House debates

Thursday, 19 June 2008

Questions without Notice

Fuel Prices

2:04 pm

Photo of Kevin RuddKevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

I think it is important to look at the range of measures which we can deploy responsibly as a government in dealing with what is a global problem. Let us again put it into context: we have the greatest global oil shock the world has faced in 30 years. Therefore, a range of measures—short, medium and long term—are necessary to deal with it. I mentioned before, in my response to the question asked of me by the Leader of the Opposition, about additional global measures. One of those deals with the supply-side measures which will be addressed in part at the upcoming Jeddah conference, which the Minister for Resources and Energy will be attending. Others, on the global demand side, go to measures currently embraced by the International Energy Agency and the G8 to enhance energy efficiency measures in developing countries. When you have this huge surge in demand from China and India and the suck-in of oil from those two burgeoning economies, representing something more than 50 per cent of the overall increase in global demand for oil, it follows logically that that also is having an impact on what is occurring in the overall balance of supply and demand in the global oil market.

There is a further factor, though, which I would draw honourable members’ attention to, and that goes to increasing concerns across the international community about speculation—that is, excessive speculation within the oil industry itself and increasing evidence that some financial institutions may be trading in oil as an investment like shares and currencies. When we look at international action on these matters we have the US Commodity Futures Trading Commission, the CFTC, imposing position limits on West Texas Intermediate oil contracts on the London based ICE Futures Europe exchange. The new regulations are an attempt to limit excessive speculation on the price of oil, limiting individual positions in West Texas Intermediate oil contracts on the ICE Futures Europe, which holds up to 30 per cent of total trades. European authorities will also share trading data with their US counterparts to improve transparency.

The IMF is also acting in this respect in response to a particular request from the G8. In response to a call from G8 finance ministers, the IMF is currently analysing the real and other financial factors behind the recent surge in oil and commodity prices, their volatility and the effects on the global economy, including the role of speculators. This is an important consideration, because when we look at the overall global analysis of what is a problem for all economies at the moment, whether it is the US Treasury Secretary or the G8 finance ministers, all have expressed deep concerns about this, as does the government of Australia. I quote here the US Treasury Secretary, Hank Paulson, who said most recently:

All the evidence points to ... supply and ... demand as the main cause—

of the surge in oil prices. He continues:

“I think there’s a danger that if people say ‘all this is speculators’ then we won’t do what we need to do. We don’t want to misdiagnose the problem.”

In other words, it is a complex set of problems on the supply side and the demand side, but there is also an important consideration when it comes to speculation. Therefore, this government, in partnership with foreign governments, will be doing what we can through the councils of the international community to act consistently on the question of the impact of speculation on global oil markets and any artificial manipulation of the global oil price which may occur as a result. That is on the global action front.

When it comes to local action, could I simply say this: I still remain puzzled as to why those opposite remain so ideologically opposed to Fuelwatch. The price of petrol in some Sydney service stations yesterday reached $1.70. We understand that yesterday in Sydney there was a difference of about 20c a litre between the lowest and highest petrol price. With those opposite, it depends on who you believe: the Leader of the Opposition or the member for Wentworth, who does not support the Leader of the Opposition’s position on this, or the member for Aston, the campaign manager for the member for Higgins, who suggested a third new option when it comes to petrol policy—not 5c but 10c, depending on where you actually stand on this. It is always interesting to identify policy coherence on the part of those opposite.

I go to the specifics of what is happening in Sydney at the moment, and I think it is very important that honourable members reflect on this. In South Strathfield yesterday you had a Vartex petrol station charging 164.9c per litre at 1.16 pm while at the nearby Coles Express, along the Hume Highway at South Strathfield, 155.9c per litre was being charged at 1.20 pm. That is a 9c a litre difference. That is in and around Strathfield.

In Eastwood yesterday you had an Autodoc petrol station charging 164.9c per litre at 3 pm while the nearby 7-Eleven at Carlingford was charging 155.9c per litre at 12.16 pm. That is also a 9c a litre difference. Then we go to what is occurring in Mosman. In Mosman yesterday there was a BP petrol station charging 171.9c a litre at 1.46 pm, and the nearby 7-Eleven on the corner of Spit Road and Mitchell Road was charging 155.9c a litre at 1.40 pm. That is a 16c a litre difference. Therefore, simply in the space of yesterday in Sydney—given that we have had petrol prices go above 170c today in Sydney—we had in the single suburban areas that I have just referred to price differences of between 9c and 16c a litre. Across the whole metro area, that is some 20c a litre.

We on this side of the chamber have this remarkably radical approach that we think consumers should have access to that information! That is our radical approach—we think that consumers should have access to that information. Those opposite are of the view that this should remain the unique property of the oil and petrol companies. Our approach therefore is that a competition policy approach is a very important addition to what is an overall big challenge in terms of families trying to balance the family budget at the moment. Having available data about where you can get the cheapest fuel on a particular day in your locality—that is what Fuelwatch is all about. Those opposite have once again sided with big oil and the big petrol companies and decided that that information should remain uniquely in their possession. We on this side of the House have a different approach, and that is that that information should be provided in a time-real manner to consumers so that they can make the best choices for themselves.

