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Thursday, 4 December 1986
Page: 3326

Senator POWELL(10.07) —by leave-I move:

That the Bill be now read a second time.

I seek leave to incorporate the second reading speech in Hansard.

Leave granted.

The speech read as follows-

This Bill is a significant step in bringing a measure of sanity back to petrol pricing in Australia. I do not believe that Australia's irrational petrol pricing structure will simply be resolved by this legislation. More action, including legislative action will be needed. However, I am proposing a simple solution to a problem that currently causes massive variations in petrol prices, within cities, between States, and between rural and metropolitan Australia. The problem is that the petrol companies use their retail sites to start price wars. These price wars rarely benefit rural petrol consumers, who do after all travel greater distances and use more petrol. During the price wars it is not uncommon for petrol to be retailed below the maximum wholesale price set by the Prices Surveillance Authority. It seems strange that petrol companies which from time to time make representations to the Prices Surveillance Authority can afford to retail petrol below the wholesale price the PSA sets, having due regard to the submissions, views and profitability of the petrol companies themselves.

The major determinant of petrol prices in Australia is the Federal Government. This follows the decision by the Fraser Government to introduce import parity pricing. This meant that despite the fact that Australia is about 90 per cent self-sufficient in petrol production, and about 80 per cent of this Australian petrol comes from Bass Strait, which has been producing since the late 1960s, the Fraser government decided to equate the price of Australian crude oil with the price of Arab oil. As a result the Federal government was able to get billions of dollars of extra revenue because about half the price of a litre of petrol goes to the Commonwealth government in the form of excises and royalties.

In Opposition the Labor spokesperson for minerals and energy, Mr Keating, attacked import parity pricing as a `tax by stealth-with a branch of the Tax Office at every petrol pump'. As Treasurer he discovered that it is too hard to give up billions of dollars in revenue. When the price of petrol fell this year Mr Keating responded by passing on `some' price reductions to the consumer but he increased the excise so that Commonwealth revenues were not diminished by the fall in world petrol prices. As a result: Increasing petrol prices feed into the CPI and lift our inflation rate; Australia does not get a significant competitive advantage in production costs despite the fact that we are relatively self-sufficient in petroleum production; and rural dwellers, who have greater distances to travel, are hit the hardest by high petrol prices.

This Bill does not attack the problem of import parity pricing. It is true however that a high proportion of the price of petrol goes to the government and that this artificially inflates Australia's petrol prices. My aim with this Bill is to do something about a situation where price variations above the government `take' are so massive that in mid-October the most common price for petrol in Australia was 55c but actual prices for that month ranged from 44c to 66c. I believe that some of that variation is due to the fact that petrol companies are allowed to own and operate petroleum retail outlets and that they use these outlets to maintain market share at any cost.

In their attempts to maintain market share, price wars erupt in areas selected by the petrol companies. Consumers in those areas benefit and the petrol companies argue that this is healthy competition in the market-place. I am not against competition or price discounting, but I do not believe that the petrol companies should choose the time and place for discounting. This decision ought to flow from market forces. The petrol companies are part of a powerful oligopoly. The myriad of small business, petrol retailers are the people who ought to be left to inject the competition into the market-place.

This legislation calls for divorcement, which means that petrol companies will not be allowed to own and operate retail sites. The call for divorcement is based on my desire to create true price competition in the petroleum industry with the oil companies competing at the wholesale end of the market and the retailers being responsible for competition in their own retail section. The petrol retailers should not have to worry about how far below the wholesale price the service station down the road, owned by one of the `big oil brothers', is willing to retail petrol to its customers.

The Liberal and National parties in government appeared to favour divorcement when a firm undertaking, a promise, was given on 30 October 1978 when the so-called Fife package was announced-that oil companies would be prohibited from retailing petroleum through direct sales sites. But towards the end of 1980 the Fraser government introduced its petroleum retail marketing legislation which reneged on this undertaking. Instead each integrated oil group was allocated a quota of sites. The initial number of sites allowed in 1980 was further reduced in 1983. Currently while petrol companies own only 5 per cent to 7 per cent of the total number of retailing sites in Australia, these account for 11 per cent to 18 per cent of the volume of petrol sold in Australia. In November the Australian Automobile Chamber of Commerce held a conference in Perth where the major issue was petrol pricing. The Chamber believes that proper franchising arrangements with the petrol companies are needed to reduce the current marketing chaos.

The inequity of this marketing chaos became obvious to me when I visited a number of rural centres in Victoria in November. In that week when I left Melbourne I could fill up my tank for less than 50c a litre, although I could have paid up to 57.9c in the same city. The price of petrol in Ballarat, Mildura, Horsham, Echuca, Swan Hill, and Wangaratta varied between the mid-fifties and the low-sixties. Commonwealth government and State government taxes, the cost of freighting petrol to rural areas, and the Commonwealth freight subsidy do not explain the wide variations that I witnessed in the same State in the same week. They certainly cannot explain why some petrol retailers can afford to retail petrol below the official wholesale price.

It is time to reduce the market power of petrol companies who are ultimately interested in maximising their profits, rather than selling petrol at the lowest possible price. When this Bill is passed by this Parliament, we will in effect take away a considerable power that the petrol companies have to distort petrol prices for their own long term advantage. This legislation will also give the small business petrol retailing entrepreneur the ability to run his own show without direct competition from those who supply him with the product he sells. Petrol companies, unlike small business people, can afford to make significant short term losses to further their long term strategic interests. Most importantly this legislation will go some way to stabilising petrol prices and giving all Australian consumers, whether they live in the country or the city, access to petrol at the best prices that can be provided by retailers subject to healthy competition from each other.

I commend this Bill to the Senate.

Debate (on motion by Senator Grimes) adjourned.