Wednesday, 12 November 2008
National Fuelwatch (Empowering Consumers) Bill 2008; National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008
Debate resumed from 11 November, on motion by Senator Faulkner:
That these bills be now read a second time.
It is good to go back to exactly where we are. We are coming to the end of Fuelwatch—if you have seen The Castle, Fuelwatch has ended up heading straight off to the poolroom, straight off to the cabinet. Fuelwatch is going to sit up in the cabinet with GroceryWatch, with the war on obesity, with the war on binge drinking, with the education revolution—it is a very violent party, the Labor Party; a lot of wars and revolutions going on. We have the highest interest rates, the highest inflation and the record lowest consumer confidence—with a $10.4 billion expenditure of our surplus with no modelling. Now we have a motor vehicle package. I hope a bit more thought goes into the motor vehicle package. We have a deficit heading towards us. And the good news is that they have not even been in government for a year yet. This is the sort of government we have got. In the Labor Party poolroom are going to be all the adornments of what a marvellous government it is, what an absolute blessing to the nation this Labor government is.
It is interesting to go back through Fuelwatch. I was just having a bit of a read of the notes and looking at all the people who did not support it. The AAA, the RACQ, the RACV and the RAA in South Australia have all indicated that they did not support it. It was also indicated by the ACCC that figures for Perth motorists were based on buying petrol at prices greater than the average price over the cycle. What was Fuelwatch’s purpose? That is the question that is going to be finally left on people’s lips: what was the purpose of that exercise? The purpose of that exercise was the same purpose as the exercise that Mr Rudd used when he disclosed a private conversation with the President of the United States. The purpose of that exercise was purely and simply the media. That was it; that was the purpose of that exercise. The ramifications of that exercise are complete and utter embarrassment. I see Mr Dimasi from the ACCC waiting for the day when he can let the remnants of Fuelwatch slip into dark, distant memory.
What we can learn out of this Fuelwatch debacle is that we have to watch the Labor Party very closely when it comes to detail because they are lacking. When it comes to detail, when it comes to homework, they are very dangerous in how they actually go about spending our money and delivering a program for the nation. What we learned from Fuelwatch is that if the acumen that they deliver into that program is delivered into how they run the economy, if it is delivered into Minister Carr’s motor vehicle package, we will have the expenditure of funds for no outcome. We believe that we should have a strong and vibrant motor vehicle industry. We just do not believe for one moment, on the record that the Labor Party have presented so far, as ably displayed in the Labor Party pool cabinet, that they have any capacity to actually show diligence and efficacy in outcomes. The Australian people are going to start looking at the Labor Party pool cabinet, the trophy cabinet in the poolroom, and start asking themselves this question very soon: do these people know what they are up to? There have been so many reviews and programs and so much spin doctoring going on, but on delivery of an outcome that can be discernible, that can be attributable, that can actually show the nation benefit, they have not got one run on the board—not one. Not one thing can they show to the Australian people as a program that worked. But we have the instigation of a multiplicity of marvellous ideas. Anybody can come in here with marvellous ideas, but your capacity to govern is your capacity to deliver an outcome—not the initiation of an idea but an outcome of an idea. Not one outcome has this Labor government so far been able to present to the Australian people.
One outcome that we do have is that we started with a surplus in excess of $20 billion and we have now lost most of it. We are now heading towards a deficit. The Australian people are going to have to go to the marketplace to borrow the money to run a nation which was left in surplus. We will go into the most tenuous credit market in the world to borrow those funds. And think of the profligate waste of money! On 8 December money will be spent in lump sums that will appear in retail therapy, and everybody will be happy to get it. I am not denying for one moment that people are going to be happy to get it. But a lot of it will end up in poker machines and being spent on alcohol. In some areas of our nation, 8 December will be like Guy Fawkes night, the Fourth of July and Christmas all rolled into one. Unfortunately there will be the abuse of alcohol, the abuse of gambling and the assaults and everything that get rolled into that practice. I know because I will see some of it outside my window—I live next door to a pub.
This also is part of Labor Party management. They actually lack the acumen to see the social implications of some of their policies and exactly what happens next when the big lumps of money turn up in certain bank accounts in one fell swoop. This also is a reflection of the lack of Labor Party planning. After the money has been squandered on 8 December, the thought that the people of Australia will have to go to the market to borrow back the money I find absolutely incredible. But it fits well with Fuelwatch. If someone said, ‘Describe the Labor government to people from another nation, another planet,’ I would say, ‘Fuelwatch. That is the Labor Party.’ That is them to a tee. They think it is a marvellous idea, but they have absolutely no conviction whatsoever to bolster the powers of the Fuelwatch commissioner so they could actually do something. It was all rushed, with the ridiculous situation whereby people had to work 36 hours straight towards the delivery of a program with no efficacy or modelling on what the outcome was going to be. Then there was the huge charade, the absolute rubbish of a launch, with all the earnest faces that said, ‘Look at us bringing the price of fuel down.’ That was so insincere when you actually got behind and saw that they did not do the homework. That is the issue that I hope the Australian people start connecting to. The Labor Party do not do the homework. They can spend half the nation’s surplus without doing the modelling. I believe that if you ask them right at this moment, you would find that they still have not done it. This is the sort of management that is now running our nation. The results are so clear.
We are heading towards a deficit. We now have one of the highest inflation rates in recent history. We are now heading towards record growth in unemployment. We now have one of the lowest levels of business confidence on record. We have interest rates at their highest levels on record. That is certainly a quantifiable and salient picture of Labor Party management. It cannot be attributed to anybody else. If they say that it is unfair, you only have to balance it up with Fuelwatch. And the next fiasco tearing down the path towards us is GroceryWatch. You would think after you made one complete and utter botch up of a job that you would be smart enough to curtail the embarrassment and not continue down exactly the same path in another field. But, no, not only have they botched up the job, they have the arrogance to not be able to reflect on what they have done and improve the process.
