BP, Woolies deal could raise petrol prices

BP petrol stationMotorists could end up paying more for fuel if BP’s proposed $1.8 billion takeover of Woolworths petrol stations goes ahead, the competition watchdog warned.

Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims said the deal could substantially reduce competition in metropolitan areas by reducing the number of rivals in the fuel market, and lessening pressure on other retailers to keep their prices low.

“As a result, motorists may end up paying more at the pump,” Sims said.

Woolworths in December said it had agreed to sell its 527 petrol stations and 16 development sites to BP, which already owns 350 retail sites in Australia and supplies a further 1,050 BP-branded sites. Sims said the exit of Woolworths from fuel retailing would remove its infuence on metropolitan fuel prices, and he is concerned BP would not follow the supermarket giant’s pricing strategy.

The ACCC said it will also investigate what impact the takeover would have on hundreds of smaller markets, which each have their own competitive dynamics. BP Australia President Andy Holmes said the company is confident it can work with the ACCC to address the issues raised.

“We believe that Australian retail fuel and convenience markets are highly competitive and will remain so following the completion of the transaction,” Holmes said in a statement.

Woolworths said it would continue to work with BP and the ACCC to progress the merger clearance process. Under the acquisition, BP and Woolworths plan to jointly roll out up to 200 new format convenience stores, rivalling Caltex and Shell-owner Viva Energy in the fuel convenience store market.

BP said it also plans to keep the Woolworths four cent per litre fuel discount offer. The oil giant said it currently owns and operates five per cent of all retail fuel sites in Australia – taking into account its 350 stores and not the other 1,050 which are BP-branded but owned by independent business partners.

The deal would lift the share of stores it owns and runs to 15 per cent. The ACCC has called for submissions from interested parties, and its final decision is scheduled for October 26. The acquisition also requires approval from the Foreign Investment Review Board.

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