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Tuesday, 11 May 1920

Mr BRUCE (Flinders) .- This matter is certainly of very great importance, and is one on which it is necessary that we should have the' fullest and most ample debate, in order to discover the real opinions of honorable members, who have to carry the eventual responsibility for a very far-reaching contract. In regard to the sugar contract recently submitted to the House, and for which we were asked to take the responsibility, I had considerable criticism 'to make of the way in which the Prime Minister (Mr. Hughes) presented his case. It appeared to me then that he did not give sufficient facts to enable honorable members to form their own views, and I considered that it was almost impossible .for us to take the responsibility of that contract on the information that he vouchsafed. I do not know whether that debate had any effect upon him, but on this occasion, whether his case is right or wrong, he has at least taken the trouble to present some facts in support of what he wishes us to do. I think the case he. has made out .is strong in certain respects. He has distinctly established the perfect accuracy of his statement that this is a petrol age. The honorable member for Yarra (Mr. Tudor), like a true and good leader of the Opposition, said it was not the age of petrol, but the age of electricity. There is no question that it is the age of petrol, whether for peace or for war. All of us who were at the Front during the recent war, and saw how completely and totally the armies were dependent upon petrol for every stage of their operations, must admit that in these days, before the League of Nations is an accomplished fact, if we ' in Australia are to be in a p .osition to protect ourselves we must take every step possible to insure a full and ample supply of oil. The same thing applies to peace. To-day we are dependent upon oil, and it is essential for the commercial, agricultural, and every other interest in Australia that we should have a full supply of it.

But there is another fact that we have to bear in mind - that we should have supplies at a reasonable price. That, I think, is the determining factor which we must consider in regard to this agreement. There are certain great oil interests in the world. The Prime Minister has indicated them all, and has suggested - I remind the House that on this- occasion, with admirable restraint, he has only suggested - that these great concerns are more or less working in combination, and control the whole of this absolutely necessary supply from one end of the world to the other. I admire that attitude in the Prime Minister, that he put the facts before us for our own judgment, and only suggested what I have stated. But the First Lord of the Admiralty in Great Britain, when the original Persian contract was under consideration, was swayed by no such restraint as to the responsibilities, of his position. He said straight out and emphatically what he saw the position to fee with regard to these great Oil Combines. What he said then is perfectly true today. We have another great oil company in the world, in the shape of the Anglo-Persian Oil Company, but those other Combines are in the same position, and are working in the same way to-day. This is what the First Lord. of. the Admiralty said on that occasion about the experience of Britain with regard to prices -

We have experienced, -together with private customers, a long, steady squeeze by oil trusts all over the world, and we have found prices and freights raised steadily against us, until we have been forced to pay more than double what a few years ago we were accustomed to pay.

That statement was made in June, 1914, and the Minister's summary of the position, with no restraint whatever, was that the two great controlling factors in the oil business were the Standard Oil Company, which controlled the New -World, and the Royal Dutch " Shell " Group, which controlled the Old. At the time those remarks were made one man rose in the House of Commons and said that they were not true. That man, significantly enough, was the brother of Sir Marcus Samuel, who was the leading and controlling spirit in the " Shell " Oil Trust. There was considerable noise outside about it, but nobody really fought the case that there was not a Trust, except the Petroleum World, or some such paper, which was edited by a man named Devorkivitch, and which was notoriously financed .and run entirely by the oil interest. Nothing has happened from that day to this to alter the position, save that the AngloPersian Company has come into existence, and has grown in strength. On the same occasion the First Lord of the Admiralty said that, as , against the Standard Oil Company and the Royal Dutch " Shell " Group, amongst the many British companies that had: maintained! a completely independent existence, the Burmah Oil Company, with its offshoot the Anglo-Persian Oil Company, was almost the only noticeable feature. Those words were uttered by a responsible Minister. These statements were challenged, but never seriously, and they certainly were never refuted. The position to-day is the same. We have the Standard Oil Company and the .Royal

Dutch "Shell" Group, and it is into those hands that we have sunk. We are in those hands today. There is ito question whatever about it. The Prime Minister made his case with regard to prices, and I need not remake it. The prices are all quoted in Hansard, and the record shows how they have gone against us. It has been said that tie price of everything has gone up the world over, and naturally also in Australia; but I would remind honorable members that while the price of petrol, a thing that comes home to us most quickly and easily, has gone up in Australia to an extraordinary extent, it has not gone up in America, which is the home and source of supply. There it is still at the same figure, and, consequently, the argument that, as the price of things has gone up the world over, it is natural that we in Australia should be paying higher prices, is not borne out in the case of oil.

