Mr McARTHUR (1:15 PM) —I note that my colleague and philosophic friend the member for Werriwa, with his philosophic views as a free marketeer and market economist, is having some difficulty supporting the opposition's position. I will refute some of the things that he has put forward. He would fully understand that the power industry in Victoria is now competitive; there is competition between the generating companies and between the distribution companies. The Auditor-General is able to examine those competitive arrangements, which are transparent. As the member for Werriwa would understand, that is a very much improved position compared with the dominant position of the former SEC.

The member for Werriwa and the member for Hunter are supporting the amendment that is before the House. I think we should firstly deal with the amendments that suggest there is a failure to finalise the oil code. Let me assure members that the oil code is in draft form. As the member for Indi indicated, it is a matter of reaching agreement between the main players. A lot of tax legislation has been drafted by the parliamentary draftsmen, so that there has been little time, but the oil code is in the stage of some negotiation. However, the government is determined to move forward with the legislation that is before the parliament to bring about a more competitive situation. The Prime Minister has given a clear undertaking that the oil code will be proclaimed only when it is agreed to as part of this legislation.

In terms of amendment No. 3—open terminal access regime—how can the Labor Party suggest that we failed to tackle this issue? They were very much part of the Laidley agreement. Under trade union arrangements, the Laidley agreement ensured that anybody who did not have a union ticket could not go to an oil refinery. Everyone in Australia understood that. They knew that that was a practice that prevented open market arrangements and ensured there was limited access to those refineries. That was a trade union arrangement, and the legislation of the day was unable to change that.

All I can say about the protection of the jobs of those service stations is that the consumers out there in all our electorates are very keen that we ensure lower petrol prices. That is the argument. Obviously, with changing conditions and rationalisation of the industry, no political party will be able to save those jobs. Uppermost in the minds of the member for Indi and other country members is the differential between metropolitan and country prices, and the government is making an attempt to bring about a solution to this fundamental difficulty facing us all.

Mr Deputy Speaker, as you and other members of the House would know, this industry has been the subject of inquiries over the last 30 years by various governments of various colours where the players have tried to resolve the conflicts between the refiners and the distribution system. Previous governments have put in place legislation, rules and regulations to try to bring about what they thought was a fairer system of distributing and manufacturing oil products. Members of the House—and the public—should be aware that, currently, the maximum retail price is set on the daily assessment of the Australian Competition and Consumer Commission. That is a result of former arrangements where the price was being set in a transparent manner but, of course, that has not always worked out.

The Petroleum Retail Marketing Sites Act, which other members have referred to, limits the number of sites an oil company can own and operate. Again, this was an attempt to look after the smaller retailers in a former age. Under the sites act, four of the major oil companies can only operate between 87 and 136 sites, which is a restriction of trade. I have some difficulty with the member for Werriwa saying that this is a good thing. The sites act means that companies which have sites beyond this quota have to be operated by a franchisee.

The Petroleum Retail Marketing Franchise Act regulates the relationship between the oil majors and the franchisees, franchisees agreement negotiations, the minimum terms and the prohibition on price discrimination. As the member for Indi and others of us would know, there have been long discussions about these franchisee arrangements, the argument between the oil majors and the individual retailers and their concern that they were not fairly and equitably treated. Again, this did not work out because there were ways around it. Access to buying directly at the oil terminal was not open historically. Under these new arrangements, it will be open. The removal of the Laidley agreement has transformed that situation.

The shortcomings of the current system are fairly obvious to all of us, but the solutions are not always as easy as we would hope. The system of the ACCC setting the maximum price has not really worked. Some commentators are suggesting that by using the ACCC in this manner, the price is set without the operation of the marketplace. The maximum price in the capital cities becomes the target price at the end of the discount cycle, and all of us would be aware that the discounters operate in a competitive fashion in the capital cities but at the end of the discounting period they move back to the set price.

In regional and country areas, the maximum price becomes the floor price because, out in country areas, as most regional members would know, there is less volume and there is less competition. The result is a significant gap between country and city prices. The tremendous gap is hard to explain and is of major concern to most of our constituents. In my electorate of Corangamite, the historical situation is that between the regional town of Colac and the city of Geelong—only 45 kilometres up the road—there is a price variation of between 5c and 10c.

