil rich shale…

Shale oil used to be mined at Joadja, a very little joint near Mittagong. It was mined from around 1870 till 1911. The shale was used to manufacture kerosene , but the kero manufacture became cheaper by other methods and it folded. I still have somewhere a video of the place, made for sale at a reunion held by former descendants.

JC JC 1:08 pm 05 Jan 15

watto23 said :

Which to me looks like competition is there but the prices were not coming down. We don’t even have a cycle (which would make sense if prices high on pay day and low a few days before).
Its been shown that people seem to drive to Majura to get cheap petrol (probably because its really cheap). I did notice I paid $1.37 last week which is at least 10-15c less than normal in Tuggeranong.

I’m not sure why prices are high in Canberra, but I suspect everyone knows if they lower prices every other servo will do the same so they won’t gain much more business except in the short term, so why bother, keep rolling in the profits of the higher price in Canberra.

Wait and see as maybe the costco servo has started to drop prices around Canberra a little bit, due to the fact people have worked out they if they go to costco once a week to save 20c a litre is actually saving them a lot of money. Even the cost of fuel to get there is offset easily, and easy enough to combine a visit to the hardware store or do groceries or even when you visit say the bus depot market/ fyshwick markets, its not that much further to Costco for the cheap fuel.

We’ll see, I won’t be surprised if this is short term only.

What it shows is there is a variety in branding and ownership in Canberra that reflects prety much the national market. There is still a lack of competition, but it is not between the brands, rather, it is, as I said in one of my first posts a geographical issue that many of the stations are off main roads and few located together, so each is a virtual monopoly.

Your hope that Costco will drive prices down is to be admired but reality is most people in Canberra fill up when they need to, except for a few hard cores they won’t drive to the airport to save a few bucks. Indeed just look at the supermarket market to see that whilst there are many going to Costoc, there is still no shortage of customers in the other supermarkets and the prices have not changed due to Costco.

watto23 watto23 10:07 am 05 Jan 15

JC said :

7Eleven:

So my count is northside 28 servo’s of which 13 are Shell/Coles or Caltex/Wollworths and 15 are not aligned to the Evil supermarket brands.

Southside 25 servos’s of which 15 are Shell/Coles or Caltex/Wollworths and 10 are not aligned to the Evil supermarket brands.

So 53 ACT wide, 28 are either Shell/Coles or Caltex/Woolworths and 25 are others.

Which to me looks like competition is there but the prices were not coming down. We don’t even have a cycle (which would make sense if prices high on pay day and low a few days before).
Its been shown that people seem to drive to Majura to get cheap petrol (probably because its really cheap). I did notice I paid $1.37 last week which is at least 10-15c less than normal in Tuggeranong.

I’m not sure why prices are high in Canberra, but I suspect everyone knows if they lower prices every other servo will do the same so they won’t gain much more business except in the short term, so why bother, keep rolling in the profits of the higher price in Canberra.

Wait and see as maybe the costco servo has started to drop prices around Canberra a little bit, due to the fact people have worked out they if they go to costco once a week to save 20c a litre is actually saving them a lot of money. Even the cost of fuel to get there is offset easily, and easy enough to combine a visit to the hardware store or do groceries or even when you visit say the bus depot market/ fyshwick markets, its not that much further to Costco for the cheap fuel.

We’ll see, I won’t be surprised if this is short term only.

JC JC 8:18 pm 04 Jan 15

7Eleven:

Northside:
Kippax
Melba
Spence
Casey
Braddon
Giralang (6 in total)

Southside

Fyshwick
Erindale
Mawson (3 in total)

Caltex (non Woolworths)

Kaleen
Gold Creek
Airport
Braddon
Mitchell (5 in total)

Southside

Kambah
Hughes
Fyshwick (3 in total, though really 2 as Fyshwick isn’t a traditional station)

BP

Macquarie
Watson
Braddon (3 in total)

Southside

Phillip
Kingston
Chisolm
Fyshwick (4 in total)

Shell/Coles
Hawker
Belconnen x2
Charnwood
Gungahlin
Dickson
Braddon (7 in total)

Southside

Deakin
Manuka
Fyshwick x2
Curtin
Phillip
Tuggernaong
Wanniassa (8 in total)

Caltex/Woolworths

Gungahlin
Kippax
Belconnen
Dickson
EPIC
Majura Park (6 in total)

Southside

Mawson
Kambah
Tuggernaong
Hume
Calwell
Conder
Weston Creek (7 in total)

Others
United Amaroo (1 in total)

So my count is northside 28 servo’s of which 13 are Shell/Coles or Caltex/Wollworths and 15 are not aligned to the Evil supermarket brands.

