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Thursday, 2 December 2004
Page: 76

Senator LUNDY (2:37 PM) —My question is to Senator Minchin, Minister for Finance and Administration and the Minister representing the Treasurer. Can the minister explain why, despite the Australian Institute of Petroleum stating that the price of crude oil per barrel has decreased from $70.10 on 1 November to $57.20 on 2 December 2004, the fall in the price of crude oil has had minimal impact on the price of petrol? Why is it that, despite this decrease of 18.4 per cent in the cost of crude oil, the cost to the consumer at the petrol bowser has dropped in the vicinity of only four per cent? Minister, given that the price of crude oil represents 90 per cent of the product cost before taxes and is a primary factor in influencing refined petrol prices, doesn't it follow that a decrease in crude oil prices should translate to a decrease in bowser prices, particularly given the current strength of the Australian dollar in US terms? Minister, why are these factors not influencing bowser prices for Australian consumers of petrol products?

Senator MINCHIN (Minister for Finance and Administration) —I thank Senator Lundy for her question. That is more a question to me as Minister representing the Minister for Industry, Tourism and Resources. I am advised by the Minister for Industry, Tourism and Resources that, if you look at the price of petroleum in Australia, the average retail price in Australia is relatively low—we are ranked fourth lowest among OECD countries. It is certainly true that the price for oil has fluctuated markedly. Petrol prices have been relatively high and we for a long time have had oil pricing geared to international prices, but the price at the bowser is a function of many things other than the price of crude oil. Indeed, if you examine the margins for petrol retailers—and having been the minister for industry, I am familiar with them—they are incredibly thin. You will know that independent retailers in particular complain long and loud about the incredibly intense competition in that industry—competition provided by the likes of Coles and Woolworths now entering that industry with margins that are incredibly small. Independent retailers need to bulk up their margins because they have lower volumes and their businesses do not necessarily have the advantage of being able to rely on the trade that goes through the retail sector for other products that many of the service stations now have.

The price of petrol at the bowser at any one time is influenced by a whole range of things, including the marketing strategies of the major refiners, which cause prices to fluctuate from time to time. Because of these various influences, you are never going to get a translation of the movement in the crude oil price at any one time directly into the bowser. But it remains the case that Australians do enjoy relatively low petrol prices in a situation where the retailers of petrol are operating on very thin margins. The refiners themselves operate on thin margins. I recall leaving that portfolio wondering why anyone was in the business of refining in this country, because they do not make any money out of it. Indeed, one of the issues for Australia is how to ensure that we retain a refining industry, because I do think it is of strategic importance.

It is an industry that is typified by high competition at the retail level, as evidenced by the activities of Coles and Woolworths and their success in providing discounts. It has been a very successful strategy, and the independents are increasingly moving into that strategy of providing discounts themselves. It is also an industry that is typified by very thin margins at the refining level and is subject to the movement in crude oil prices. But I think it is untrue to say that anyone is necessarily profiteering. If, indeed, they are, they will have the ACCC all over them. As you know, the ACCC takes a very keen interest in this industry. Allan Fels certainly did in his time there and Graeme Samuel does as well.

I am not quite sure what you are alluding to. If you are alluding to some deficiency in the regulatory arrangements—the consumer protection arrangements—I think you should identify those. We on this side believe that, generally speaking, Australians do benefit from relatively good petrol pricing and that we do have satisfactory regulatory arrangements in place. If you wish to allude to how they could be improved, we are all ears.

Senator LUNDY —Mr President, I ask a supplementary question. The minister did not explain the missing net 14.4 per cent decrease that has not been passed on to consumers. Minister, why is it that oil companies are continually blaming rising petrol prices on the rising cost of crude oil and are always very quick to react to an increase, yet when the cost comes down the market is so slow to pass on those decreases to consumers? Minister, given your advocacy of the role of the ACCC in your answer, will the government now follow Labor's lead and call on the Australian Competition and Consumer Commission to investigate the petrol prices being passed on to consumers, which are clearly not reflective of the current drop in the price of crude oil?

Senator MINCHIN (Minister for Finance and Administration) —I reject the assertions made in your question. If the ACCC believes there is any basis on which it should intervene or look at this industry it will do so. I certainly know from evidence in Adelaide that petrol prices fluctuate markedly. They can move 10c in one day. As I say, that is a function of marketing strategies and the intense competition in that industry, and you cannot expect an immediate transfer of a movement in the crude oil price to the daily price of petrol.