I was a little startled to hear the Leader of the Opposition as almost an apologist for those companies about which, I venture to say, if one had the time and industry to refer back to some of his more illuminating statements, one would find he has said as bitter, as biting, and as merited things as anybody else has uttered in this chamber. But I suppose one must recognise that it is. not quite fair to criticise the honorable member for having done this to-night, because he is an admirable and excellent Leader of the Opposition, whose job is to oppose. On the present occasion he has done his job well.' He has opposed, and it is a matter of sincere regret to me that, in the course of opposing, he has had to defend those against whom I am sure he has as great an animus as anybody in the community.

Mr Tudor - It is only fair for the honorable member to state that I said I did not apologize for either of those companies, but I objected to any monopoly that was not a Government monopoly.

Mr BRUCE - I quite agree that my honorable friend said all that, but do not let us have bits of his speech again. I merely suggest to any who think I have not been quite fair, or have not interpreted correctly what he said, that they should read the honorable member's speech. They will there find that the honorable member dealt with those companies in a way rather different from that in which he generally handles them.

We have now to decide whether we are going to continue on the present basis, and intend to leave ourselves in the hands of those two forces, the American and the Dutch, or to strike out, and perhaps place ourselves in the hands of another corporation. There is this to be said, that at least it is a corporation which is British-owned and British-controlled, and one in which, so far as the Australian side of it is concerned, we are going to be active partners, and from whose operations we are to receive certain benefits. We propose now to enter into an agreement, and we have to decide, after weighing the merits and claims of the AngloPersian Company, whether it is to become the supplier of oil to Australia until we get our own supplies. We must also think what is going to be the position in the future if we decide to do this thing. I should like to remind the House exactly of the position of this company. It is purely and simply a British concern. It comes really from the Burmah Company, who owned the whole of the assets until the British Government stepped in.

Mr Blakeley - We were promised the articles ' of association, but have not got them yet.

Mr BRUCE - We should be all interested to see them. This company was then practically taken over by the British Government so far as capitalizing it was' concerned. 'That Government found the capital, and holds the majority of the voting rights.

Mr Blakeley - Can the honorable member give us any idea of who are the private shareholders in the Burmah Company ?

Mr BRUCE - I do not know who they are. But the private shareholders in the Anglo-Persian Oil Company are apparently non-existent. It consists of the Burmah Company, the British Government, and the trustees of the late Lord Strathcona. The company is a purely British one, and though its capital has been enormously increased it has preserved the same ratio, and the British Government is still in the position of controlling a. majority of its shares. In regard .to its operations, I would point out one fact which seems to have been overlooked, namely, that the whole of its management and control has been left in the hands in which they were when it was owned by the Burmah Company. A provision operates in the case of that company similar to that which is embodied in the agreement now before us. Under it the British Government have directors upon its board of management, and exercise a veto up to 'a certain point. Under this agreement the Commonwealth is to have three directors out of seven - a point which has been very much criticised to-day- In this connexion it must be remembered that the British Government entered upon a similar enterprise in which they now have invested over £5,000,000, although they have only two directors out of a total of fourteen. The fact that they considered that number sufficient to safeguard their interests suggests to me that we shall have adequate protection if we have three directors out of seven, as is proposed in the Bill. ,That number with the power of veto is quite sufficient, and it is very much better that the control and management of this company should be left i n the hands of experts who are likely to make a success of it instead of being placed in the hands of Government nominees.

Mr Considine - Does the honorable member say that the powers of veto which the British Government exercise in regard to the Anglo-Persian Oil Company are similar to those which are embodied in this Bill?

