Australian petrol prices tend to follow predictable cycles, but they have all gone out the window in recent weeks.
In the early days of the Middle East conflict, petrol stations across Brisbane, Sydney and Melbourne raised prices faster than the rise in global oil prices, in what several leading experts said was an attempt to preserve their profit margins.
But since then, there has been a complete change. Profit margins on gasoline have been squeezed to almost nothing.
According to several experts, the reasons for this are different. Strong consumer awareness, strong media scrutiny and consumers checking prices on multiple channels likely played a role in the shift.
In normal times, petrol dealers can sell petrol for about 15 cents per liter above the wholesale (terminal gate) price (TGP). This is down to around four cents a liter for the last few weeks in March, according to the ABC’s analysis of fuel prices.
Prices have now reached the same level across Australian cities, which is a far cry from normal as prices often vary by 50 cents a liter in different cities.
A ‘about’ pattern appears
In the first days of March, motorists started to worry about the possible problem of petrol.
Traffic in the Strait of Hormuz, where about 20 percent of the world’s oil transport, was stopped, although there was still a lot of oil stored on the way to Australia.
Ian Jeffreys, an economist at RACQ, who has been analyzing the oil market for 15 years, said: “There was some panic buying.”
He was watching as the general price of petrol – basically how much it costs to buy petrol from an importer – was reached on 3 March.
That’s when he sees a “relative” trend going on in terms of how retail prices – that is what you pay at the pump – are getting higher and higher.
Usually, it takes at least several days for large price changes to flow through the supply chain before reaching the tap at your local servo.
But Dr Jeffreys noticed that petrol stations were raising their prices on the same day.
These early signs have come at the peak of a normal fuel price cycle, further exacerbating already high prices.
Australia’s five largest cities – Brisbane, Adelaide, Perth, Sydney and Melbourne – have regular petrol price cycles, where retailers move their prices up and down in predictable ways.
When prices started to rise in the first few days of March, retail prices in Sydney, Melbourne and Brisbane were all near their respective cycle highs.
Prices should have started to fall, but instead they started to rise again.
It was the beginning of what Dr. Jeffreys calls “a massive and endless upsurge”, which he says is an “absurd reaction” to world events.
Watchmen’s warning
On March 4, RACQ wrote to the Australian Competition and Consumer Commission (ACCC), outlining its concerns about the retailer’s pricing behaviour.
“We’ve seen an increase in world oil prices,” Dr Jeffreys said in an accompanying announcement, “but it usually takes two weeks to get to Australian farmers, not two days”.
The ACCC also wrote to oil companies including 7-Eleven, Ampol, BP, Chevron, Mobil, United Petroleum, Viva Energy and EG Australia. The expert was “looking for urgent information about the latest price increase”.
More than a week later, when the ACCC published its data for the period, it noted “concerns about price movements”.
“We know many consumers are struggling and are frustrated by the rapid changes they have seen. We expect petrol retailers to explain to us and the Australian public how they arrived at their prices,” said ACCC chief Anna Brakey.
He promised the ACCC “will seek the highest possible penalties in any cases we bring to court”.
7-Eleven declined to comment on the price hike, but noted it participated in an ACCC roundtable on March 17. Viva Energy, EG Australia and Ampol did not respond to requests for comment.
Now, the headlines were dominated by talk of high fuel prices. The stations were running out of gas. Rumors of government subsidies and fuel shortages were rife, and now the consumer sector was expected.
Apparently, the vendors were listening.
The cost of being first
To understand what happened next, you need to understand how fuel price cycles work in Australian cities.
Andy Wu, a leading expert on this phenomenon and a senior lecturer at the University of Melbourne, can help us with that.
He says that in normal times, one or two gas chains will raise prices, station by station, before their competitors.
In early 2026, for example, it was Reddy Express (formerly Coles Express) and EG Australia (formerly Woolworths) that dominated the Sydney market.
Other chains followed, raising the average price across the city while maintaining a small price limit on the first mover.
It costs a lot of money for these stations to be the first, as they will lose business to their cheaper competitors.
That’s why different vendors will play that first role at different times, Dr Wu says. Next time, another chain or two chains will usually hit.
“Everybody benefits from high prices, and then they compete and drive prices down” during the downturn, says Dr Wu.
Gas station profits expand – then contract
Aaron Barkley, a senior lecturer at the University of Melbourne who collaborates with Dr Wu, says these are strange times for the oil market.
In times like these, petrol stations know they can be “outside the normal rules”, he says.
“From the point of view of the station, they should have chosen a kind of normal environment with health and well-being. [fuel price] cycling etc,” Dr Barkley says.
They are trying to “shape” the market to suit them, he says.
But that’s not what happened. In the days following March 3, with all eyes on rising petrol prices and dire warnings from the ACCC, the fuel price cycle disappeared.
Prices across brands and cities are all lumped together at the same price.
In this situation, “no one would want to send their prices up 50 to 60 cents [than their competitors]”, Dr. Wu explains.
“If they do, they will be scrutinized by consumers, the media [and] government – it’s a very bad image for their brand, and that has long-term consequences.”
The price they used to meet is very close to the wholesale price, which means that even if some stations run out of petrol, those who are still selling petrol do not make much money from it.
Credits:
- Report: Julian Fell
- Image: Teresa Tan
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