Fuelwatch today will be taken off to the poolroom to be stored in the trophy cabinet where it will gather dust and be an item of ridicule. Slowly, that Labor Party trophy cabinet in the poolroom will fill up to such an extent that the people who come to visit will ask: do these people know what they are on about? This sort of banal and kitsch policy, which it is, will be seen clearly as the emblem of Labor Party government. The honeymoon is over today, ladies and gentlemen, with the purposeful burial of Fuelwatch. It will be interesting to hear the requiem that is now going to be sung by the Labor Party about the proposed benefits or losses to the Australian people for what could have been had things been different. What any person looking at this has to ask is: why would things be any different when the planning was so completely lacking?
Mr Walker is a classic endorsement of the Fuelwatch package. He was the person in charge of it and he bolted. That is the ultimate indictment of the package. The boss was appointed with such lauding and fervour and one of the first things he did was to run for his life because it was an absolute and utter mangy dog. This has to be seen. But, no doubt, Mr Bowen is going to come up with some other political fascinator to be worn on his head in the near future. We will wait for that and we will treat it with the same contempt with which we treated Fuelwatch.
I heard Senator Joyce commence his tirade last night, and I thought it was a bit flippant, a bit lightweight and a bit without substance. Well, it did not get any better this morning. Here is the National Party criticising the government’s economic capacity. Let me tell you that the nation will not be running down to put money into poker machines, they will not all be getting drunk and they will not all be fighting outside the pubs. Our economic security package is there for hardworking families in this country. I think it is an absolute disgrace for Senator Joyce to come in here and flippantly run those tired old lines that people cannot look after themselves and they should not have access to the government security package. Listening to Senator Joyce this morning, you would think that nothing has changed in the world, that we are still in the middle of an economic boom and that there is no economic crisis or no failed banks around the world. Senator Joyce continues with the same claptrap that he went on with for the 11½ years that the Libs were in government.
I will now turn to the National Fuelwatch (Empowering Consumers) Bill 2008. I appreciate the opportunity to participate in this debate. This is an extremely important bill that will provide significant benefits to the Australian public. The public are entitled to get some access to information on where the cheapest fuel is; it should not be just the public who do not have access to information. Fuelwatch will go directly to the problem of the lack of information available to consumers. It will provide detailed information to consumers. It will not leave us with the current situation whereby the only detailed advice or information on petrol prices belongs to the producers, the wholesalers and the retailers. This inequality of information is described in economic terms as ‘information asymmetry’. We did not hear any argument about this economic issue from Senator Joyce; we just heard a flippant rant about the government. Joseph Stiglitz, who won the 2001 Nobel prize for his work on information asymmetries in the market, put it this way:
Efficiency requires that information be freely disseminated. The private market will often provide an inadequate supply of information … there are various market failures associated with imperfect information …
That is exactly the position that the Australian public find themselves in in relation to fuel. The public do not have access to the breadth and depth of information available to the big oil companies, the wholesalers and the retailers. Yet we are going to see Liberal senators get up and argue that the public should not have access to information while their mates in big business, their Maserati-driving mates who do not need to find cheap fuel, have better access to information than the Australian public do.
The public are expected to predominately rely on petrol station billboards—that is the Liberals’ answer to Fuelwatch—which requires the visual sighting of a number of billboards at different petrol stations to establish the lowest price amongst that range of petrol stations. That is what the Liberals are saying to the Australian public: you depend on the billboards and let the retailers and big business have access to minute-by-minute information on petrol prices which you will not get. The public have to rely on an extremely inefficient, time-consuming and—for most of the public—frustrating exercise to find cheap fuel. During a Senate Economics Committee inquiry the cheap fuel day was described as ‘magic Tuesday’. Nobody could explain during any of the committee hearings that I was involved in how magic Tuesday worked. Magic Tuesday, in my view, is a manipulation of the market. It gives big business a very big incentive to make sure petrol prices stay high. Nobody could explain to me whether magic Tuesday was about black magic or white magic. Everybody knew magic Tuesday was there, but nobody could explain how it worked. Yet the Liberals want magic Tuesday to stay. I do not want the Australian public to have to face magic Tuesday, the black magic of big business, supported by the Liberals, keeping proper information from the public.
It is interesting to note that the Australian Competition and Consumer Commission have commented on this information asymmetry and its potential to distort the market in favour of the petrol industry. The industry uses a private company, Informed Sources, to provide instantaneous advice on movements in petrol prices to it. Using Informed Sources is an extremely expensive proposition that is beyond the reach of the general public and even a lot of businesses within Australia. Evidence was given to the committee in Rockhampton by Mr Steve Marshall of WIN Television—and WIN Television would not be the poorest lot around and not the poorest company in the country—that the cost of obtaining price information was extremely high. WIN Television wanted to provide a community service in the Rockhampton region. They conducted their own surveys. But Mr Marshall told the Economics Committee it was going to cost ‘an extraordinary amount of money’ to pay Motor Mouth, which is a subsidiary of Informed Sources, to collate that information for WIN Television. He said they were quoted $50,000 per year per market to get access to the information that is available to big business. All WIN Television wanted to do was provide that information to the community of Rockhampton. As WIN Television cover five Queensland markets, it would have cost them $250,000 to participate in the Informed Sources program.
This demonstrates that, if you have money and power, you can participate in the Informed Sources program to give you an advantage in the market. That is what the Liberals are going to stand up here today and support: an advantage for big business, an advantage for the retailers and a disadvantage for ordinary Australians. If you are an ordinary consumer, according to the Liberals, you are to depend on the billboards. But if you are one of their big business mates, you can spend money and get access to the computer technology that lets you manipulate the market. If you are a small independent petrol station operator and you cannot afford to participate in the Informed Sources program, you have to either hope for the best or seek to conduct your own local survey of prices at significant cost to your small business.