Mr BRUCE - They are substantially the same, and I expect that the provision in this Bill has been copied from the British agreement.

Mr Blakeley - Does the British Government exercise control so faT as a majority of the shares are concerned, and yet give the Anglo-Persian Company the greater number of directors?

Mr BRUCE - Yes. The British Government have the right to put their foot down whenever those 'directors appear likely to do anything which is against the policy of that Government.

There are a number of things in the agreement which, it seems to me, require to be altered. At the same time, I shall not vote to refer the Bill to a Select Committee, and I will give my reasons why I consider that course should not be adopted. We are here as a Parliament with an Executive which the country has been misguided enough - if that will suit honorable members opposite - to put into power. Surely it is the job of the Executive to do something! That Executive has made an agreement with the AngloPersian Company, and has submitted it for our approval. We have the power to alter that agreement as we think fit. Yet it is now suggested that we should refer it back to another executive, a Select Committee, which we are asked to create in place of the Cabinet. I am not prepared to do that. I am prepared, however, to strenuously advocate the making of certain changes in the agreement. I believe that one or two of those alterations are of so vital a character that if they are not embodied in the Bill I shall vote against its third reading. But before we have attempted to put the agreement into shape, it is suggested that we should refer the measure to a Select Committee. I am not such an extraordinary believer in special Committees as to become a party to that proposal. With regard to the actual contract itself, I am hopeful that we are going into Committee to discuss it clause by clause. There are, as I have said, one or two points which certainly need to be discussed.

It is contemplated that this company shall have a capital of -£500,000. I cannot agree that that can conceivably be the capital required to run a concern of the magnitude of the proposed refinery. I think that the history of similar concerns in this connexion is rather illuminating. If one takes the history of the Anglo-Persian Company itself he will be struck with the small commitments with which Britain entered into that enterprise, and the large commitments with which she is now confronted. This fact raises the question of whether £500,000 is not an absurd estimate of the capital required for the proposed enterprise.

Mr Blakeley - Is not the honorable member making out a good case for referring the matter to a Select Committee ?

Mr BRUCE - Quoting the case of the Anglo-Persian Company itself, I would remind honorable members that before the British Government entered into an agreement with it in 1914, its capital was £2,500,000. That was made up of £1,000,000 worth of 6 per cent, preference shares, of which £999,000 worth were issued to the Burmah Company, as well as £1,000,000 worth of ordinary shares, and there was a debenture debt of £600,000. The British Government became a partner in the enterprise in June, 1914, when the share and debenture capital was at once taken to £4,799,000, made up of 1,000 preference shares to the Government, and 999,000 to the Burmah Company, 2,000,000 ordinary shares to the Government, and 1,000,000 to the Burmah Company. The debenture debt in respect of the Government was £199,000, and £600,000 was divided amongst outsiders, making a total capital of £4,799,000.

Mr Maxwell - What was its turnover as compared with ours ?

Mr BRUCE - Heaven only knows. I am merely quoting our case as possibly a parallel one, for the simple reason that where. £4,799,000 was a small capital for such . an enterprise as' that upon which the British Government embarked, £500,000 is an equally small capital for such: an enterprise as ours. I have not been able to get the last figures for myself - I am quoting those given by the Prime Minister the other day. The present issued capital of the Anglo-Persian Company is £17,500,000 out of a total capital of £20,000,000.

Mr Tudor - Is that all genuine capital, or have the shares been watered?

Mr BRUCE - There has been no watering. The debentures at the present time total £5,000,000, and there can be no watering of debentures. The 6 per cent, preference shares represent £5,000,000, and the ordinary shares £7,500,000, of which the British Government hold £5,000,000 worth. The history of that enterprise rather indicates that the capital proposed for this new venture is altogether too low.

There are other factors that we ought to take into consideration. This refinery company, I presume, will do what the Vacuum Oil Company and other companies have done, namely, become its own distributor. I do not think that any of us would become parties to the agreement if that were not so.

Mr J: H Catts - That is provided for in the Bill.