Members of this parliament cannot really explain to the constituents why this situation has arisen and what the background is. Hopefully this legislation will bring about a better set of circumstances where there will be more genuine competition, especially in country Victoria. The interests of franchisees and service station operators have not been protected by the franchise and sites acts. We can see, as always, that legislation and regulations—either state or federal—often do not achieve their objectives, especially when they interfere with the normal market process.

The ACCC's 1996 report into the petrol industry found that the sites act had been bypassed. When they looked at it yet again, they found that vertical arrangements between the oil companies and the operators meant the oil companies basically had control of retailing, which was the very reason that the franchise act and the sites act were introduced in the first place. So the oil companies had brand marketing changed, which was considered to be an entity, instead of all the franchises being considered as separate entities. The oil companies were able to move past this piece of legislation and operate in a manner that the parliament back in the 1980s had tried to prevent. The fundamental problem is that regulations per the sites and franchise acts have not worked to protect the interests of the consumers or the industry players. The motorists are not getting lower prices and the industry players—the refiners and the retailers—are very unhappy.

As other speakers from this side have said, this bill is a very positive and courageous attempt to address some of these longstanding problems and to bring about more competition in the industry and more genuine competition between the players. How will this be achieved? The maximum wholesale price currently set by the ACCC will be abolished so there will be a more market oriented price and there will be no scope for the maximum price set by the ACCC to act as a floor price. Hopefully the gap between the city and the country will decrease, and it will be easier for new players to enter the market. We see instances of this where Woolworths are now entering some of the country sites. There are Woolworths operations in the city of Colac and the city of Geelong, so there is a genuine possibility of that operation, where they import some fuel from overseas, to provide genuine competition.

Historically, refiners seemed to have the same price. With this new set of arrangements, Woolworths, which uses some imported fuel, has provided the possibility of genuine competition—as operated in the cement industry—between the four majors and other importers because Professor Fels, in his recent judgment, made sure that the importers had the access to facilities to import the fuel. It will mean that there will be more genuine competition between the players in the country areas and the city operators and it will help to overcome the problem of different country prices. There will be some economies of scale flowing from the major operators because they will be able to operate in another manner and not be tied into certain franchise sets of arrangements.

There will be open access for bulk customers to fuel terminals. As the member for Indi indicated in his address to the House, the farmer groups now have access to the terminals. They are able to buy at a price and distribute it. That again provides genuine competition and overcomes the Laidley agreement, which was a great thorn in the side of this whole argument over the last 20 years. We know that the ACCC prices surveillance did not work. That will be abolished so that pricing will now be more transparent. Motorists, retailers and wholesalers will know what the price is and they will not be able to blame everyone else.

Historically, people have not been sure where the price was established and why it fluctuated so much. Was it the oil company? Was it the distributor or was it the retailer? Generally, I think they blamed members of parliament for the problem. We were unable to explain the intricacies of this particular market and, hopefully, this legislation will help.

The oil companies will have to publish a list of prices to make the market more open to scrutiny—I understand that one of the companies is doing this religiously. So there will be a daily price. People will be able to see what the price is at the refinery, and the consumers—the motorists—will be in a position to make a judgment of where they can buy petrol, what the price will be like in the competitive city area and what the price will be like in the country if you add the transport to it. These government changes have been supported by the Royal Automobile Club of Victoria, which has been very active in this whole argument about petrol pricing, as the member for Indi would be aware. It has been running campaigns for many years—the variation especially has been their main concern.

The industry will become more efficient if some of these savings are passed on. We have eight refineries in Australia and they are under considerable pressure in terms of their return on capital. I have one in my home town of Geelong, where they are being subjected to efficiency pressures to make sure they remain world competitive. As we know, the margins are low in the refineries, so they are looking for ways to improve their efficiency and move that on to the distribution system. The economies of scale—of joining together in some of those bigger refineries—can assist.

