NRMA questions widening gap in fuel prices

Anna Patty April 04, 2012

Disparity .. the price jump on ethanol petrol, E10.

Disparity ... the price jump on ethanol petrol, E10. Photo: Peter Braig

THE NRMA has found the price gap between premium unleaded fuel and the ethanol blend, E10, jumped to 11.5¢ a litre this month, compared with only 2¢ in wholesale prices.

The motoring authority has written to the Independent Pricing and Regulatory Tribunal, which is inquiring into ethanol supply in NSW, asking it to look into the widening gap.

The NRMA says premium unleaded fuel, which is 95 octane, was 9.5¢ a litre more expensive than E10 in September 2009 and the gap had grown to 11.5¢ this month. However, the gap between international wholesale benchmark prices for regular and premium unleaded fuel - Mogas 95 and 97 - was only 2¢ a litre.

The NRMA president, Wendy Machin, said it was expected that motorists who chose not to use ethanol would switch to octane 95 after regular unleaded petrol was phased out. Oil companies should explain the reason behind the increased retail price gap, she said.

"In the height of the debate on the NSW government's E10 mandate, the oil companies went to great lengths to argue that mandating ethanol would force up the price of fuel,'' she said. "Our research has shown that there are considerable discrepancies in the price gap between E10 and octane 95 but it has nothing to do with mandating ethanol. The gap between the two grades of fuel has consistently widened over the last 2½ years but this is not reflected in the benchmark prices."

The NRMA submission said 70 per cent of service stations across NSW sold E10 fuel and many had begun phasing out regular unleaded in accordance with the E10 mandate.

Ms Machin said ethanol producers disputed claims that there were shortages of ethanol in NSW that would force up the price of fuel.

The NRMA conducted tests last month to rate the performance of E10 against regular unleaded fuel. It said these showed minimal differences in fuel consumption. For example, a Hyundai i45 got 738 kilometres on a tank of E10, compared with 741 kilometres on regular unleaded.

Ms Machin said the NRMA supported the E10 mandate when it had bipartisan support in the NSW Parliament and continues to support policies and initiatives that encourage the take up of alternative fuels. ''Our continued dependence on imported crude oil will leave Australia more exposed to oil shock price increases in the future as well as relative higher prices as the cost of extracting oil becomes more expensive with deeper oil wells,'' she said,

In January, the Premier, Barry O'Farrell, shelved a ban on regular unleaded petrol, which was to be replaced by a 10 per cent ethanol blend, E10, from July, after a cabinet leak revealed it had planned to proceed with the ban despite advice it would drive up petrol prices.

However, the state's 6 per cent ethanol mandate - which the ban was designed to enforce - would remain in place, prompting BP Australia to warn that little was likely to change for motorists. The company said enforcing the mandate - under which petrol companies must ensure 6 per cent of all fuel sold is ethanol - meant virtually all unleaded petrol would have to be sold as E10.