Mr BRUCE - If the company is to become its own distributor, I should say that it will probably require the whole of that £500,000 capital to cover its outstanding book debts. It must be remembered that it has to establish its refinery, its depots, and its whole distributing organization, and that it will have to carry week by week book debts because all its transactions cannot be upon a cash basis.

Mr Riley - The honorable member is making out a good case for referring the Bill to a Select Committee.

Mr BRUCE - Perhaps I am making out a case for honorable members opposite, but I fail to see it. However, all these points can be dealt with in Committee.

We have also to consider what will he the position here until this refinery has been built. The best estimate is that it will take two years to get the refinery into operation. Is the Anglo-Persian Company going to behave like a gentleman during that term by stepping into the breach, and distributing its refined products here at a reasonable price in competition with the Standard Oil Company and the Royal Dutch "Shell" Group? Or is it going to wait until the plum falls into its own mouth, and in the meantime to leave us at the mercy of those Combines? If so, God help us.

Mr Tudor - What would the honorable member do if he were given two years' notice to clear out?

Mr BRUCE - That is a point which ought to be considered. As the AngloPersian Company is getting a good agreement - although it is one which I approve - I think that most certainly we ought to embody in that agreement some provision to the effect that it will help us through the two years we shall be obliged to wait for the erection of its refinery, and for its own fuel oil and refined products to come into competition with those of the other great Trusts of the world.

Mr.Fenton. - Even then it cannot satisfy the Australian demand.

Mr BRUCE - The honorable member means, I presume, that its refined products will only suffice for half our Australian requirements. Whilst that is so, we must not forget that if the Standard Oil Company or any other company wishes to trade here, they must do so in competition with this particular company. If they will not do that, but put their prices up to such an extent that we are being hopelessly robbed, the spur will be put upon the Anglo-Persian Company to increase its refining plant. There is no doubt that that company has more than sufficient oil to supply all our requirements if we are going to persevere with this refinery proposition. .

Another point which has to be carefully considered has reference to the price of this oil. I quite admit that under the agreement set out in the Bill, and subject to arbitration, we can get a lot of things. But it seems to me that the agreement itself might go a little farther in the way of determining what is fair. Let us consider the position of the Anglo-Persian Company. It is going to sell us oil f.o.b. at port of shipment, and I think there is some hope for us there. We have to remember that it is from the purchase price and freights upon the crude oil that that company will get its profits. We are not entering into this scheme for any other reason than to obtain cheap oil. The Anglo-Persian Company is controlled by the British Government, which lately reeeived some admirable advice from the sub-committee of the Board of Trade, which was referred to this afternoon by the Leader of the Opposition (Mr. Tudor). I intend to quote that advice again, 'because I think it furnishes an argument which we may use in order to induce the company to be very reasonable towards us. The Board of Trade sub-committee stated -

We feel strongly that when the AngloPersian Company (in which His Majesty's Government held a controlling interest) is free to market its own production, steps should be taken by His Majesty's Government to insure that the products are sold at a reasonable figure in this country without reference to excessive prices ruling in other fields. We attach great importance to this point, as we are of opinion that, when the existing contracts by which the Anglo-Persian Oil Company are bound, expire in 1022, it will be in the power of His Majesty's Government to give substantial protection to British users of petrol, and thereby to confer substantial benefits on the whole community of this country, to whom the cost of all commodities must be enhanced by any rise in the cost of petrol. In our opinion, it is far more important that the Government should secure for British users of petrol a reasonable price, than that it should participate, as a shareholder in the company, in excessive, profits made at the expense of the British public.

All over the worldan intense hatred against the profiteer has been engendered-, and I am inclined to think that the British Government are going to take that advice, and include in the agreement provision for the supply of cheap oil fuels to Great Britain. They can do it by their control, and I suggest the incorporation of a similar safeguard in this agreement by adding this proviso to clause 12 of the agreement -

But the price shall not exceed the price paid by the Britian Government f.o.b. at the same port of shipment.

The inclusion of this provision in the clause would go a long way towards insuring cheap fuel oil for Australia.

