The move by BP to substantially increase fuel prices at some of its stations in Perth could easily lead to an industry-wide decision to follow suit, a competition expert says.
Frank Zumbo, an associate professor at the University of NSW, says the move by the oil major to raise the prices at several of its service stations by 12 cents a litre yesterday, despite fuel prices continuing to fall, was worrying.
BP's move went against a trend of steadily falling fuel prices in Perth in the past two months, with average prices at their lowest level for almost four years.
His comments follow BP claiming it needs to raise prices to increase its "unsustainable" retail margin.
"They're the price leaders in Perth, given that they operate the (only) refinery there (at Kwinana)," Mr Zumbo said.
"That's got great weight. They supply to the others and dictate that price. Everyone then puts their prices up and that minimises any downside risk, while maximising their profit margins."
BP yesterday defended its actions.
"We're actually making no margin. We have to get to a sustainable margin," spokesman Chandran Vigneswaran said.
"At the moment, it's not enough to sustain the business end."
He also claimed the increase was part of a normal weekly price cycle in every capital city and was "nothing new".
However, he then conceded there had been no price cycle in Perth for the past two months.
Mr Zumbo advocated against WA's FuelWatch scheme being established nationwide, saying it gave cartels "the discipline they need but usually can't get".
"It's also allowed the price of petrol in Perth to be carefully managed down about one cent at a time, and is giving service stations a means to minimise the impact on their margins," he said.
"They're only now getting down to the point where prices are about where they should be."
He stood by his criticism of the scheme yesterday, saying if normal market forces had been allowed to take place, prices would decrease when an outlet tried to go against the trend and raise them.
In Sydney, prices had already reached 90 cents a litre, Mr Zumbo said.
"But there's no chance your prices will go down quickly, because they're locked in for 24 hours," he said.
"With FuelWatch, everyone can reasonably easily predict everyone else's behaviour after a while, because they know what their competitors will do in given situations.
"Perth motorists haven't enjoyed the full benefit of falling oil prices because FuelWatch managed the price down."
FuelWatch spokesman Michael Ferrante said he agreed BP was the price-setter in Perth, along with Caltex, but said other stations had not followed their latest lead.
FuelWatch figures for today bear that out, though some BP stations have continued to post prices about $1.08.
However, Mr Ferrante disagreed with Mr Zumbo's assessment of FuelWatch, saying it was about giving motorists time to do some research before buying.
"We're letting people know out there what's actually happening," Mr Ferrante said.
He also disagreed with BP's reasons for hiking its prices, saying there had been no price cycle in Perth for quite some time.
"The price cycle is just a contrived marketing ploy anyway," he said.
"It's a bit of an oxymoron... It's just another word for a price hike."
