Grant Chapman (SA, Liberal Party) Share this | Hansard source

I remind the Senate that we are debating the Petroleum Retail Legislation Repeal Bill 2006, because the chamber might have forgotten that, given the contributions that we have heard so far from the opposition benches. Senator O’Brien briefly referred to the bill and accused the government of stagnating reform in this area but then referred to a whole lot of measures that are quite irrelevant to this legislation. Senator Murray spoke largely about trade practices issues, which might have some peripheral relevance to the legislation, and Senator Crossin talked about high petrol prices and GST revenue. I will deal with those comments in a few moments. At the outset I want to congratulate Senator Stephen Parry on his election as Deputy Government Whip. I hope he enjoys his tenure in that office and I am sure that he will contribute very positively to the way in which this chamber operates. Congratulations to Senator Parry.

The legislation that we are debating this afternoon, the Petroleum Retail Legislation Repeal Bill 2006, opens the way for a new era in petroleum marketing because it paves the way for the introduction of the Oilcode. The introduction of this bill follows extensive consultation with the industry, industry associations and consumer groups, who all agree that the current legislation—the Petroleum Retail Marketing Franchise Act 1980 and Petroleum Retail Marketing Sites Act 1980—has become obsolete.

This 1980 legislation implemented what was known as the ‘Fife package’, after the then Fraser government minister responsible for its implementation, Wal Fife. As a then member of the House of Representatives who had previously worked in oil industry marketing management, I was involved in the consultation process that led to that legislation. It was much needed at the time to ensure a fair go for service station operators. However, to those who argue that this legislation should remain in place I say that it is well past its use-by date.

The retail petroleum market has changed substantially, and not just in recent years. The entry of Coles and Woolworths into the market during the past two decades has allowed substantial circumvention of both the intent and the letter of the 1980 Fife package. What made the Fife package obsolete was the introduction by the oil companies in the early 1990s of multisite franchising and the failure of the then Labor government to stop it—to amend the Fife legislation at that time to prevent multisite franchising, which was circumventing the intent of the Fife package. As an opposition senator at the time, I well recall calling for action on this front, but the Labor government simply sat on its hands. So I say to those who remain advocates for the legislation that we are repealing today—and this is worth repeating—it has been obsolete and ineffectual since the last Labor government allowed the law to be compromised by multisite franchising a decade and a half ago.

Subsequent marketing arrangements, in particular the developments with Coles and Woolworths, have simply built on that. That is why a new approach is required. That is why, after much consultation and negotiation, albeit not to everyone’s satisfaction, the Howard government is legislating the Oilcode through the Trade Practices Act. Labor sat on its hands and did nothing to give service station owners a fair go. The Howard government has acted—with the Oilcode.

I noticed, in his brief reference to the bill, that Senator O’Brien accused the government of stagnating on this matter. Over the years there have been entrenched differing positions between the retailers on the one hand and oil companies on the other on a few aspects of the Oilcode. Quite rightly, the government facilitated negotiations on those issues and allowed time for those negotiations to bear fruit. However, in the face of continuing disagreement, the government has taken the very difficult decisions on these aspects that have been in dispute and determined that it will mandate the Oilcode. That is why it has taken a considerable amount of time for this legislation to come forward—because, quite properly, the government allowed appropriate negotiations to be undertaken.

As I said at the outset, apart from that brief reference to the legislation, Senator O’Brien did not really address this legislation at all. He talked about excise issues and gas and coal to liquids, which he indicated that Labor had supported 20 years ago when they were in government, and then he accused this government of not doing anything about it. What did Labor do when they were in government to bring about some practical results as far as gas and coal to liquids were concerned?

As I said, Senator Murray referred to issues related to the Trade Practices Act, and they are certainly still under consideration. Senator Crossin, in her contribution to this second reading debate, talked about high petrol prices and then went on to talk about the increased GST revenue that was being generated as a result of that and the impact that that was having on people’s ability to cope. I remind Senator Crossin that if she is concerned about the revenue that is being generated by the GST she should talk to the Northern Territory Labor government, because they are the beneficiaries of the GST revenue. If there is some capacity for GST revenue to be used to relieve the effect of high petrol prices, which result directly from the fact that international oil prices are high, then it its within the capacity and the wit of the Northern Territory government to use some of its GST revenue to provide a rebate to petrol consumers and benefit them in that way. So, as I said, I suggest to Senator Crossin that she talk to the Northern Territory government if she is concerned about the amount of GST revenue that is being generated.

The concurrent repeal of the Fife package and the instalment of the Oilcode is undoubtedly essential to ensure greater transparency, accountability and national consistency in this radically altered market, which I referred to a few moments ago. Of course, the petroleum market is one of the most competitive in Australia. For these reasons, I strongly support this legislation. Support for the legislation was also recommended by the Senate Economics Legislation Committee, of which I am a member, in its report on the provisions of this bill that was tabled in the Senate on 11 May this year.