This is not a good system. This is a system that the Liberals wanted to continue. This is a bad system. It is a system that provides benefits to the business users of Informed Sources and, in my view, disadvantages Australian consumers. This is what the government wants to fix. We want to deal with it in an economically credible manner. We want to deal with the information asymmetry. We do not want to deal with the rant that we heard from Senator Joyce. The unfair advantage that business has over consumers has prompted the ACCC chairman, Graeme Samuel, to comment on the current system. He said that while the use of Informed Sources information by large retailers was not illegal—and I say that in inverted commas—it could be described as being as close to illegal collusion as you can get. So what do the Liberals want? They want ordinary Australians to depend on the billboards, and they want their big business mates to have access to illegal collusion to disadvantage ordinary Australians. Fuelwatch will move the retailing of petrol from a system which is close to illegal collusion to one which is open and transparent for the Australian public. Why should the Australian public not have an open and transparent system? Why should the Australian public not have access to the same information that big business has? Do you know why? It is because the Liberals do not want the Australian public to have access to that information. It is an absolute disgrace.
Concern has been raised about the 24-hour rule, which requires companies to lock their prices in for 24 hours. There has been an argument put that this would be anticompetitive and that it would distort the market. There was no substantive argument put to the committee in support of this unfounded proposition. The people who argue this proposition are the same people who take advantage of the collusion that now goes on in the industry at the expense of ordinary Australians. I expect it is also supported by the mates of big business on the other side, the Liberal Party. To the contrary, on this proposition, evidence from the ACCC, the NRMA, the Western Australian Department of Consumer and Employment Protection, Professor Wang and Commerce Queensland supported the 24-hour rule. The NRMA said:
By having to quote fixed fuel prices for a 24 hour period, petrol retailers will have to make better judged and more competitive choices on fuel prices.
Thus the pressure comes back onto the retailers, not the consumers. Professor Wang, an international expert on fuel prices, said:
The disincentive to be the first to hike price is much greater under the 24-hour-rule. Without the rule, the price leader for a cycle knows that once its price is hiked, other firms can respond very quickly (within hours) by hiking their prices as well. If other firms do not respond quickly, the price leader can quickly retract its price hike to avoid losing much market share. However, under the 24-hour-rule, after a price leader hikes its price, other firms cannot respond within 24 hours. The price leader has to lose market share for an entire day—it cannot retract its price hike either.
Senator Joyce’s rant this morning suggested that we were not dealing with economic reality. The economic reality is that the Treasury, via evidence from its executive director, Mr Jim Murphy, has clearly said that it is in support of the need to provide consumers with some counterbalance to the unfair advantage that petrol retailers have by their use of Informed Sources. So it is collusion. It is an unfair advantage. That is what the Liberals are standing up to support this morning: maintaining a position that disadvantages Australian consumers. Jim Murphy, from Treasury, said this:
Realistically, if you want to get the best deal you can for Australian consumers, you have to start looking at getting pressure coming, at the grassroots level in my view, from consumers to be seeking out the best prices for petrol. Hopefully they will then put pressure on the retailers to actually compete more aggressively in the supply of petrol. The only way you can do it, given the introduction by the retailers of this informed sources device or mechanism, is to actually try to redress that and get an energetic consumer awareness out there.
How do you get energetic consumer awareness out there? How do you try and get this disadvantage against consumers dealt with? You do it with Fuelwatch. If there are other issues that are problems in the industry, they should be raised and dealt with, but what we can do immediately, in the short term, is to even up the disadvantage that ordinary Australian consumers have against big business in this country in the retail petrol industry and give them access to the same information that is available to big business.
I am sure we will hear the same refrain from the Liberals here this morning about the econometric modelling, so let me turn to that. Opponents of Fuelwatch have asserted—in the absence of any evidence—that the scheme led to higher petrol prices in Western Australia. The reason for this assertion was never put in a proper manner to the committee. The reasons were never stated. In the face of the criticism, the ACCC conducted a model of the Fuelwatch scheme to test the assertions that had been put by those opposed to putting more market information in the hands of the consumer. The overall conclusion of not only the ACCC study but also of the analysis done by Professor Harding, Professor Davidson, Access Economics and Concept Economics, is that, since the Western Australian Fuelwatch scheme was introduced, the average retail margin in Perth relative to other mainland capitals had fallen. This was the evidence that was put forward, and what the Liberals want to do is to deny consumers access to the information that is paid for by big business in order to give them an advantage over ordinary Australian consumers. It is an absolute outrage.
It was clear that the wild fluctuations in fuel prices that had characterised the petrol market in all the capital cities no longer existed in Perth. So what the econometricians really argued about was whether Fuelwatch, some other factor or a combination of factors contributed to this highly beneficial phenomenon in Perth. Let me tell you what we heard from some of the econometricians in their arguments to the committee. They said that Perth is just different from the rest of Australia.
It might have been their strongest point. They said that Western Australians think differently to Victorians; that Melbourne is in a valley and Perth is not; that Melbourne is the home of Coles Myer; that the introduction of the GST had had different effects in WA than it had in the rest of the country; that there is only one refinery in Perth; and that Perth is closer to Singapore than the rest of the country is. The committee was left to determine what effect any of these factors have had in WA, if any.
The ACCC found that the introduction of Fuelwatch in WA had had the effect of dropping the retail margin by 1.9c per litre. The ACCC’s conclusions are supported by Treasury, which found their methodology ‘reasonable, valid and robust’. Professor Joshua Gans described the ACCC’s work as ‘a far more rigorous investigation of the WA scheme than anyone had ever done’. These were the facts that were before the committee, and all the support for big business to have an advantage over Australian consumers will not hide the facts about the need for the Fuelwatch scheme for the benefit of ordinary Australian consumers. If the Liberals want to protect their big business mates, they should be upfront about it. Do not hide behind some crook econometric modelling. Do not hide behind an argument that says this is bad for consumers. Because none of those points can be sustained. None of those points were argued with the committee. This is a good thing. Fuelwatch will be good for the economy and good for consumers. It will fix up the information asymmetry in the industry and give ordinary Australian consumers a good old Australian fair go. (Time expired)
It is apt and fortuitous that the Senate is discussing the National Fuelwatch (Empowering Consumers) Bill 2008 and related legislation on the eve of the first year of Rudd Labor. It is apt because the Fuelwatch legislation typifies Rudd Labor’s first year in office, and it is fortuitous we are debating it because it allows us to summarise the ever-emerging flaws in Rudd Labor. When people think of Rudd Labor they think of overpromising and underdelivering. They think about spin over substance.
