ICCC: Retail margins of fuel prices need to increase

 THE retail margins of fuel prices are very low and need to increase, the Independent Consumer and Competition Commission (ICCC) says.

“While, the wholesale margin are too high and needs reduction,” the commission added.

The ICCC said that in a publication following a review into the current pricing of certain refined petroleum products supplied by the oil companies in the country.

In its report, ICCC’s key findings and the draft determinations were based on the submissions provided by industry participants, relevant stakeholders and its own analysis.  

The cost of retail price of fuel sales, wholesaling, road transport, coastal shipping and drum filling have been modelled and analysed by the commission and results indicated that: 

Retail margins are currently too low as retail costs vary between the regions the commission is proposing to have different rates for Port Moresby, Lae, regions and remote areas. 

On the other hand, the wholesale margin was very high and ICCC has proposed to reduce it to 22t per litre and then apply a negative X-factor of 1%. 

Furthermore, the ICCC has plans to change its approach to setting wholesale margin by modelling costs of the whole industry rather than using costs of one wholesaler as representative of all wholesalers. 

The proposed approach seeks to identify cost of an efficient operator rather than simply identifying costs of a single operator, as was the case previously. 

The cost pass through approach is  something ICCC is looking to move away from and determine cost allowance of each area. 

The only aspect the commission wants to leave the margin unchanged is the drum filling. 

For coastal shipping, the ICCC is proposing to set costs at current levels and adjust them monthly by means of coastal shipping index.

ICCC’s principal determination is that prices for refined petroleum products would continue to be regulated for the forthcoming regulatory period.