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Wednesday, 12 November 2008
Page: 6642

Senator XENOPHON (10:38 AM) —Over the past few months the issue of Fuelwatch has been debated extensively in this parliament, in the media and in the broader community.

Senator Conroy —Why do you hate Australian motorists?

Senator XENOPHON —Here we go. Senator Conroy asks: why do I hate Australian motorists? I love Australian motorists. Senator Conroy should know that I want to do the right thing by consumers, and that is why I have taken the position that I have.

Senator Conroy interjecting—

Senator XENOPHON —Just as I have listened to other speakers in silence, I hope that Senator Conroy can afford me the same courtesy.

Senator Conroy interjecting—

The ACTING DEPUTY PRESIDENT (Senator Barnett)—Order! Senator Xenophon, you have the call.

Senator XENOPHON —Thank you, Mr Acting Deputy President—that is apparent to me but not to others! It is a matter of record that I was initially attracted to the idea of Fuelwatch when I was a member of the South Australian parliament. That was in 2004, and the initial indications from Western Australia were that the scheme could help motorists. I was subsequently contacted by the RAA, the peak motoring body in my state, which cast serious doubts about whether such a scheme could assist in reducing retail petrol prices. And, just as significantly, I was contacted by independent petrol retailers who told me unambiguously that Fuelwatch could well squeeze them out of the market because small players could not spread the risk if they locked in a price for 24 hours and got it wrong, compared with the larger operators who had the financial muscle to be able to do that. The independent operators told me that the most effective way to make a difference with fuel prices at the pump would be to tackle the wholesale market and the stranglehold that the big four oil companies have in this country over the supply and distribution of fuel.

I subsequently moved for a select committee inquiry into the wholesale fuel market in South Australia and the impact the mothballing of the Mobil Port Stanvac refinery and storage facility was having on consumers. The evidence that that inquiry heard was clear. It showed that consumers could get a benefit of some 4c a litre, possibly more, if the wholesale market was freed up and made more competitive. So in a sense I agree with Minister Bowen’s intended policy destination—to reduce the price of fuel. Where we differ is on the best path to achieve that. At this stage I want to thank the minister for his time in discussing this issue with me. I am also grateful for the meeting I had with ACCC chairman Graeme Samuel a few weeks ago on this issue, when Mr Samuel well articulated the ACCC’s views in support of Fuelwatch. But, after significant research and discussions with motoring groups such as the RAA in my home state, and after talking with independent fuel retailers, I am convinced Fuelwatch is a bad idea.

I note that the RAA, the RACV and the RACQ do not support Fuelwatch. The RAA, in its submission to the Senate inquiry on this issue, stated that by forcing retailers to lock in prices for a full 24 hours you actually flatten the price cycle and reduce the opportunity for motorists to seek out a bargain. To quote directly from the RAA submission:

RAA has long opposed the introduction of a Fuelwatch scheme into South Australia (1) due to the absence of comprehensive modelling which shows South Australian motorists would benefit from such a scheme; and (2) on the basis that Adelaide’s retail market is highly competitive and operates under a distinct and predictive weekly discount cycle. Indeed Adelaide’s discount cycle clearly demonstrates that the price available at the bottom of each week’s cycle (Tuesdays) is consistently lower than those prices likely to be available under Fuelwatch.

The RAA goes on to conclude:

Analysis of current pricing data suggests SA motorists would be no better off should a national Fuelwatch scheme be introduced. In fact, such a scheme has the potential to deliver higher fuel costs.

Mr Acting Deputy President, I want to achieve a reduction in the retail price of fuel. And I believe there are significantly better ways for the government to achieve this than by running a Fuelwatch scheme. One way forward is that the whole issue of oil retail prices needs to be simplified. Price boards are almost written in code these days, and motorists are the ones being left confused or, worse, misled. I believe the ACCC should work with petrol retailers to develop a price board protocol to minimise confusion amongst motorists. So-called discounted prices can be deceptive. If you do not have a discount docket, what is the price then? Sometimes the discounts are 4c, sometimes they can be 20c—depending on whether you have gone to an associated liquor outlet. Sometimes it is not a true discount—if the retail price is inflated, as it has been in recent times. How can motorists really know what they are going to be paying? But that is at the retail end. It is important, but it is not the main game.

I believe that, if the government is serious about helping motorists, it needs to be tackling the wholesale market. It is here that significant savings can be achieved. We need to inject new competition at the wholesale level. This means opening up the current buy-sell arrangements between the big four oil companies to competition rather than letting these arrangements continue to operate as a cosy club between the oil companies to the detriment of independent retailers and to the detriment of motorists. We need to open up access to terminal and storage facilities, controlled by the oil companies, to inject new competition into the market. Without access to these facilities importers simply cannot get the product into Australia to help break the oil companies’ stranglehold over the wholesale fuel market.