They think about the abuse of the Public Service for political purposes. They think about the manic prime ministerial behaviour. They think about policy based evidence rather than evidence based policy. And they think about abuse of parliamentary processes. Fuelwatch is all that and more, wrapped up in this one packet of legislation.
During Mr Rudd’s desperate attempt to win the election, he made promises to the Australian people he must have known he could not keep. Mr ‘I feel your pain’ Rudd told Australians he would reduce petrol prices for them. He has not. The only way he could have done so would have been by reducing the excise tax, but the only positive move to reduce petrol prices was deliberately rejected by Mr Rudd and Labor.
Thank you, Mr Acting Deputy President. We are not at Trades Hall at the moment. So, despite all the electioneering and promising of reduced petrol prices by Labor, it is only the coalition that has a decisive plan to reduce the burden of petrol prices for pensioners, wage earners, small business and, indeed, everyone.
Opposition senators interjecting—
The Acting Deputy President:
Order! Senator Abetz is entitled to be heard in silence.
Mr Rudd promised to reduce petrol prices. He has not. Labor has failed and broken this fundamental pledge, like Labor has done with grocery prices. So Mr ‘I feel your pain’ Rudd has failed to provide pain relief through price relief at the bowser. The coalition has the plan and the will to ease the burden.
Another hallmark of Labor is the triumph of spin over substance, and Fuelwatch is the exemplar of spin over substance. First we were told that Fuelwatch would reduce petrol prices by 1.9c per litre. Then it was to be 2c per litre. Then we had the hapless Fuelwatch commissioner—remember him?—saying it would be 5c per litre. Then we were told Fuelwatch was not even about reducing petrol prices. And then we had the Treasurer, in a most desperate and quite pathetic effort, claim that savings of $10 per tank, or 20c per litre, could be achieved. And all these quite ridiculous and misleading claims were made in the face of all the evidence clearly indicating the contrary and, indeed, suggesting that prices would increase under Fuelwatch.
So overtaken by spin were Labor that they spent $100,000 of taxpayers’ hard-earned funds to develop a logo for Fuelwatch—before it was even passed through this place. Before the legislation was passed, they arrogantly concentrated on getting a slick logo to help us overlook Fuelwatch’s failures. I could have saved Labor that $100,000, because a perfect logo for Fuelwatch would have been the visage of Mr Rudd wearing a dunce’s hat with a big ‘F’ on it—F for failure, F for fatally flawed, F for foolish or F for ‘foolwatch’! Take your pick, the logo would be a great and accurate descriptor.
Throughout this disastrous process, we also witnessed the shameful and unacceptable abuse of the Public Service. We had Treasury trying to advocate for Fuelwatch before the Senate Standing Committee on Economics when we know that they, along with three other senior economic departments, had advised the government against Fuelwatch because it was so badly flawed. But Labor forced these public servants to appear before committees to support Fuelwatch against their advice to the government. They also forced individuals in Treasury to work 37 hours around the clock to get this legislation ready for tabling. Why? What was the urgency of it? We still do not have an answer despite that question being raised at Senate estimates.
Why was it done? It was done to answer the coalition’s popular and highly regarded budget response to reducing petrol prices. Mr Rudd unconscionably forced Treasury and other officials to work 37 hours straight in a pathetic attempt to regain the political agenda. There was no imperative other than Mr Rudd’s partisan political agenda. It was an abuse of the Public Service, which is totally and utterly unacceptable. This behaviour links in with Mr Rudd’s quite bizarre and manic predisposition. Why would any self-respecting Prime Minister make such a bizarre and manic demand of his Public Service to prepare, in 37 hours straight, that which the department itself had recommended against? It was simply for politics and for no other reason.
What was the reason the departments recommended against Fuelwatch? The evidence did not support the policy. Having promised evidence based policy during the election, Labor again broke faith with the Australian people and embarked on Fuelwatch, deliberately ignoring the wealth of evidence against it. In desperation, Labor even abused the parliamentary process of the Senate committee system. We got an urgent interim report in August because of an alleged urgency to get this report out to the community. That was in August. And here we are, three months later, debating it. The government could have brought this legislation on for debate in August if they had wanted to, but they did not. They made bureaucrats work 37 hours straight to get the legislation ready—because it was so urgent it had to be rushed—and now we have had a hiatus of three months. What happened to the urgency?
Even more concerning was the maltreatment of witnesses and the deliberate misquoting of evidence in the Senate economics committee report. Labor did not cherry-pick the evidence; they manufactured it. Witnesses wrote into the committee complaining of exactly that. It was not only the Australian Institute of Petroleum—who you might think may have had a vested interest—that made a complaint. The respected Royal Automobile Association of South Australia made a similar complaint. If there is one thing the Royal Automobile Association of South Australia are concerned about, it is representing the consumers—the petrol buyers—in South Australia. And they themselves were moved to write to the Senate committee to object to the way that the evidence had been mishandled, mistreated and, I would say, distorted. Although urgency was claimed in relation to bringing down the interim report, the final report was tabled two weeks after it could have been tabled in this place. There was no explanation from Labor as to the reason for that, and I think the Senate is entitled to one. What all this highlights is that Labor will stop at nothing to pursue their flawed agenda.
Let us now turn to Fuelwatch proper. This $21 million impost on Australia’s taxpayers will, if anything, increase petrol prices and not reduce them. Indeed, the one independent fuel provider quoted by Labor senators in the Senate economics committee report into Fuelwatch said that he favoured Fuelwatch—and that is where Labor stopped the quote, of course. They did not go on to tell the readers of the report why this independent vendor of petrol supported Fuelwatch. And do you know why it was? It was because Fuelwatch would increase his margins; he would make more money out of Fuelwatch. But the Labor senators deliberately cut and pasted the quote to make it read as though there was an independent fuel provider who actually supported Fuelwatch. The only one who supported it did so on the basis that he was of the view that he could make even greater profits. Who do you think would bear the consequence of that? The petrol-buying public of Australia—the consumers of Australia. That is why I compliment Senator Xenophon on his very strong stance against Fuelwatch. If there is one state and one lot of consumers in this country who would suffer very heavily under Fuelwatch, there is no doubt that it would be South Australia and the petrol buyers of South Australia.
