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ChannelNewsAsia: Retail tie up threatens Australian oil business: trade body

ChannelNewsAsia: Retail tie up threatens Australian oil business: trade body: “Shell are creating a duopoly threatening the long-term future of other major oil companies in Australia”

13 July 04

SYDNEY: Australian petrol retailers have warned trading alliances linking supermarket giants Woolworths with Caltex and Coles Myer with Shell are creating a duopoly threatening the long-term future of other major oil companies in Australia.

Motor Trades Association director Michael Delaney said a price war sparked by the Woolworths-Caltex and Coles Myer-Shell alliances — where shoppers are offered significant petrol discounts as a reward for shopping at supermarkets — was squeezing the margins of Australia’s other oil refiners, BP and Mobil.

Delaney said executives at BP and Mobil had told him privately that they would consider quitting Australia if the supermarket alliances continue to damage their bottom line, leaving the market to Shell and Caltex.

“We as a nation end up with yet another layer of duopoly in prospect across one of the most critical and fundamentally unavoidable consumption goods in our economy,” he told public radio.

Delaney, who represents Australia’s 7,000 independent petrol station owners, said the supermarket discounts were making rival refining and petrol retail operations uneconomic, to the long-term detriment of consumers.

Australia’s consumer watchdog, however, said the schemes were good for the market.

Australian Competition and Consumer Commission chairman Graeme Samuel said an extensive review found the alliances meant both petrol and groceries were cheaper and the regulator had no plans to step in to prevent them.

“This will provide for a competitive retail grocery and retail petroleum market and that that will benefit consumers. We do not see there being a substantial lessening of competition from these arrangements,” Samuel said.

The ACCC said similar supermarket-oil company links had existed in Britain for more than a decade, resulting in a more competitive market.

Coles Myer formed an alliance with Shell early last year, prompting Woolworths to sign a similar deal with Caltex.

The two retailers dominate the Australian supermarket sector, leaving rival oil companies unable to pursue the same type of alliance.

– AFP

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