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Petroleum marketing reforms.



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Media Release

 

Statement by

The Hon. Peter Costello/The Hon. John Moore

The Treasurer/Minister for Industry, Science and Tourism

 

PETROLEUM MARKETING REFORMS

 

20 July 1998

 

246/98

 

The Government today announced a reform package for the petrol industry in moves designed to cut prices for consumers.  These reforms will benefit all consumers but will be of particular importance for consumers in rural and regional Australia who have suffered from a lack of competition in the retail market.

 

Price surveillance of petrol prices and the setting of a maximum endorsed wholesale price has had an adverse effect on the retail petrol market.  In the capital cities, the maximum endorsed wholesale price has acted as a target for prices at the end of a discount cycle.  In the country, the maximum endorsed wholesale price has acted as a price floor underwriting the price paid by country consumers.

 

Key aspects of the Government’s reform package for the petroleum industry include commitments that all four oil majors have made to provide open access to their oil terminals, the operation of horizontal arrangements in the oil industry such as product exchanges between suppliers and joint terminalling arrangements and greater price transparency.

 

The Treasurer will remove prices surveillance of petrol and automotive distillate from 1 August 1998.

 

On open access, the oil majors have committed that customers for bulk fuel supply will be able to directly access terminals for supply.  Some companies have already published details of the procedures for such negotiations.

 

In addition, the oil majors have agreed to establish and fund a mediator to deal with any disputes on terminal access.  This would apply to all terminals from which petroleum products are marketed to third party customers.  Access would be subject to minimum volume and health and safety requirements and be on normal commercial terms, including price, credit and loading schedule.  Mediation would also be available for disputes arising from third parties seeking participation in the industry horizontal arrangements.

 

Open access to oil terminals will ensure that the infamous Laidely Agreement is finally laid to rest.  The Laidely Agreement was an anti-competitive covenant which restricted access to oil terminals originally established between the Transport Workers’ Union (TWU) and the Australian Petroleum Agents and Distributors Association (APADA) in 1980.

 

The oil majors have also committed to support an independent price monitoring system for 100 country towns which will be monitored by the Australian Automobile Association and its constituent members.  Some of the major oil companies already publish their own data on prices through the supply chain from crude oil to consumer.  The ACCC will continue to monitor petrol prices, with a particular focus on ’hot spots’.

 

In recent months, considerable progress has been made on finalising the principles for the petroleum retail industry’s code of conduct - the Oilcode.  In January 1998, the Government appointed the Hon Andrew Rogers QC to facilitate discussions between the industry parties to improve Oilcode.  Mr Rogers reported to the Government on 22 April, highlighting considerable agreement between the parties, as well as a number of outstanding issues.

 

Concurrent with the negotiations chaired by Mr Rogers, the Government enacted the Trade Practices Amendment (Fair Trading) Act 1998 which has re-drawn the relationship between big firms and small.  For the first time, smaller firms have an effective legislative vehicle through which to seek redress when dealt with unconscionably by larger firms.

 

The Government believes that the new general legislative protection offered through the Fair Trading Act, and the industry specific protections identified in Mr Rogers’ report, form the basis for an equitable Oilcode.  Regulations prescribing the Oilcode, covering all franchise and commission agent outlets in Australia, will now be prepared.  The Minister for Industry today released draft principles.

 

In finalising the principles of the draft Oilcode, the Government has been aware of the need to balance the desire of small business for protection against unfair actions by larger firms with the need to remove the regulatory impediments to competition that exist in the petroleum market.  Oilcode, when taken in conjunction with the other measures announced today, achieves this aim.

 

The Government recognises that aspects of the strengthened Oilcode are incompatible with the existing legislative framework.  To address this, and to encourage competition between all participants in the petroleum retail sector, the Government will repeal the Petroleum Retail Marketing Sites Act 1980 and the Petroleum Retail Marketing Franchise Act 1980.  The new Oilcode will be timed to take effect from the date of repeal or suspension of the Petroleum Retail Marketing Sites Act 1980 and the Petroleum Retail Marketing Franchise Act 1980.

 

An efficient, competitive and robust petroleum products industry is essential for the Australian economy.  The industry is undergoing major restructuring to meet new challenges, both domestic and from abroad.  For many years, the industry has been highly regulated.  It is now time to act to remove all the unnecessary and inefficient regulation.

 

This reform package will allow the industry to look ahead and restructure itself to meet the future needs of the community.  At the same time, the package will ensure that small business participants in the industry are treated fairly in order to ensure that all sections of the industry can access the benefits of this package.

 

(Further information about the package is available at http://www.dist.gov.au/industry/petroleum)

 

CMR 1177

 

Contact:

Niki Savva

Media Adviser, Peter Costello’s office

02 6277 7340 or 0418 868 710

 

Chris Wordsworth

Media Adviser, John Moore’s office

02 6277 7580 or 0419 982 482

 

 

 

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