The one place where Fuelwatch does operate, Western Australia, has been unable to provide any proof that there is in fact a reduction in price in that state. What is more, when we as a committee were over there in Western Australia asking questions of that department, they admitted as much. They agreed that they could not point to a price reduction for Western Australian consumers as a result of Fuelwatch.
I must say that the conversion of the ACCC to supporting Fuelwatch after years of opposition and ridiculing of Fuelwatch smacked of the adoption of the government’s agenda. To change their mind so conveniently around the time of the change of government in November last year does not build confidence or trust in the ACCC’s objectivity. Indeed, if we accept their evidence now, it leaves big questions over their previous advice to the Senate committees.
They cannot have it both ways. I can accept that they have come to this view and have now been converted along the road to support Fuelwatch, but what it shows is that all their previous reports and discussions on Fuelwatch have been flawed. As a result, one has to question the robustness of the way that they approach their business—and that is the point that I am seeking to make.
Confronted with the ACCC’s new approach, we have to balance against that four independent Public Service departments that all recommended against it. And, of course, now, thankfully, Senator Carr has stopped his interjecting, because I am sure he would have been at the cabinet meeting where those four departments’ recommendations against Fuelwatch were presented. Despite all the evidence against Fuelwatch, he and other Labor ministers in cabinet voted for Fuelwatch for one simple reason. It was for politics—for the spin—not the substance, because cabinet ministers were told by their own departments that there was no credibility to the claim. Then, of course, on top of the view of the four departments, you have got such distinguished people as Professor Don Harding, Mr Henry Ergas and Associate Professor Frank Zumbo—whom I see in the gallery and who has shown very real interest. When you combine all that evidence, and the late conversion of the ACCC as the only ones who actually support Fuelwatch, I confess that I do have some questions about the way that they have arrived at their conclusion.
But, above all, Fuelwatch would be, without any doubt, anticompetitive. Retailers could not reduce their price for 24 hours because, if they did, they would be fined. How could that be of benefit to Australian consumers? Of course, it would not be. It cannot be and it never will be. Fuelwatch will overwhelmingly hurt the small independent operator and the small chains. Interestingly, the supermarket chains seem quite comfortable and relaxed with Fuelwatch. Yet Mr Rudd disingenuously inserts into the public debate that somehow the opponents of Fuelwatch are the friends of big oil. I can tell you that the Senate Standing Committee on Economics heard time and time again from independents and the small chains that they were opposed to Fuelwatch and the big companies told us that they could live with Fuelwatch. Who is on the side of big oil? But, once again, it is all about spin—say whatever you like and hope you can get away with it. That is where the importance of these Senate committees comes in, because we can unravel the spin and get to the substance. What we have done in this case is expose the huge flaws in Fuelwatch.
The legislation will impose penalties—and this is interesting—as of 30 November 2008 on those retailers not providing price information. Today, if I am correct, it is 12 November. There are 18 days to go before its implementation, and the small operators will have to be set up for that. I hope, without reflecting on or suggesting the way the Senate will vote, that this will not happen—and I suggest to the Senate that it cannot happen. Interestingly enough, though, Labor have got a logo in place but not the mechanics to make it work. So they have got the spin in place but they do not have the substance in place. That is the hallmark of the Rudd Labor government—spin above substance each and every time.
It is time for Labor to level with the Australian people. Labor should say they should never have made their promise about reducing fuel prices—a promise they knew they could never keep. They should also acknowledge that all this Fuelwatch nonsense was about trying to create an impression of taking action rather than actual action. Labor should admit their spin contained no substance. Labor should repay the Australian people the $100,000 wasted on developing a logo for Fuelwatch.
Hopefully, today, Fuelwatch will be laid to rest. Fuelwatch has been running on empty now for a very long time. Labor, still sitting at the wheel, despite the needle being on empty, think they can still drive this vehicle. Well, it has been on empty for a long, long time, and I think later on today, hopefully, we will see Fuelwatch coming to a spluttering halt. That is what happens if you keep trying to drive on empty for too long. That is a lesson that I hope Labor will learn from this exercise. The people have a right to be angry with Rudd Labor. They are right to be angry over the electoral deceit, the spin, the waste of money, the abuse of the Public Service, and the overpromising and the underdelivering.
I conclude as I began: the exercise of Fuelwatch provides us with a great insight as we approach the first anniversary of the Rudd Labor government. It provides us with an insight as to how Rudd Labor does business: overpromise and underdeliver. Spin first; do not worry about the substance. If need be, abuse the Public Service. If need be, for your political agenda, abuse the parliamentary processes. If need be, manufacture the evidence. If need be, have policy based evidence rather than evidence based policy. This has become the hallmark of the first year of Labor in office, and Fuelwatch embodies all those fatal flaws of Rudd Labor. That is why, sad as it is that the Senate has to be debating Fuelwatch, it does provide an excellent window into the operations of Rudd Labor. Fuelwatch is a dud and should be opposed. (Time expired)
I rise, proudly, in support of the National Fuelwatch (Empowering Consumers) Bill 2008 and the National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008. As a Western Australian, I believe I can speak with some authority on the intent of these bills. The reason for that is that Fuelwatch has operated in metropolitan and regional areas in Western Australia since January 2001, so we have had almost seven years of comprehensive experience of how Fuelwatch operates and the benefits it provides to consumers in Western Australia. Fuelwatch in Western Australia was introduced by the Court Liberal government in response to a select committee report. Since that time it has been supported by both the Gallop and Carpenter Labor governments and it will be maintained by the Barnett Liberal government.