There is another factor which, I think, presents great possibilities for cheap oil. The Anglo-Persian Company is under some restriction as to profits, but owing to the fact that the agreement with the British Government was for the supply of oil for navalpurposes, neither the amount to be supplied nor the price to be paid, so far as I can ascertain, has even been disclosed, nor have the terms of the contract itself. There is, however, some provision restricting the profits which the Anglo-Persian Company can make out of its sales to the British Government, and the only information I have been able to get is the statement by the First Lord of the Admiralty when introducing the Bill, that there would be automatic reductions in price down to 25 per cent, in excess of the amount necessary to pay preference dividends and 10 per cent, on ordinary shares. What that means it is difficult to say, but it seems to imply that the profit 'to be made by the company in any year is limited to a figure 25 per cent, in excess of the amount required to pay all its debenture obligations and preference dividends, and 10 per cent, on ordinary shares. Another reference to this matter is contained in the speech made by the chairman of the company, who said he could not give details of the agreement, but he mentioned a sliding scale in relation to profits. No doubt the Commonwealth Government are in the position to find out, aud so I suggest that they ascertain what provision the British Government inserted in the agreement as to the amount of profit which the Anglo-Persian Company could make, and then they might consider the insertion of a similar provision in this agreement with the refinery company. We can do nothing with the AngloPersian Company. That concern is in the hands of the British Government; but the refinery company will be under the control of the Commonwealth Government. I do not think any one is . bold enough to suggest that the company should be encouraged to make excessive profits so that heavy dividends might be paid into the Treasury, to the relief of taxpayers, instead of providing cheap oil by means of which out primary and secondary industries may be stimulated.

Sir JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) (Minister for the Navy) - Cheap power is the great desideratum.

Mr BRUCE - Absolutely. We want the refinery company to be a sound commercial venture,- in which money will not be lost; but on the other 'hand we do not want it to make excessive profits out of the people, for while one-half of the profits will go to the Treasury, the other half will go into the pockets of the AngloPersian Company. For this reason, I suggest the insertion in the agreement of some provision such as that which I have mentioned.

Another matter referred to in the agreement is the basis of freights at current rates. It must be obvious that the clause is too loose. There is no basis of current freights from a wild part in Persia to Australia, and so the clause bearing on that question should be modified. -

The principal clause is probably that providing against dumping, and I can clearly define my attitude on that matter. If we enter into this agreement, I am, quite prepared to protect Australia against dumping, with the proviso that the people must be* safeguarded, by Parliament, and not by the imagination of a Minister. If it is made clear that this matter will be dealt with by Parliament, I will accept it: but if there is any suggestion that it is to be left to the whim of a Minister, acting under administrative powers, I shall not accept it. We have had too much of that sort of thing in this country.

The only other point to which I desire to refer is the question of finding oil in Australia, or in some part of its Territories. This is a vital clause of the agreement, and until such time as we discover oil, I am quite prepared- to go on with this proposal for the establishment of refineries. I am confident we shall find oil some day, and unless we have put our house in order, and. have our refineries ready, the discovery will be useless for many months, perhaps for years.

With regard to the arrangement by- the Imperial and Commonwealth Governments to put up £50,000 each for the purpose of exploring for oil, and to hand over the administration to the AngloPersian Company-

Mr Blakeley - An arrangement of which this House knows nothing.

Mr BRUCE - As I see it, this agreement is one which places the AngloPersian Company in a somewhat invidious position, as under the refining agreement they will have an outlet for 200,000 tons of crude oil per year from the Persian fields, which will cease as and when indigenous oil is discovered. I have, however, sufficient faith in the commercial morality of a respectable trading concern such as this is to feel no anxiety about the discharge of their obligations. I am satisfied that, as the servants of the British and the Commonwealth Governments, they will do everything in their power to find oil in Papua, and that we are perfectly safe in their hands. I am sure we shall have a fair and square deal. The undertaking could not have been placed in the hands of better people, as the history of exploration teaches us that the British as a race have more aptitude for this class of pioneering work than the people of any other nation, and I would sooner see this matter in their hands, under British management and control, than under the best American experts that could be brought to Australia.

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