Associate Professor Frank Zumbo, from the Australian School of Business at the University of New South Wales, has made a number of recommendations to tackle this vexed issue, including, firstly, introducing complete transparency surrounding the wholesale-pricing practices of the oil companies, including transparency about the level of preferential pricing given to Coles and Woolworths and the level of discrimination faced by independent service stations; secondly, having an immediate review of the current operation and possible abuse of import parity pricing; thirdly, giving the ACCC the power under the Trade Practices Act to formally monitor LPG and diesel prices; and, finally, the government immediately strengthening the Oilcode regulations under the Trade Practices Act to ensure independents continue to play an important and competitive role in the retail market. On this I note the work of Minister Ferguson in reviewing the Oil Code. That is important because the Oil Code needs to be reviewed and reformed to give the independent operators a fighting chance.

I had a discussion with Professor Zumbo earlier this morning and I believe that these recommendations have real merit. I also want to refer to the removal of the ‘sites’ act from our legislative framework several years ago. It was supported—and I believe shamefully—by both the coalition and the Labor Party. It was opposed by some crossbenchers, including Senator Joyce, who crossed the floor to oppose the abolition of the sites act. The sites act had a ceiling of five per cent on the control that oil companies could have over petrol sites. That has been lifted. We are now seeing a slow, creeping but steady acquisition of sites and a greater degree of vertical integration in the market.

So when the government talks about trying to do something at the retail level, that to me just does not cut it. It does not address the fundamental issue that, where the wholesale price can be manipulated and is less competitive than it should be, that obviously impacts on the retail price. That is what we need to do. We need to have real transparency at the wholesale level. Without this transparency we will never know if the pump price is a fair price.

I refer you to a 20 October article in the Age by economics correspondent Peter Martin entitled ‘Petrol giants quizzed over margins’. The article reported that petrol prices had fallen by less than 14c a litre at a time when the international oil price had more than halved. Even after factoring in the slide in the Australian dollar, the crude oil price had fallen from a peak of $153 a barrel in July to $100 a barrel back on 20 October. Whilst I accept that there are a number of factors at play, the question has to be asked whether consumers are getting the full benefits of a reduction in world oil prices. I and many other Australians would suspect not.

In reference to the raw deal independent fuel outlets are getting in the current market, can I say that just a few days ago in Sydney Marie El-Khoury, the owner of the BP petrol station on Sunnyholt Road, Blacktown, received enormous community support when she and other independent operators took on the big four oil companies. She slashed the unleaded petrol price to 94.5c a litre in protest against the petrol companies and supermarkets, which she says are killing small business enterprises. Yesterday in Adelaide a number of independent fuel outlets made similar complaints about this unlevel playing field.

Recently I met with the Petrol Commissioner designate, Joe Dimasi. It was a good meeting and I certainly wish Mr Dimasi well in his new role. One of the issues I would urge him to investigate is whether oil companies are passing on the full extent of the drop in world oil prices.

The Motor Trades Association of Australia also supports real transparency at the wholesale fuel level. They are also seeking a review of import parity pricing in the way that the benchmarks are set.

I am strongly committed to cutting the cost of petrol for motorists, but Fuelwatch is not the answer. I support the RAA when it says ‘there is more merit in looking to expand the availability of real-time pricing information to motorists rather than introducing a national Fuelwatch scheme’. The RAA said:

This option would make real-time price information available to the public for each petrol retailer—ideally through a website managed by the ACCC and/or utilising the Australian automobile clubs.

There has been a suggestion that those who do not support Fuelwatch support the big four oil companies. I think it is clear from what I have said that that is not the case. We need to tackle the big four oil companies, and there has been a lack of political will in this country over many years, under both coalition and Labor governments, to take on the big four oil companies and their cosy arrangements. I do not think anyone could possibly suggest that Associate Professor Zumbo is in any way a friend of big oil, given his outspoken criticism of the big four oil companies. Indeed, he was at the hearing of the Senate Standing Committee on Economics only last night giving evidence in relation to the North West Shelf and the joint marketing arrangements there.

I agree with the destination Minister Bowen has been seeking—that is, to lower the price of fuel for motorists. But Fuelwatch is the wrong road to achieving that. I look forward to working with the government to find the right road to cheaper petrol. If the government want my support in tackling the wholesale price of fuel and retail transparency and in tackling the power of the big four oil companies over fuel supply and distribution in this country, they have it. If you want to drive down fuel prices, you need to tackle the wholesale market and you need to tackle the big four oil companies. We must find better ways to help motorists, but Fuelwatch is not that way.