So how does Fuelwatch work? At 2 pm petrol retailers are required to provide a price at which they will sell petrol the next day. At around 4 pm that information is available on a website. Fuelwatch also operates a personalised email service. On evening news bulletins, information on the cheapest petrol prices and the suburbs that have the cheapest petrol prices is listed for viewers. The information is also available regularly and readily on radio, and the next morning the daily paper also lists the daily petrol prices. It is an extraordinarily popular scheme. Why? Because motorists know what petrol prices will be for that day. If there is going to be an increase, they have 14 hours to decide whether they need petrol and to take advantage of the lower price. Consumer surveys have reported that over 90 per cent of Western Australian motorists are aware of Fuelwatch. A Royal Automobile Club of WA—the RAC—survey shows that 57 per cent of motorists use the service. Over 32,000 motorists receive daily emails on petrol prices. The point is that almost all motorists are generally aware of the range of petrol prices on any given day.
Much has been made about how supplying pricing information to motorists will lead to a reduction in competition, but that has not been the experience in Western Australia for the last seven years. Pricing information in the eastern states is available but you have to pay for it. Large petrol retailers subscribe to a company called Informed Sources, which collects information on petrol prices in defined geographic areas. Updates are then provided to large retailers several times a day. Informed Sources was not willing to disclose the cost of collecting data on retail prices throughout the day or what it charged its clients for the service. I would imagine that it is rather an expensive service. Apparently the company relies heavily on people driving from service station to service station to get the information. So what we have are large petrol retailers with information on competitors’ prices throughout the day. If their competitors are cheaper, they drop their prices. But what if their competitors have a higher price? Do they maintain the price advantage they have or do they make a decision to maximise profit? It is a fair question that is difficult to answer because petrol prices can change throughout the day.
I understand it is common for someone who is looking for the best price on their way to work to find that the same retailer is not the cheapest on their way home. Receiving updated information on petrol price fluctuations throughout the day is not an illegal practice; however, the ACCC has described it as being ‘as close to illegal collusion as you can get’. Fuelwatch, by comparison, will provide retailers and motorists alike with up-to-date and accurate information on petrol prices in their particular suburb. The information would also be available to independent retailers who, I understand, are not regular subscribers to Informed Sources. It is my understanding that independents drive around a few times a day and do their own research on local competition. However, by far the greatest advantage is that Fuelwatch will provide motorists with information on what petrol prices will be tomorrow, not what they were half an hour ago.
There is considerable merit in a national Fuelwatch scheme. The Senate was not so sure about that and referred the matter to the Senate Standing Committee on Economics back in June 2008. Unusually, the committee was told not to report until 29 September 2008, and that report was tabled around the middle of October. The report properly recommended that the Senate support the introduction of a national Fuelwatch scheme. It also recommended that a review of the scheme be undertaken 12 months after its introduction and the data collected by Fuelwatch be released to independent academic researchers.
But, in what has become common practice, those opposite have chosen to issue a dissenting report. Their main opposition to the plan is that watching fuel prices will not bring them down. What an obvious comment to make. What an obvious theme to have in their report. Clearly the opposition do not understand the intent of the bills, which is to provide consumers across Australia with information on the price of petrol at each service station in the metropolitan and major regional areas every day.
The value of the scheme comes from its utility. The utility lies in the fact that every evening on each of the major news bulletins there will be 30 seconds in which the price of petrol by suburb and by retailer will be disclosed. The price will then be fixed for a 24-hour period so that we as consumers will know that, for example, tomorrow the cheapest fuel will be available from Caltex in Belmont. The utility, the drive, lies in the disclosure. Disclosure leads to price competition, price competition leads to consumer choice, and consumer choice leads to maximisation of welfare. The benefit of disclosure is that it is an aid to effective price competition. Consumers will be able to ask the most obvious of questions: why? Why are petrol prices 20c a litre higher in an outlet 300 yards away from another? Why is there a 20c a litre differential? This in turn will require responses from major wholesalers and fuel companies to justify to the public their price settings and margin settings. Again, it will assist in the elimination of hyperbole, disinformation, misinformation and outright lies about a product critical to industry and households alike. The bills will also give compliance and enforcement powers for the scheme to the ACCC.
There are many critics of this scheme. They are found only on the benches opposite. However, there is no—and I quote from the dissenting report—‘overwhelming evidence that it provides a greater certainty of higher prices’. The truth is that price volatility does not equal competition, that weekly price cycles cannot guarantee motorists get the best price if they fill up on a Tuesday and that supermarket shop-a-docket discounts have not led to a measurable increase in competition in petrol prices. I quote from the dissenting report:
The evidence also suggested that a national scheme would adversely affect the position of independent retailers, making the market less competitive.
The truth is that there is the same percentage of independent retailers in the Perth market as in other capital cities and that they are not disadvantaged by fixing petrol prices for 24 hours. Motorists and independent petrol retailers in my home state support Fuelwatch and want it to continue. And, in the Western Australian experience, the Fuelwatch scheme has received for the last seven years, with different governments, bipartisan support.
Coalition members recommend in their dissenting report that the bills be opposed. My question to those opposite is: why is it only motorists under a Liberal government that are permitted to enjoy the benefits of a Fuelwatch scheme? This is a scheme that will empower motorists to make informed decisions about where and when they fill up their cars. It will increase the reliability and certainty of fuel price information for motorists every day of the week, and it has done so every day of the week for the last seven years. It will also provide motorists with information that in most Australian cities is only available to large petrol retailers.
In summary, Fuelwatch is a scheme that was championed by the Court Liberal government in 2000. It was supported by the Gallop and Carpenter Labor governments. And in the lead-up to the last state election, barely two months ago, Mr Barnett—now the Liberal Premier for Western Australia—said he would not tamper with the existing state Fuelwatch scheme. As late as 3 October 2008, the daily paper in Western Australia reported the Liberal state Treasurer as saying that he had received advice from his department, the Department of Consumer and Employment Protection, that Fuelwatch in Western Australia was working successfully. He went further and said to the West Australian that allowing petrol stations to lower their prices on the same day to match those of their competitors would ‘undermine the integrity’ of the system. He also said:
What Fuelwatch does is provide information to consumers to allow them to make decisions as to where they buy their petrol …
That is precisely what the national scheme is intended to do, it is precisely what the national scheme wants to do and it is precisely what the national scheme, if enacted, will do. It will provide information on a website and through reports in the media on the price of petrol for the next day. It will allow consumers to identify when and where to buy fuel at the lowest price.
