Kerry O'Brien (Tasmania, Australian Labor Party, Shadow Minister for Transport) Share this | Hansard source

I rise to speak on the Petroleum Retail Legislation Repeal Bill 2006 at a time when Australians are more concerned than ever about record high petrol prices. Reform of the petrol retail industry, including the repeal of the two acts dealt with in this bill, has never been more important. The Petroleum Retail Marketing Sites Act 1980 and the Petroleum Retail Marketing Franchise Act 1980 are outdated and serve no useful purpose in today’s petrol retail industry. Well over 50 per cent of the industry by volume of sales is not covered by these acts, because of the inclusion of the supermarket chains, Coles and Woolworths. The rules for market participants are inconsistent and unfair. That is bad news for the industry and it is certainly bad news for consumers.

The Oilcode, which will be introduced as a mandatory industry code under section 51AE of the Trade Practices Act 1974, will bring the whole industry into a common regulatory regime with better protections for market participants and better protections for consumers. The Oilcode will improve the protections available to commissioned agents and independent operators, who currently do not have the protections available to franchisees. Both franchisees and commissioned agents will also have access to a low-cost dispute resolution scheme for the first time. Labor’s view is that section 46 amendments to the Trade Practices Act are necessary to address outstanding concerns about the potential for abuse of market power, and I call on the government to bring these forward as a matter of urgency.

Nevertheless, the introduction of the Oilcode to cover the entire petrol retail sector will be an improvement over the existing situation where more than 50 per cent of the industry by volume is not regulated at all. Petrol retail reform is a good step forward to give consumers more confidence that the petrol prices they are paying are as fair and competitive as we can make them.

But reform has been a long time coming. Petrol retail reform has been government policy since 1996. In 1998 Labor said it would support petrol retail reform as long as an Oilcode was agreed. But it has taken this government another eight years to get to that point. As in so many other policy areas, reform under the Howard-Costello government has stagnated for 10 long years. This government simply cannot keep up with the changes that are necessary to encourage investment and maintain competitive markets and affordable prices in petrol, in electricity, in transport and in telecommunications.

This Howard-Costello government has failed completely to keep the reform momentum of the Hawke-Keating era going and we are starting to pay the price: in labour shortages, erosion of our skills base, choked infrastructure, inflation pressures, productivity stagnation and higher interest rates. And, most worrying of all, this government’s answer to everything is to spend, spend, spend, and that solution has hit a brick wall. The budget is no longer sustainable. The chickens are coming home to roost. Interest rates are rising. Petrol prices have been going through the roof. It is said that there will be some short-term relief for motorists because of the current reduction in petrol prices but experts are telling us not to expect that to continue. Wages for the already struggling are under pressure because of this government’s extreme industrial relations changes. Tax cuts have been more than swallowed up. Foreign debt is through the roof.

The Prime Minister and Mr Costello will not be able to spin their way out of this one. They tried cutting petrol excise back in 2001. They have used tax cuts, family payments, baby bonuses and any number of other handouts to buy off the electorate since then, but eventually the coffers will run dry. Now they have no options left on petrol prices. Petrol retail reform has taken them 10 long years. Excise cuts are no longer an option because we cannot afford them. And this government still have done nothing to address the real issue: our dependence on foreign oil from unstable parts of the world such as the Middle East.

It is obvious to everyone except this government that, if we do not have home-grown fuel industries, Australia will always be hostage to foreign oil. That is the key, not short-term fixes but a national transport fuel policy that guarantees supplies for the long term and gives Australia options to deal with global fuel supply and price emergencies—because that is what it is really about: supply and demand. When supplies are short or demand is high—or both, as is the case now—prices go up. The absolutely ironclad rule is that prices go up. It is only with home-grown fuel industries that Australia can have policy options available to it to ensure that the wheels continue to turn for Australian consumers and Australian industries to ensure that Australia can afford fuel. That is where this government has been seriously remiss.

Federal Labor has always supported the oil and gas industries and, indeed, the alternative fuel industry. They are strategically important to Australia, and I remind the Senate that Labor supported the proposal to extend the effective excise-free period for biofuels and LPG by three years, until 2011, and supported legislation to introduce mandatory cleaner fuels standards that should benefit environmentally friendly fuels. However, while Labor supported this approach, I must point out that the overwhelming reason for that was to provide some level of certainty for the alternative fuel industry and for the refining industry.

Historically, of course, it was the Keating government which introduced an 18c-a-litre production bounty for ethanol, in the 1993-94 budget, in addition to the zero excise rating for that product. The Howard government abolished the bounty scheme one year early, in the 1996-97 budget, and has consistently undermined the industry by changing the playing field on a regular basis over the last nine years. In the last parliament alone, the Howard government changed its mind three times on the excise regime, not only for ethanol but also for LPG. Despite the Treasurer’s May 2002 view that applying an excise to ethanol and LPG was a bad idea, he announced in the 2003 budget that he would do just that. He announced that biofuels and LPG would be subject to an excise from July 2008. In December 2003, he changed his mind again, announcing new excise regimes to apply from July 2011.