Southside 25 servos’s of which 15 are Shell/Coles or Caltex/Wollworths and 10 are not aligned to the Evil supermarket brands.

So 53 ACT wide, 28 are either Shell/Coles or Caltex/Woolworths and 25 are others.

JC JC 7:43 pm 04 Jan 15

watto23 said :

I know many people who will go to neither and blame Coles and Woolies for high prices. Either way the non woolies/coles servos haven’t exactly dropped their prices either. They know Canberrans love to drive, have a high average wage and will pay for fuel. We will whinge about it, but still pay for fuel over catching a bus, cycling or buy smaller cars/motorbikes..

Perception is everything of course, but reality is different. The core barrier to competition in Canberra is location of service stations and the population they serve.

The real down fall started about 25 years ago when Shell put up barriers that allowed private service stations to brand as shell. If I recall they set a minimum buy which basically excluded many of the local suburban servo’s in Canberra. In the area where I live, in Kippax this saw Shell Holt close, Shell Macgregor went to BP, then later got rid of fuel sales all together and now is just a repair shop. Shell at Higgins if I recall had the volume but didn’t last too long before it too closed.

Shell also introduced multisite franchising which saw many established franchisees out of business. Two ladies run the Shell at Charnwood and were replaced by a multisite franchisee. This change saw many workshops close down as the multisite francisees were interested in fuel only. Multisite franchises also tend to set the same price across the sites they own, so no real competition even within the same brand. Again all well before the supermarkets started co-branding.

Other brands did the same but to a lesser extent. Caltex for example has more independent owned stations using their branding, and of course about 25 years ago saw the disappearance of Esso as a brand. Fortunately in Canberra only a few servo’s closed (the one where Waves Carwash in Braddon was being one), the rest became Mobil, though not sure if at the same time or latter the servo at Kaleen became Caltex, and around the same time Ampol also dissipaered with many re-branding as Caltex and again some closing (Braddon again comes to mind).

So lack of competition is nothing new and certainly nothing to do with the supermarkets, who’s contrary to what many beleive don’t set the price on fuel, the oil company owners and franchisees do.

watto23 watto23 3:43 pm 04 Jan 15

JC said :

watto23 said :

Further to this, where there is say a 7Eleven (previously Mobil) and a Woolies in Erindale, Why would 7Eleven lower their prices, they’ll get plenty of traffic from those not wanting to support the duopoly, and they passively sit there looking innocent with no need to lower their prices. Costco have done it, because it will drive up membership. I’m thinking for $60 per year I’ll save that in petrol alone. I’ll just fill up when I’m out that way. Of course I’ve found the best way to save petrol is to not drive a big SUV 🙂 Canberrans a re very indulgent and come up with all sorts of reasons to have what they have!

There is no duopoly in the fuel market, the Woolworths/Caltex branded stations have 24% of the market Coles/Shell 24% of the market with the remaining 52% shared between BP owned sites, 7Elelven/Mobil ownd sites and the independant’s (incuding those that use brands). So yeah two might be slightly dominate but in a market where there are 4 brands plus indpendants, 24% share is not excessive. Certainly not to duopoly status, unlike supermarkets where the big two have almost 75% market share combined with the rest sharing the remaining 25%.

In NSW/ACT there share may well be a slight skew towards Shell and Caltex which is not surprising when you consider that Shell and Caltex were the refinary operators here. Compared to say Victoria that had Mobil and Shell refinaries, SA had if I recall Mobil and Caltex, with a skew towards Mobil and QLD that had a BP refinary. Many of the refinaries are now closed of course but each state seemed to skew towards brands that had refinaries in their state, just in NSW they were the two brands that have alligned themselves with the ‘evil’ supermarkets.

By duopoly i’m referring to coles and woolworths with regards to supermarkets. So while with petrol its not a dominant duopoly like supermarkets, the perception is it is. I’m not sure what the market breakdown is in Canberra. In Tuggers i can think of Chisholm BP, Erindale 7Eleven and the Caltex on Drakeford drive. Then there are woolies at Erindale, Calwell, Conder, Tuggeranong, Kambah and Coles at Tuggeranong and Wanniassa (its a shell not sure if its Coles as well?) so thats 70% to the duopoly in Tuggeranong.

I know many people who will go to neither and blame Coles and Woolies for high prices. Either way the non woolies/coles servos haven’t exactly dropped their prices either. They know Canberrans love to drive, have a high average wage and will pay for fuel. We will whinge about it, but still pay for fuel over catching a bus, cycling or buy smaller cars/motorbikes..

spades spades 12:31 am 04 Jan 15

I have been a Costco member since they first opened in Sydney. My partner is loves her groceries and reads junk mail every week. We discovered that Costco is only good value for maybe half its products, so we shop at both Coles and Costco.