It is incomprehensible to argue that competition will be eroded by fixing the price of petrol for a 24-hour period. It is incomprehensible to argue that a motorist who stumbles across a retailer offering a lower petrol price at, say, three o’clock in the afternoon is participating in a competitive process. Fuelwatch will provide a competitive environment because it will allow motorists to buy the cheapest petrol at the cheapest petrol stations at the cheapest times. You cannot ask for a better scheme. There will be no guesswork involved in picking the best time and place to get the best price. Fuelwatch is not a silver bullet that will lower petrol prices, but it will ensure that drivers do not pay one cent more than they have to or one cent more than they choose to. The government has committed to a review of the effectiveness of the national Fuelwatch scheme after 12 months. I am betting that consumers across Australia will be as supportive as those in Western Australia. I commend the bills to the Senate.
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.
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.
I rise today to comment on the National Fuelwatch (Empowering Consumers) Bill 2008 and the National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008, which concern the Fuelwatch scheme. I note that the basis on which Fuelwatch was proposed was increased petrol prices in Australia. For the 20 years that I have been in politics, every time fuel prices go up governments rush around and announce yet another inquiry into fuel prices, and that inquiry comes out with a whole range of recommendations and very little ever happens. The main reason for that is that you can run around all you like and have as many investigations as you like into fuel prices—and I have absolutely no doubt that there is manipulation in the market to a certain degree—but the underlying driver of increased fuel prices is the increasing price of oil at a global level and the underlying driver of that is that the world is running out and has already run out of cheap, easily accessible oil.
Global oil, in my view, has peaked. That is not to say that it has run out. It is saying that from now on extracting oil globally is going to become more and more expensive as the explorers have to go into deeper water, more difficult terrain and, of course, have to deal with the extreme weather events of climate change, which we have already seen in terms of reduced field capacity, especially when you have a look at what is happening in the Caribbean as a result of extreme storms, cyclones and the like. The issue is, as the International Energy Agency said recently:
The future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.
In my view, Fuelwatch is actually fiddling while Rome burns. We need to deal with the fact that Australia is no longer self-sufficient in oil. We are already importing more than 50 per cent of the oil used in this country, and it is to the detriment of motorists and farmers. You only have to look at the increased price of petrochemical fertilisers to see the impact on agriculture and the flow-on effects to food prices. There is the whole dependence of the working fleet in Australia—whether it is in agriculture, fisheries or whatever it is—on petroleum based product. We are now in a situation where Australia has lost its independence in terms of energy security and we, just like the Europeans, are reeling from the fact that we are not sustainable or self-sufficient. We are now dependent on what is out there.
We had the oil inquiry, which I initiated when I first came into the Senate in 2005, to look at Australia’s future oil supplies and alternative fuels because at that time it was obvious to me that this dependence on foreign oil was a bad thing not only for climate change and our dependence on oil products but also for Australia economically. We had, at the time, ABARE telling us that it did not matter because Australia could always buy oil on the global market and that we could be net energy positive because of our gas supplies. To an extent that is true in terms of the exports but it does not alter the fact that, when you import that much foreign oil and are vulnerable to the machinations of the oil supply globally, you are going to end up in this scenario.
Fiddling around with a scheme that is just to give motorists a more informed choice is really not delivering on the critical issue, which is: what are we going to do to get off our dependence on imported foreign oil, which is also driving up our greenhouse gas emissions? That is what we should be doing. That means that the government should have a national energy and transport strategy that gets Australia off its dependence on foreign oil and makes a significant contribution to our targets, which we have already under Kyoto but also under a post-2012 scenario.
The first thing the government should be doing is looking at the issue of urban design and how we might redesign and rethink our cities and convert them into urban villages linked by rapid mass transit. Then they should look at our national transport system to get off our dependence on road based transport and get our freight onto the rail networks. To do that we have to spend money through Infrastructure Australia. We need to get our north to south, eastern states freight rail link in place and fix up the bottleneck in Sydney.
We need to consider the fact that aviation fuel is one of the few fuels that, at the moment, is not substitutable with anything else and that we are going to see increased prices for aviation fuel. We saw it in the price spike earlier this year and it is going to come again. That means that we need to start looking in Australia at building, particularly between Sydney and Canberra, for example, the kind of fast rail networks that you have in Europe. It is a logical thing to do.
When we look at rescuing the car industry we need to not only go with a strategy of electrifying the car fleet and moving to plug-in hybrids, which I support, but also look at building public transport systems. We need to be actually building those systems and rolling them out in Australia as part of a national transport strategy. When the fuel prices went up, people went to get out of their cars and onto public transport, but the public transport was not able to do the job because it has been run down over a long period of time. People will use public transport if it is safe, clean and efficient. At the moment, depending on where you are, there is a variety of combinations of how that might be achieved.
We need to look at having this national strategy which recognises that we need to get off oil and to electrify the transport fleet, to get the freight onto the trains, to get more people out of their cars and onto that public transport. We need to ensure that the cars are plug-ins and that they are powered by renewable energy sources, which goes to the national strategy on energy security. This means rolling out more renewable energy and enabling consumers to be energy suppliers by putting photovoltaics on their roofs, by having small-scale hydro, by having small wind turbines or whatever they are going to have domestically, plus plug into solar thermal and the like. This is the kind of big picture thinking Australia ought to be engaged in to come up with a really bold national strategy which looks at squarely facing climate challenges and oil challenges.
I will just go through the way the government is responding. You have Fuelwatch, which is a tiny fiddling-around-the-edges program. I agree with Senator Xenophon and others who have spoken in here—particularly Senator Joyce—about the need to actually look at the wholesale market and at the transparency issues with regard to that. We need to look at the import parity issues and the Oil Code regulation. All those sorts of things need to happen, and I do not think there would be anyone in the Senate who would object to those things happening.
