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Fresh offensive in supermarket petrol wars -

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PETER CAVE: Independent service station owners are up in arms at the latest moves by the large
supermarket chains to offer discount fuel vouchers to people who buy their groceries.

For the next three days Coles will offer generous discounts to people who spend more than $100 in
their supermarkets.

The move comes amid fresh concerns that companies aren't passing along the savings made from a drop
in the global price of oil

Meredith Griffiths reports.

MEREDITH GRIFFITHS: Independent service station owners are alarmed at the latest salvo fired in the
battle between the country's two largest supermarket chains.

CRAIG GLASBY: It seems we're collateral damage once again in the fight between Coles and Woolies.

MEREDITH GRIFFITHS: Craig Glasby is the president of the Service Stations Association.

He's livid at Coles' plan to give away big fuel discounts in its supermarkets over the next three
days.

Shoppers who spend more than $300 will get 40 cents off the price of a litre of petrol.

People who spend over $200 will get 25 cents off and people whose groceries come to more than $100
will get 10 cents off.

Craig Glasby says it's unfair.

CRAIG GLAS: Colse Express hasn't got 40 per cent margins on their fuel. They just can't afford to
do it. It's coming out of their supermarkets. As an independent I average around about three cents
a litre, so obviously there's no margin there to give away a discount.

So the money has got to come from somewhere and it's coming out of the supermarket. And that means
that everybody pays for it. The pensioner that doesn't have a car, that the mums and dads that have
got children and are on a tight budget, they are all paying for this 40 cents a litre giveaway.

MEREDITH GRIFFITHS: But Monash University's dean of business and economics Steven King says that
argument doesn't stack up.

STEPHEN KING: When you start talking about subsidising, I think it's pretty hard to say, well we're
taking money from our left hand and giving it to our right hand, which is essentially what you're
saying. We're taking, Coles is taking from supermarkets and giving it to petrol stations.

I think, quite frankly, the whole argument is a nonsense. When you've got integrated businesses
like Coles or like Woolworths, trying to say well, is the money coming from the left hand or the
right hand is just not a sensible argument.

MEREDITH GRIFFITHS: Professor Stephen King says the Coles scheme is great for consumers.

STEPHEN KING: I wouldn't get too worried about it from a competition perspective in the short term.
Consumers benefit, it's clearly part of Wesfarmers' strategy, where they're really ramping up the
advertising on Coles.

I mean think of this as being another part of their advertising strategy, because that's really
what it is. It's to get the consumers back into the supermarkets. And it's clearly focussed at the
supermarkets. You have to be spending more than say, to get the largest discount, you need to be
spending more that $300 at a Coles supermarket.

So that's a pretty substantial spend.

MEREDITH GRIFFITHS: Petrol pricing is also causing particular concern in Queensland.

When the State Government announced it was scrapping its fuel subsidy it said it would name and
shame petrol companies who used that as a excuse to hike up their prices.

The state's motoring organisation, the RACQ, thought that meant a permanent monitoring system would
be put in place.

So spokesman Gary Fites says he was surprised to hear the Treasurer say it was only for a limited
time.

GARY FITES: Although we always thought the threats to name and shame owed more to spin then
substance, it is all the more farcical, we think, to understand now that it was only probably 24
hours of the changeover period.

So one really does have to wonder how fair dinkum the Government was about keeping any sort of
check over pricing practices following the demise of the fuel subsidy.

MEREDITH GRIFFITHS: Gary Fites says drivers have been paying too much for fuel since the subsidy
was scrapped.

He says the fuel industry has been exploiting the consumer confusion.

GARY FITES: What we saw in the first week in south-east Queensland was most operators keeping their
heads down and keeping margins low to avoid any adverse publicity. A week on and certainly if the
naming and shaming exercise was for the last 24 hours, it's pretty clear that the week after 1
July, they've all resorted to normal pricing practices and then some.

In the past few days in south-east Queensland certainly, we've seen not only the full impact of
that extra nine cents a litre in tax, but also a little bit of extra margin being recouped to make
up for obviously what was pretty skinny margins in week one after the abolition of the fuel
subsidy.

MEREDITH GRIFFITHS: The fuel watchdog FuelTrac agrees.

Its spokesman Geoff Trotter says that the price of unleaded in Singapore has fallen four cents and
the price of diesel has dropped five cents. But he says none of those savings has been passed on to
drivers.

GEOFF TROTTER: The week after the subsidy was removed, the increase was 8.6 cents a litre on
average. This Friday the differential has moved to 14 cents a litre. And that's at a time when the
intervening period, the wholesale price for unleaded petrol has gone down 3.5 cents a litre.

So the oil companies have recovered much more than the cost of the state subsidy removal.

PETER CAVE: Geoff Trotter from FuelTrac ending that report by Meredith Griffiths

The other retail giant, Woolworths, has announced it will match the Coles fuel offer price.

The company says the price cuts are unsustainable in the long term, but that similar snap specials
are quite likely in the future.