Between May and December 2003 the LPG industry was in turmoil, and many of the small business operators involved in LPG conversion and maintenance suffered serious business downturns due to the uncertainty about the excise regime. Now, when the government announces a subsidy, we are seeing that problem play out with massive shortages in the supply of fitting capacity. Of course, the biofuels industry also suffered during this period, with no certainty for new investors in the industry. It has taken some time for both of these industries to recover and it will be some time before the LPG conversion industry has the capacity to meet the rush of demand—which, the industry notes, might have been addressed had it been consulted about the government’s plans for the subsidy that was most recently announced.

We also have to have regard to the problem being exacerbated by record high petrol prices. This means that consumers are more willing to set aside their concerns about fuel tax uncertainty than they would otherwise have been and that biofuels are now more price attractive to refiners and marketers. In fact, let me say at this point that Caltex is to be commended for its announcement about discounting all E10 petrol by 3c a litre.

The history of the Howard government’s double backflips on alternative fuels is in stark contrast to the stability Labor provided throughout its 13 years in office, when it maintained the LPG excise exemption introduced in 1979 for fuel security reasons. The other stark contrast is between just how interested in fuel security the Prime Minister was before he was Prime Minister, in 1979, and his complete lack of interest today as Prime Minister when fuel security has never been so important and petrol prices have historically never been so high.

As Mr Martin Ferguson, our shadow minister for resources, has said before, this government treats tax cuts as ‘go away’ money for motorists worried about petrol prices. Let me remind the house of some other facts I have raised before and indeed that Mr Ferguson has raised before many times in the other place. The fact is that, without developing large-scale alternative fuel industries in Australia, we will increasingly be hostage to supplies from the Middle East, west Africa and Russia. I do not need to spell out the implications of that for energy security. Australians around the kitchen table today want to know that their governments and the companies with stewardship of their resources have a plan to secure their energy supplies for the future at affordable prices. But there is no plan and they are far from ‘relaxed and comfortable’ about that.

Creating the right fiscal and regulatory regime to convert our natural gas and coal to clean diesel, as well as new industry options and a new fuel supply source for Australia, is just not on this Prime Minister’s agenda. He was thinking about energy security in 1979, but it is not on his radar in 2006, when it has never been so important. Frankly, the government’s most recent announcement was poll driven, not national interest driven. Unlike other alternative fuels, the Prime Minister has done nothing to provide any industry framework to encourage the establishment of industries in Australia to convert our vast coal and gas resources to clean diesel. The Labor Party has always been a great supporter of both gas to liquids and coal to liquids, which of course are integral to the commercialisation of clean coal technology for power generation.

I recall that former Prime Minister Paul Keating, as former resources minister, was a great advocate of gas and coal to liquids technologies more than 20 years ago. So were my colleagues, Joel Fitzgibbon, the shadow resources minister in the last parliament, and Martin Ferguson, the shadow resource minister in this parliament. Establishing new nation-building industries is not easy and, more than anything, it requires sustained leadership and focus at the national level to make it happen.

Unfortunately, the Howard government has waxed and waned on both coal to liquids and gas to liquids. Once again, let me remind the Senate that it is now almost five years since Senator Minchin, the then minister for resources, appointed a gas to liquids task force to investigate the feasibility and benefits of establishing a gas to liquids industry in Australia. Five years later, no action has been taken other than the most recent announcement to think about it again. Australia’s reliance on imported oil and fuel is increasing and, while the liquefied natural gas market is booming, it remains a tough job to get new gas projects off the ground.

My colleague the member for Hunter once said that in the Prime Minister’s Australia it is easier to get gas to Shanghai than to Sydney. The Prime Minister is happy to dig it up, ship it out and look after Japan’s, China’s and the United States’ energy security, but this government has no plan for Australia’s security—no domestic gas strategy for our future and no transport fuels strategy either. When the wells run dry, the Prime Minister will still be hoping for a miracle, still hoping that he will be able to spend his way out of trouble with the electorate. Prime Minister, you need an industry policy, a resources policy and an energy policy, and those policies have to give us large-scale options to reduce our reliance on foreign oil if the Strait of Hormuz is closed, the Alaskan pipeline has to be fully shut down, war escalates in the Middle East or civil unrest shuts down west African production.

The Prime Minister knows that gas to liquids is Australia’s best option today. His own gas to liquids task force noted that, while Australia can simply wait for the market to provide an incentive for a gas to liquids industry, once gas supply infrastructure is in place and investment is sunk into countries where taxation and infrastructure incentives are on offer today, those countries will serve as investment hubs for expansion for many years to come—and that is exactly what is happening in Qatar.

The implication of the task force was that Australia’s remote gas fields could be left stranded from markets for even longer because, by and large, it would be cheaper to expand existing projects than build new ones here. I am sure this is a concept Australia’s LNG industry already fully understands. The task force highlighted the potential significance of a gas to liquids industry to Australia’s economy, saying it could underwrite offshore gas supply infrastructure to bring forward the possibility of major new domestic gas pipelines to connect the national market, increase domestic gas competition and energise gas exploration. The task force said:

These benefits would be of national strategic significance to Australia ...