The entry of supermarket chains Woolworths and Coles into the retail petrol market has altered significantly the structure of the industry. Under the current legislation—the two pieces of legislation that this bill repeals—they hold a competitive advantage in the industry, free from the conditions that are currently placed upon the oil majors with regard to franchising. This has affected the industry to such an extent that the supermarkets now account for 50 per cent of all metropolitan sales. This has rendered the retail petrol sites of the major oil companies a dwindling market share, as they find it increasingly difficult to compete in a market in which they are put under exceptional restrictions on their business structures and the contracts they provide to their franchisees. The Senate Economics Legislation Committee concluded that it is difficult to justify the maintenance of one set of restrictions on a retail petrol site that may be operating directly next door to another site that is able to determine the conditions of its contracts under another completely unrelated piece of legislation. Through this legislation the Oilcode will be able to simply and uniformly create laws that are the most conducive to an open market performing at its optimum.

It follows that the legislation currently in place, which was developed, as I said, some 25 years ago, is no longer appropriate. Again, the Senate Economics Legislation Committee, considering changes to the industry’s structure since the introduction of the prevailing legislation, concluded that the different regulatory requirements of different market participants were unjustified. Indeed, we found that the most difficult obstacle to reforming the retail petrol industry was in reconciling the competing interests of the major oil refiners with those of the independent retail franchisees. The Howard government has provided a piece of legislation, which we are debating today, to take the necessary next step in reform of the retail petrol industry. It will provide greater flexibility for those in the market and ensure greater simplicity and efficiency, which will balance the different interests of the two parties by providing an atmosphere of competition that is similar to that experienced in other industries throughout Australia.

The most important potential benefit from the introduction of a bill affecting the sale of petrol is that it will reduce prices for all Australians. In the Oilcode, this is to be achieved through national terminal gate pricing, whereby the wholesale price of petroleum will be transparent whilst still able to be sold below cost. This will be consistent for all petrol retailers. It should put downward pressure on the price of petrol and retain competition through allowing all market participants to negotiate the price they pay for petrol.

Moreover, this legislation will address the continued insecurity that has occurred across Australia in relation to retail petrol sites, which have declined in numbers since the early 1970s. It is believed that the introduction of terminal gate pricing will have the secondary effect of ensuring the number of petrol retailers in Australia is at an optimal level, achieved through their capacity to remain price competitive or through their ability to retain a niche benefit for their customers.

I note some in the opposition have expressed concern that the potential for below-cost sales to those with greater buying power will result in a reduction in competition, as smaller operators may be forced out of the market. However, the introduction of the Oilcode will not undermine competition. Those sites that remain competitive will continue to be economically viable when faced with further industry rationalisation and the increased dominance of the supermarket franchises. Regardless of the introduction of this bill, the retail petrol market will continue to evolve according to market demand with regard to the sites of independent operators in opposition to larger retail franchises or the oil majors.

Indeed, it was the conclusion of the Senate Economics Legislation Committee that we risk seeing a decline in competition within this industry if reform does not occur, as Coles and Woolworths will be able to continue their ascendency within the market if left with their current competitive advantage. It was concluded by the committee that the oil majors, if faced with continued competitive disadvantage, will not have any incentive to stay in Australia. The distinct possibility arises that the majors would be forced to consider withdrawal from the market altogether. This would not only weaken competition within the industry, which would result in higher petrol prices; it would see a discontinuation of their interest in developing more efficient fuels and, through market withdrawal, result in a loss of refining capacity within Australia. This raises serious issues of energy security for the nation, and it is only fair that we ensure the market is free from disadvantage for any of its members by removing this outdated legislation.

The Oilcode contains appropriate safeguards to ensure all market participants are safe from their interests being compromised. Establishing disclosure statements when parties are engaged in fuel-reselling agreements will ensure that all of those in the retail petrol market are accountable. This will protect the interests of all independents and retailers by ensuring that both parties are accountable to the provisions of the agreement as specified within terminal gate pricing. This will level the playing field for petrol retailers, regardless of their relationship to the supplier, and will in turn provide an across-the-board solution to the current problems of inconsistency being experienced by our retail petrol sites, which are under different legal classifications.

Further safeguards have been put in place for all market players through the establishment of the independent, downstream petroleum dispute resolution scheme. This will provide consistency of outcomes for all retail petrol sites through the provision of an acceptable and affordable alternative to court proceedings. The dispute resolution scheme will protect the interests not only of those vulnerable independent retailers but of all retail sites equally.

The introduction of the Oilcode in an extremely competitive environment will provide an efficient mechanism to ensure all reselling agreements are honoured. The repeal of the current legislation and the introduction of the Oilcode will be a long-lasting reform for the retail petrol industry. It will provide a fair platform upon which businesses can compete and will improve competition by actively putting downward pressure on petrol prices. It will also allow the process of market rationalisation so that the industry will be able to perform at its optimal level. On this basis, I oppose the amendment that was moved by Senator O’Brien and commend the bill to the Senate.