Sydney drivers get slugged as supermarkets sweep profits

Skyrocketing ... Woolworths and Coles have profited significantly from their petrol stations.
Skyrocketing ... Woolworths and Coles have profited significantly from their petrol stations.

SYDNEY drivers have been pouring petrol money into the coffers of the supermarket giants, with new figures showing that revenues of Woolworths and Coles have skyrocketed since they entered the fuel market.

Australians are spending hundreds of millions of dollars extra to fill up their cars, with revenues of the dominant players continuing to increase nearly five years after the federal government's doomed FuelWatch was proposed to put an end to petrol profiteering.

The booming revenue enjoyed by Australia's largest retailers, witnessed in their annual reports showing a near-$1 billion increase from their petrol stations last year, is occurring alongside seemingly generous shopper dockets offering discounts of up to 8¢ a litre.

In the 2004-05 financial year when both major retailers had launched large expansions into petrol retailing, the average revenue they received from a litre of petrol was 3.4¢.

By last financial year, the amount received by petrol retailers had grown by more than 100 per cent to 6.9¢ a litre, according to the Australian Competition and Consumer Commission.

New figures suggest Sydney has borne the brunt of the increases.

Retailers' revenue from each litre of unleaded petrol in Sydney has increased seven times in seven years, from 0.9¢ a litre to 7.1¢ a litre, according to an analysis by independent petroleum industry consultants FUELtrac.

''One of the reasons is the entrance of Coles and Woolworths. They are very astute and able retailers,'' Chris Kable, the managing director of FUELtrac, said.

''They're able to extract a maximum margin from all markets that they're in. They're giving an 8¢ a litre discount but we're paying more.''

Since Coles entered the retail fuel market in 2003, the combined market share of the two major retailers has increased from 10 per cent to nearly 50 per cent.

In the past three years, the number of petrol stations in the retailers' network has increased by 4 per cent, while the number of independent stations has fallen by 16 per cent.

Professor Allan Fels, a former head of the ACCC, said the increased payouts were due to the dominance of the two main players.

''Ten years ago we had Shell, BP, Caltex, Mobil, Woolies, Liberty and many independents competing, and Coles poised to enter,'' he said. ''Now, the industry is far more concentrated domestically. Not surprisingly, profit margins have skyrocketed''.

John McArthur, a former fuel trader for Mobil who has consulted to the ACCC on Australian petrol prices, said a 1¢-a-litre increase leads to more than $100 million in extra revenue across Australia's 11 billion litre a year petrol market.

The increase in retailers' revenues since 2004 resulted in an extra $400 million finding its way to petrol retailers last financial year. About half that has been claimed by the supermarkets, which bring in more than $13 billion between them each year.

''I personally think there has to be some link with the supermarket docket discounts,'' Mr McArthur said.

A spokeswoman for Woolworths said their revenues were increasing because they negotiated better deals from suppliers. She said their margins had remained flat and were nothing like the ACCC estimates.

Caltex, which is in a joint venture with Woolworths but also runs petrol stations independently, said revenue figures excluded the costs of running a service station.

This story Sydney drivers get slugged as supermarkets sweep profits first appeared on The Sydney Morning Herald.