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Petrol price monitoring firm says political interjections are unlikely to change prices; claims that reinstating ACCC's wholesale price-setting mechanism is the only solution.

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Monday 11 June 2007

Petrol price monitoring firm says political interjections are unlikely to change prices; claims that reinstating ACCC's wholesale price-setting mechanism is the only solution


MARK COLVIN: The Prime Minister will meet the head of the competition watchdog, Graeme Samuel, this week to talk about a bigger role for the ACCC (Australian Competition and Consumer Commission) in monitoring petrol prices. 


Labor's tried to get a jump on the Government, with a plan to bring in a new petrol price commissioner within the ACCC with greater powers to scrutinise oil companies. 


But neither plan is likely to do much to change the price at the bowser, as Emma Alberici reports. 


(Excerpt from song I See Red


EMMA ALBERICI: Motorists are seeing red over the price of black gold. The oil companies, on the other hand, must be tickled pink. For all the outrage from the politicians and consternation from the public, there's not much governments or the competition regulator can do to crimp their profits. 


The Opposition wants to introduce a new petrol price commissioner, with the powers to investigate exactly how much consumers are being ripped off. 


Federal Labor Treasury spokesman, Wayne Swan. 


WAYNE SWAN: I mean, the Act already provides for these powers, but it can only be activated by an instruction from the Federal Government under Section Part 7A. That's not occurred. We're proposing to give the petrol commissioner that power so they can examine what's going on behind the scenes. 


EMMA ALBERICI: They are entitled to increase their profit margins as they see fit, in an open market, aren't they? 


WAYNE SWAN: If those allegations about super profits being taken unreasonably over time are true, then people will react accordingly. 


EMMA ALBERICI: Who determines what's unreasonable? 


WAYNE SWAN: The petrol commissioner can determine what's unreasonable and he can publish his results. 


EMMA ALBERICI: But that doesn't necessarily lead to a change in behaviour by the companies, does it? 


WAYNE SWAN: Well, it may or it may not. 


EMMA ALBERICI: The profit margin for Australia's refineries is now around 15 cents a litre, about double the past month's average. 


Being a publicly-listed company makes Caltex the most transparent of the bunch. 


GEOFF TROTTER: Back in 2001 the Caltex share price was in the order of $2 a share. It recently peaked as high as $25 a share, and that growth in that share price is linked almost directly to the growth in their gross margins. 


EMMA ALBERICI: That's 10 times. 


GEOFF TROTTER: Yes, it's a dramatic increase. 


EMMA ALBERICI: Independent petrol price monitoring firm FUELtrac already does much of what Labor is looking for from its proposed commissioner. 


FUELtrac managing director Geoff Trotter says the only answer is to reinstate the ACCC's wholesale price-setting mechanism. 


GEOFF TROTTER: It would be a regulated, transparent price, and that price would be the basis for the independence, and the other service station operators and distributors, to buy. But to have a competitive retail price we've got to have real independence in the market, buying at a competitive wholesale price. 


EMMA ALBERICI: But Labor's proposal is nothing like that. Labor's proposal simply calls for some kind of scrutiny of prices, which indeed FUELtrac already does. 


GEOFF TROTTER: Well, yes. We monitor petrol prices, but obviously we have no power influence in relation to the dissemination of the wholesale price in Australia. And if the Labor proposal is only to appoint a person for more monitoring, then we don't think that they will have any significant impact. 


EMMA ALBERICI: The chairman of the Australian Competition and Consumer Commission, Graeme Samuel, will this week meet with the Prime Minister, who says he's open to change. 


JOHN HOWARD: The Government has offered to provide the ACCC with any new powers it needs to ensure that Australian motorists get a fair go at the bowser. Any request for extra powers will be granted. 


EMMA ALBERICI: Former ACCC chairman Allan Fels says wholesale prices didn't do much to arrest the rise in petrol prices in the past, and is unlikely to have any effect in the future. 


ALLAN FELS: We tried price control for 60 years without much big effect, and I don't think there's that much point in bringing it back, it would just shave a little bit off the top at most, but it might discourage discounts at the other end. 


EMMA ALBERICI: Labor says the answer to the petrol price problem is to set up a petrol price commissioner under the auspices of the ACCC. Is that the answer? 


ALLAN FELS: It could make a tiny marginal difference, but that's all. 


EMMA ALBERICI: Why? Why only marginal? 


ALLAN FELS: Because most of the petrol price reflects OPEC (Organisation of the Petroleum Exporting Countries ) and taxes, but the way I would tackle things is by hastening with the Government's accepted idea that there should be jail sentences for collusion. This was accepted four years ago, and it would be really good if the legislation could be got through the parliament before the election. 


MARK COLVIN: Allan Fells, who used to be the chairman of the Australian Competition and Consumer Commission, speaking to Emma Alberici.