Looking at the oil code and at what we are really trying to establish with this set of arrangements between the operators in the petrol distribution chain, the oil code will go ahead when the parties have reached agreement and then the sites and franchise acts will be removed. Until such time as the code is agreed to, those acts will continue to apply.

The oil code is a fair and simple method of addressing the concerns of smaller participants in the petroleum industry, especially regarding the bigger oil companies. The oil code protects all current franchise agreements—a very important aspect of it. Price fixing remains illegal under the Trade Practices Act—again, a very important aspect of the whole petroleum industry.

Once a franchise agreement ends, a new cost-effective arrangement can be entered into so that the oil companies and all those involved can enter into a new set of more commercial arrangements in a new and freer market position. The oil companies can then shift to commission agents, if they so desire, to improve and make their operations more efficient.

The emphasis in the oil code will be on improving the conciliation arrangements. As members will be aware, there has been conflict between the refiners, the big oil majors and those many retailers around Australia. Hopefully, under the oil code, when they get into an argument, they can resolve it without getting into a dispute in the courts. There will be some legally enforceable protection for the smaller operators against the bigger firms and the disputes will be dealt with more quickly. The government decided that the voluntary code that we considered in 1997 would be insufficient to give legal protection and that the oil code would have the backing of the Trade Practices Act underpinned by legislation.

I draw to the attention of the House, in particular the shadow minister at the table, the unconscionable conduct provision that the government introduced which supported operators in the industry. I am sure that the honourable member at the table would agree that the unconscionable conduct of some operators is now being addressed by the trade practices legislation introduced by the honourable member for Flinders. The oil code will be mandatory; so people will have to obey the provisions of the oil code and the individual parties can opt out only if they have been given independent and legal advice that the provision is inapplicable or inappropriate for that business.

We are saying that the oil code is a very genuine and positive attempt by the government to put a set of legally enforceable arrangements between the main players to bring about a more competitive operation. If we look at the conclusion of this set of arrangements—there has been a lot of debate among people living in the country, among people involved in the industry, the players, the consumers and the franchisees—everyone who has been involved has a different interpretation, and I have been listening very carefully over the last three or four days to those various points of view. What is clear is that the current set of arrangements has not stopped the oil companies dominating the retailers; that franchising has enabled the oil companies to vertically integrate, even though they were restricted by these legislative arrangements brought in by this parliament; that there has been a lack of open access, although that is improving at the refineries; that the maximum daily settings have become floor pricing for country people rather than a freer and open market; that there still remains a gap between the city and the country; and that there has been a lack of competition.

We are suggesting that, under this set of reforms, there will be more players in the market, people will be able to access the refineries and we get rid of that Laidley agreement, which the member for Hunter cannot defend under any circumstances. I would invite him to make some comments on that. There will be the removal of restrictions on who can operate a retail site—which would again lead to less regulation of those people who wish to operate petrol retail sites—a transparency in pricing, which is not altogether the case now, so that all players know exactly where they are at and who is setting the price; and the ability of refineries to swap and share their facilities to reduce costs so that they can become internationally competitive and so that some of these cost savings can be passed on to the consumer. The oil code will protect existing franchise agreements and those people who have entered in good faith into franchise agreements. I accept that and I have been part of long discussions with some of those franchisees with major oil companies who have been unhappy with some of the termination arrangements of those agreements.

Conciliation between the producers and the retailers will be encouraged under this set of arrangements. The oil code has taken some time to be put in place because we are trying to foreshadow some of these difficulties by having them in a legally enforceable document so that, in the longer term, the oil code will actually work. I am sure that the shadow minister at the table can understand that. There will be a more cost-effective arrangement between the agents and the non-franchisee retailer so that the whole industry continues to improve.

We have a situation that the federal government is now enacting and, hopefully, the price will be reduced to consumers. That is our fundamental objective in this important fuel distribution which covers the whole nation—both in the country and the city—from major terminals. There are large transport costs and difficulties peculiar to Australia and the legislation might help in that. There will be more genuine competition within the whole industry, and these sets of arrangements that have been debated and argued for so long will fundamentally help all the players. My final delight is that there is more genuine competition in a market based arrangement for petrol retailing in Australia because of the introduction of this particular bill.