When it comes to the difficult question of oil and petrol worldwide, we have a range of measures we will be pursuing as a government: those which apply at the global level concerning supply, demand and speculation; those which also are being considered by the Henry commission; and those which deal in the here and now with the impact of competition policy. These are responsible courses of action given the difficulty which consumers are facing at present in this important area. I contrast that again not just with the overwhelming avalanche of negativity on the part of those opposite but with an overall approach where they will say anything and do anything on the question of oil prices in order to achieve a cheap headline. That is what is governing policy on the part of those opposite. The Leader of the Opposition has one policy concerning 5c a litre. The alternative Leader of the Opposition, the member for Wentworth, says that he will not implement it. The campaign manager for the member for Higgins says that he would like to double the amount. What is the position of the opposition on this matter? Our approach is clear cut. The approach of those opposite is characterised not just by negativity but by absolute populism.


Nathanael Coyne
Posted on 20 Jun 2008 12:12 pm

A sensible approach - although I wonder how long this global oil crisis diagnosis activity will take to conclusively identify the issue/s, recommend action and see that action operationalised?

Although dropping the fuel excise would be a nice temporary relief, how long would it be till the cost of fuel is back at $1.70 with a reduced or even withdrawn excise? 6 months at most? It's hardly worth it.

But clearly there's not a straightforward reciprocal relationship between fuel prices at the bowser and the remaining reservoirs of crude oil in the earth.

Cameron Reilly
Posted on 21 Jun 2008 9:37 pm

I think providing transparency on the issue of petrol prices is exactly what the government should be doing. It prevents them from interfering in the market by either placing a ceiling on petrol prices or getting more directly involved in competition regulation. They provide information and let the people decide which retailers they will buy their petrol from. It's pretty hard to argue with. Interesting to see the Liberals *still* siding with the oil companies even after losing the last election so badly. All of the post-election rhetoric about having to change and listening to the people has obviously been put aside.

Sean Carmody
Posted on 23 Jun 2008 10:34 pm

Of course markets become more efficient with greater tranparency, but why single out petrol? Why not MilkWatch, CarInsuranceWatch or DentistWatch? FuelWatch strikes me a mere populism: the Rudd Government wants to be seen to be acting. But even the Government itself estimates that FuelWatch will only save around 2 cents/litre ( while petrol prices are up by around 20c since the start of the year so the benefits do not look very impressive. Surely the $20 million or so that the scheme will cost tax-payers could be better spent elsewhere, perhaps on public transport or renewable energy initiatives!

Alan Howard
Posted on 24 Jun 2008 12:29 pm

Interesting article here:

The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.
"Record oil prices are inflated by speculation and not justified by market fundamentals," according to Gheit. "Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel."

Noel Kelly
Posted on 24 Jun 2008 1:13 pm

Well the Libs/Nats are beating the bush, as the opposition should. At this stage (of the election cycle) they don't need public policies (That should be all backroom work ATM).

The Fuelwatch system is just a trick to give the appearance of motion!

Any real fix of this issue have two side, peak oil (exhaustible fuels) & climate change.

In both cases, it comes back to move society's basic energy infrastructures from mined fuels (fossil & nuclear) to renewable sources. The govt need to be moving to building a globally system that everyone is willing to play by. Once that's in place, then we can go full steam at building a system of leaves & cross subsidies needed to get to a renewable, sustainable future.

A core change is the need to move from short term thinks to the longer term. Renewable assets tend to be expensive and long live. A matching mind set is needed.

Australia, as an economic system is going to be a laggard, naturally, due to it's coal (one of the big five) & uranium (number one) reserves. The public will need to drive both govt and business to change. The natural tendency of any system is to maintain it's status-quo state. For a Govt and business sectors, in a 'BRIC boom', coasting will be natural. A bit of inflation is something we can live with, just as long as people don't get to the civil unrest stage.

As an aside, fuel excise should go, because it's a bad tax. It's neither a general tax funding the general good nor a specific tax funding a closely related (and tied) public spend!

Morgan Gibson
Posted on 24 Jun 2008 2:02 pm

I find it very strange that the government is willing to spend $20 million on a fuelwatch scheme that will benefit major oil companies and hurt independent retailers and save at most 2cents a litre, and an opposition that is willing to spend billions of dollars to save 5cents a litre.

Meanwhile, neither party looks set to realistically combat and deal with climate change and both sides and the media seem to want to control the agenda and block out the alternatives, such as electric cars (SEE TESLAMOTORS.COM for a BRILLIANT ALL ELECTRIC CAR). These alternative technologies would have intrinsic and not so obvious benefits such as forcing increasing international integration in the Middle East, instead of propping up energy-dependent dictatorships.