Energy giant BP's plan to buy a network of Australian petrol stations from supermarket chain Woolworths was blocked Thursday by the competition watchdog over fears it will lead to higher fuel prices.

The British firm announced a year ago it had agreed to pay US$1.3 billion to buy, rebrand and operate Woolworths' existing 531 fuel and convenience stores, plus 12 sites under construction.

But the Australian Competition and Consumer Commission said it opposed the move.

"We consider that BP acquiring Woolworths' service stations will be likely to substantially lessen competition in the retail supply of fuel," said ACCC chairman Rod Sims.

He said BP prices were significantly higher on average than Woolworths in Australia's major cities and it also hiked the cost of petrol faster, and discounted it more slowly, during cost cycles.

"We believe that fuel prices will likely increase at the Woolworths sites if BP acquires them and other retailers would then face less competitive pressure," said Sims.

"The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead."

BP already supplies fuel to approximately 1,400 of its own branded service stations throughout Australia, setting fuel prices at roughly 350 of them.

It said it was disappointed with the decision.

"In light of this, we are currently consulting with our lawyers to determine our next steps," said BP Australia president Andy Holmes.

Source: AFP