It went on to say:

The cost of any government intervention must be considered against the potential benefits.

The potential benefits go beyond unlocking new resource wealth and creating new industry, more jobs and more exports. They include the opportunity for Australia to address this most pressing of problems: our future transport fuel security.

It is also three years since CSIRO’s report, The Energy and Transport Sector Outlook to 2020, which laid out its proposed strategy for Australia’s transport future—a strategy that identified gas to liquids and coal to liquids as the keys to our future transport fuel security. The tragedy is that we can all see the potential but the reality remains just beyond our grasp. Without sustained and committed national leadership to deliver the right policy settings and right fiscal environment, it will remain beyond our grasp.

The Prime Minister should be seriously reviewing the petroleum resources rent tax regime and considering special treatment of capital investment in gas to liquids fuel projects and associated gas production infrastructure. He should be facing up to some responsibility for resource related infrastructure instead of passing the buck to the states once again. Above all, this government should be sending a clear signal to Australians that it is interested in their future fuel supply security and a clear signal to the industry that it wants gas to liquids and coal to liquids as part of Australia’s national energy strategy.

I will be moving the second reading amendment circulated in my name today, which calls on the government to immediately conduct a feasibility study into a gas to liquids plant in Australia. The Prime Minister needs to dust off his 2001 gas to liquids task force report, bring it up to date and move us closer to making that industry a reality in this country. I also call on the government to review in 2009 the proposal to introduce excise on ethanol and biodiesel and LPG and CNG in 2011, and consider whether there is a case for deferring the introduction of excise depending on industry progress at that time. I think this matter is of such public importance that the government should require the Department of Industry, Tourism and Resources to report to the parliament annually, commencing next year, on the measures taken and the progress made to wean Australia off its foreign oil dependence. Such a report would need to address progress on market uptake of alternative fuels and new investment in alternative fuels industries in this country.

If this government were serious about a plan to lower petrol prices for Australians it would embrace Labor’s fuels blueprint proposals to make alternative fuel vehicles tariff free and grant tax rebates for other measures which will improve the uptake of LPG. It would have to be committed to finding more oil and using more gas in this country by using flow-through shares and re-examining the depreciation regime for gas production infrastructure.

Finally, the government should be criticised for its tardiness in moving on petrol retail reform; bypassing due parliamentary process in introducing a regulation to undeclare companies under the sites act; failing to introduce amendments to the Trade Practices Act to implement the 2003 Dawson and 2004 Senate recommendations for reform; and, above all, failing abjectly to take action to reduce Australia’s dependence on foreign oil and improve its transport fuel security. I move the circulated second reading amendment standing in my name:

At the end of the motion, add “but the Senate:

     (a)   calls on the Government to require the Department of Industry, Tourism and Resources to report to the Parliament annually, commencing in August 2007, on the measures taken and the progress made to:

              (i)    increase market penetration of ethanol and biodiesel, LPG and CNG, including the number and location of service stations and the names of the companies offering these products on their retail sites;

             (ii)    secure new investment in biofuel, LPG and CNG production and supply infrastructure in Australia; and

            (iii)    secure investment in new alternative transport fuel industries in Australia, including gas and coal to liquids.

     (b)   calls on the Government to review, in 2009, the proposal to introduce excise on ethanol and biodiesel, LPG and CNG in 2011, and consider whether or not there is a case for delaying the introduction of excise, depending on the progress made:

              (i)    in increasing market penetration of biofuels, LPG and CNG;

             (ii)    in securing new investment in biofuel, LPG and CNG production and supply infrastructure in Australia; and

            (iii)    towards achieving the 350 million litre biofuels target in 2010.

     (c)   criticises the Government for:

              (i)    its tardiness in moving on petrol retail reform;

             (ii)    bypassing due parliamentary process in introducing a regulation to “undeclare” companies under the Petroleum Retail Marketing Sites Act 1980;

            (iii)    failing to introduce amendments to the Trade Practices Act 1974 to implement the 2003 Dawson and 2004 Senate recommendations for reform; and

            (iv)    failing to act to reduce Australia’s dependence on foreign oil and improve its transport fuel security.

     (d)   calls on the Government to immediately conduct a feasibility study into a gas to liquids fuels plant in Australia, including:

              (i)    consideration of Petroleum Resources Rent tax incentives for developers of gas fields which provide resources for gas to liquid fuels projects;

             (ii)    examining a new infrastructure investment allowance for investment in Australian gas to liquids infrastructure; and

            (iii)    developing a targeted funding scheme for research and development in this area.

     (e)   calls on the Government to immediately embrace Labor’s Fuels Blueprint proposal to:

              (i)    make alternative fuel vehicles tariff free, cutting up to $2000 off the price of current hybrid cars; and

             (ii)    grant tax rebates for converting petrol cars to LPG.

      (f)   calls on the Government to immediately embrace Labor’s Fuels Blueprint to find more oil and use more gas by:

              (i)    re-examining the depreciation regime for gas production infrastructure; and

             (ii)    allowing the selective use of flow-through share schemes for smaller operators”.