While I love the fact that Costco petrol is so cheap, I still wonder about the business strategy behind them. Is it to get more people to sign up? Or to get existing members to visit the store more often?

dungfungus dungfungus 4:54 pm 03 Jan 15

rommeldog56 said :

Masquara said :

These drops in petrol prices are dwarfed by an expected doubling in natural gas prices in the next three years … thanks to a “need” to match export prices domestically …

Yep – I heard recently claimed that australia is the only large natural exporting nation that doesn’t have a “Domestic Reservation” policy – in fact, I think Allen Jones on 2GB bangs on about it.

As i heard, in the US (and other countries) gas exporters are required by law to meet domestic gas requirements at a substantially reduced rate price. It is that cheap natural gas that has helped power back the US industrial sector out of their recession. That now doubt increases the US exporters price for their gas on the international market – but protects their local industry and jobs and citizens can even morte easily afford to keep warm !

Such a policy makes logical sense – which is probably why successive Commonealth Govt’s in Australia have rejected that concept. The Lib’s Minister Ian McFarlane again rejected such a policy a few months ago.

And yes – the projected price rises for natural gas in Australia over the next few years are astounding.

I think Australia will be using their coal fired power stations for a long time yet.

rommeldog56 rommeldog56 3:52 pm 03 Jan 15

Masquara said :

These drops in petrol prices are dwarfed by an expected doubling in natural gas prices in the next three years … thanks to a “need” to match export prices domestically …

Yep – I heard recently claimed that australia is the only large natural exporting nation that doesn’t have a “Domestic Reservation” policy – in fact, I think Allen Jones on 2GB bangs on about it.

As i heard, in the US (and other countries) gas exporters are required by law to meet domestic gas requirements at a substantially reduced rate price. It is that cheap natural gas that has helped power back the US industrial sector out of their recession. That now doubt increases the US exporters price for their gas on the international market – but protects their local industry and jobs and citizens can even morte easily afford to keep warm !

Such a policy makes logical sense – which is probably why successive Commonealth Govt’s in Australia have rejected that concept. The Lib’s Minister Ian McFarlane again rejected such a policy a few months ago.

And yes – the projected price rises for natural gas in Australia over the next few years are astounding.

Masquara Masquara 12:22 pm 03 Jan 15

These drops in petrol prices are dwarfed by an expected doubling in natural gas prices in the next three years … thanks to a “need” to match export prices domestically …

wildturkeycanoe wildturkeycanoe 7:58 am 03 Jan 15

Still no change in the western burbs, $130.9 for E10, $133.9 for 91 unleaded…I didn’t dare look at 98 octane. Sad considering the news broadcast Sydney as having $1.09/L yesterday and expecting to drop to $1 flat shortly. Wish I could ride a motorcycle again….

Holden Caulfield Holden Caulfield 2:04 am 03 Jan 15

91RON was 110.9¢/litre at the BP near Sydney airport yesterday. Even the 98RON I buy was only 128.9¢/litre.

JC JC 8:05 pm 02 Jan 15

watto23 said :

Further to this, where there is say a 7Eleven (previously Mobil) and a Woolies in Erindale, Why would 7Eleven lower their prices, they’ll get plenty of traffic from those not wanting to support the duopoly, and they passively sit there looking innocent with no need to lower their prices. Costco have done it, because it will drive up membership. I’m thinking for $60 per year I’ll save that in petrol alone. I’ll just fill up when I’m out that way. Of course I’ve found the best way to save petrol is to not drive a big SUV 🙂 Canberrans a re very indulgent and come up with all sorts of reasons to have what they have!

There is no duopoly in the fuel market, the Woolworths/Caltex branded stations have 24% of the market Coles/Shell 24% of the market with the remaining 52% shared between BP owned sites, 7Elelven/Mobil ownd sites and the independant’s (incuding those that use brands). So yeah two might be slightly dominate but in a market where there are 4 brands plus indpendants, 24% share is not excessive. Certainly not to duopoly status, unlike supermarkets where the big two have almost 75% market share combined with the rest sharing the remaining 25%.

In NSW/ACT there share may well be a slight skew towards Shell and Caltex which is not surprising when you consider that Shell and Caltex were the refinary operators here. Compared to say Victoria that had Mobil and Shell refinaries, SA had if I recall Mobil and Caltex, with a skew towards Mobil and QLD that had a BP refinary. Many of the refinaries are now closed of course but each state seemed to skew towards brands that had refinaries in their state, just in NSW they were the two brands that have alligned themselves with the ‘evil’ supermarkets.

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