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Tuesday, 15 August 1978
Page: 1

Since the OPEC countries quadrupled the world price of crude oil in 1973-74, Australians have continued to enjoy artificially low prices for crude oil.

While the rest of the world was facing up to the inescapable fact that the days of cheap energy were over, Australians- even after the imposition in the 1975-76 Budget of a $2 per barrel production levy- were continuing to pay less than half of the world price for Australianproduced crude oil.

Subsidized indigenous oil prices encouraged a wasteful use of a key energy resource and inhibited the adoption of more energy-efficient processes and technologies; in recognition of this the Government moved last year towards a more realistic pricing policy for Australian-produced crude oil.

The move towards world prices for producers of 'old ' oil announced at that time was a gradual one, with correspondingly gradual benefits to conservation and improved exploitation of known reserves.

In 1 978-79 the proportion of local crude oil production sold to refiners at less than world prices would have been about 70 per cent, involving, in effect, a subsidy to petroleum product users of some $800m.

In the light both of the budgetary situation and the desirability of improving energy use and the allocation of resources, the Government has decided that all Australian-produced crude oil should, from tomorrow, be priced to refineries at import parity levels; this will mean that consumers of petroleum products will in future pay prices based on world oil prices.

However, the proceeds of the increased price paid by refineries as a result of this decision will accrue in the first instance to the Government; the price to producers will continue to reflect the arrangements announced last year.

These results will be achieved by, in effect, increasing the present productiion levy on 'nonparity* oil by an amount that will bring the price of such oil to refiners to import parity levels; this will bring the price to refiners of all domestic production to import parity.

The Minister for Business and Consumer Affairs will introduce legislation later tonight to give effect to these proposals; in brief, however, the new arrangements involve the imposition of a production levy at the rate required to bring the price of 'non-parity' oil in Bass Strait up to import parity, with variable rebates being allowed to reflect, on the one hand, the maintenance of a net levy of about $3 a barrel on 'import parity' oil and, on the other hand, the slight differences between Bass Strait and elsewhere in both import parity prices and non-parity prices.

The net effect of these arrangements will be to increase immediately the production levy on Bass Strait 'non-parity' oil from the present rate or $18.90 per kilolitre (about $3 per barrel) to $64.53 per kilolitre (about $10.26 per barrel) for the period ending 31 December 1978; for Barrow Island the net levy on 'non-parity' oil will be $6 1 .39 per kilolitre (about $9.76 per barrel).

It is anticipated that this decision will add about Vh. cents per litre to the price of petrol (roughly 16 cents per gallon).

Retail prices for petrol in Australia vary considerably; however, the maximum allowable retail price for premium petrol in Sydney is now 2 1 cents per litre, and even with the increase expected, would remain much lower than the price paid by consumers in most countries comparable to Australia.

For example, during the first quarter of 1978 consumers were paying 49 cents per litre in Italy, 44 cents in France and Japan, and 28 cents in the United Kingdom.

New rates for the standard levy and rebates for the period 1 January to 30 June 1979 will be announced at the appropriate time following the determination of import parity prices for tha* period by the Minister for National Development.

On the basis of existing import parity prices, this increase is estimated to raise additional revenue in 1978-79 of $676m; there will be some offset in excise collections from petroleum products, reflecting the effects of the rise in the prices of such products on the demand for them.

In other respects, the pricing arrangements announced in last year's Budget will be unchanged.

As then indicated, producers of 'old' oil will obtain import parity prices (less the existing levy of $ 1 8.90 per kilolitre) for increasing proportions of production from existing fields, with the proportions specified over the period to 1 980-8 1 and moving to 100 per cent as soon as possible thereafter; only for refiners (and hence consumers) is the inevitable move to world prices being accelerated.

The levy will remain at $ 1 8.90 per kilolitre on import parity' oil; as the proportion of that oil in total production increases, collections from the new rates of levy will fall.

Those fields currently producing less than 6 million barrels per day, including Moonie, already attract full import parity, and the levy in respect of their total production will remain unchanged.

As announced in last year's Budget Speech the Government will review, prior to the end of 1980-81, the further progression to be made towards import parity for producers from existing fields.

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