Australian Fuel Retail Industry Is An Integral Part Of The National Retail And Oil Industry

1947 WordsMay 7, 20168 Pages
Introduction Australian fuel retail industry is an integral part of the national retail and oil industry that play a strategic role in the national economy. The industry also enjoys sustainable profits over the years despite the product price is volatile. There are several factors that cause the industry profitable despite its price volatility. This essay will identify the factor affecting the industry profits and measure the strength of those factors in threatening its profitability using Michael Porter’s (1979) ‘five force analysis framework’ which broadly analyze the internal rivalry, barriers to entry, and supplier and buyer power within the industry. Market Definition Australia’s petroleum industry consists of two broad areas of…show more content…
These products are supplied from upper vertical chain sectors which include refining, imports and wholesale. On the other hand, the products such as jet fuel, diesel, and gas fuel have a different market, thus, they are not considered. Internal Rivalry The retail fuel market in Australia is highly competitive and not regulated. There are approximately 6300 retail sites in 2013 with a high number of retailers. According to Australia Competition & Consumer Commission (ACCC) in 2014, the market share is dominated mainly by several companies such as Shell, British Petroleum, Caltex, Coles Express, and Woolworths respectively by 2, 13, 18, 24, and 24 percent, while the independent retailers (i.e. retailers who own single or multiple outlets) contribute another 19 percent to the share. The variability of fuel prices is dominantly determined by the movements of international crude oil and refined petrol prices using Singaporean Mogas 95 price as the benchmark (Roarty & Barber, 2004). Additionally, the exchange rate of Australian dollars (AUD) to US dollars (USD) also affect the prices since the international trade of oil is expressed in the USD. As a result, the retailers cannot influence the price and the market becomes competitive. The petrol prices vary according to the grades where higher RON indicates a higher price. Almost all the graded products are available in the retail sites which create product similarity among each
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