That will make a marginal difference, but Fuelwatch and even dealing with those wholesale issues will still only make a marginal difference. If you are serious about acting and acting fast, we need to get on to mitigation strategies and planning strategies for the long term. As the Hirsch report to the US Energy Agency said in 2005:
The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship …
That is what we had recently when the oil price went above $100 a barrel and approached $150 a barrel. Then you start getting chronic dislocation and shortages in places, like Western Sydney, where there is very little public transport. We know that the way Australian cities have developed the poorest people live furthest from the centre of the city; drive the oldest, least efficient cars and have the least, if any, access to public transport. So they are the people who are disproportionately affected when you get higher oil prices flowing on to high petrol prices. With Fuelwatch you might be able to give them some certainty around one or two cents, but in the longer term we need to ensure that there are better options for moving those people so that they are protected permanently.
It is actually cruel to keep building cities that do not take into account the need to mitigate greenhouse gases and oil prices. I know there will be some people saying, ‘Oh well, this doesn’t really matter so much because the underlying issue is not peak oil; there is plenty out there.’ I would draw their attention to the International Energy Agency report which has just come out on 6 November which is pointing out that, whilst there is a global economic slump that has curbed energy demand and pushed oil prices down in recent months, it will only provide a short-lived respite for consumers. The International Energy Agency is saying that supply shortfalls that pushed oil prices into triple-digit territory this year are far from resolved and could lead to a new period of high prices. In fact, it goes on to say that we are going to see oil consumption reach 106 million barrels a day in 2030, up from 86 million barrels a day this year. If that is the case, where is this oil supply going to come from? There have been several large-scale new developments announced but they have not been taken forward—the investment has not been forthcoming. We are rapidly going to reach a time when the economic stimulus packages get the economies going again, the demand is going to rise but the supply is not going to be there for the reasons I mentioned in the beginning—the cheap, easily accessible oil is gone and now we are into accessing oil from much trickier scenarios: deeper sea, more difficult terrain and extreme weather events.
What I would like to see the government do is actually give a sense to Australians of whether they believe in peak oil—whether they think peak oil has occurred and what we are going to do about it. How are we going to get rural Australia off its dependence on petrochemical fertilisers—off its dependence on petroleum based products, whether it is in fisheries or farming? How are we actually going to do that? When are we going to say there is a win-win scenario here by getting our rural community back to more sustainable farming practices and by giving them adaptation strategies to farm renewable energy as well as to increase their soil carbon, build more resilience in the face of climate change, and reduce their prices and improve their margins? That is the kind of strategy we should be looking at as a nation rather than what I see as a political exercise to disguise the reality of the situation. Governments are going to wring their hands and say, ‘There is nothing we can do about the international oil price.’ That is right; there is nothing we can do about that. What we can do is get ourselves off the dependence on foreign oil and that oil price and at the same time meet our climate objectives.
It is not a sensible policy to spend millions on coal to liquids, which is what the Australian government strategy is at the moment, saying: ‘Yes, we could well be in a situation where we can’t run our cars on petrol because we cannot afford it. Therefore we are going to run them on coal.’ That is a terrible strategy. It is a bad climate strategy. You cannot be serious about addressing climate change if you go down that route, and that was one of the conclusions of the oil inquiry conducted in the Senate three years ago—that we ought not to be issuing policies to deal with energy security that undermine our climate strategies. So I would like to see that work on liquefying coal finished, over, done with, and instead the effort going into electrifying the car fleet and, as I said, rebuilding the rail network so that we have that freight network along the east coast of Australia and the Sydney bottleneck dealt with—and at the same time the rollout of public transport systems, urban metros and a fast train between Sydney and Canberra, for example.
I just think what we have got with Fuelwatch is a political reaction to high fuel prices that disguises the actual problem we are dealing with. Yes, you have got manipulation by the oil companies. I am sure that is the case. As Senator Xenophon said, we can deal with those things; bring them in here and let us deal with the Oilcode, let us deal with import parity and let us deal with transparency in pricing. But it is not going to change anything when the oil price gets to $150 or even goes north of $150 and higher towards $200 a barrel. That is what I would like the government to exercise its mind on. There is an opportunity to do it now when there is a respite in the oil price, where it has fallen back in the short term because of the global economic downturn and less demand now. The pressure is not on so much now, so now is the time to bring out a national strategy to tell Australians how we are going to get off oil, how we are going to electrify the transport fleet, how we are going to invest in the rail networks and how we are going to roll out renewable energy so we can electrify the fleet. It was exciting news to hear that we had a company here ready to invest in three Australian cities with plug-in stations for the electric cars. That goes hand-in-hand with the investment in what I hope will be plug-in hybrids.
The second thing we can be doing is looking at second generation biofuels. We certainly do not want to go down the track of substituting food-growing land for fuel-growing land. That has been a bad strategy globally and has had many perverse outcomes, including the loss of tropical forests, which is a disaster. The second generation of biofuels using lignocellulose and actually generating a fuel from a waste product is well worth investing in. Also, ANU have developed algae grown from salt pans which can be put in the centre of a solar collector and the chemical reaction makes a high-grade transport fuel. That is a win-win for rural Australia because it means that people who have salt pans and high levels of salinity on their properties can actually do something with that, and frequently those areas also have very good solar radiation. So it is a win-win scenario, again providing rural Australia with an alternative to the kind of farming they do now. They could be not only farming renewable energy but also generating a transport fuel if we get behind that research.
What we need is a national strategy that deals with energy security and climate change that says, upfront, it is an unacceptable scenario for Australia to be left so vulnerable and exposed as to be dependent for more than 50 per cent of its oil on foreign imports. It is an unacceptable scenario for us in a climate change world to go down the route of liquefying coal. Therefore, what do we do that addresses climate change, that gives us self-sufficiency in transport fuel, and, at the same time, builds competitiveness and new jobs? The competitiveness and new jobs will come from the investment in those technologies and the rollout of the green new deal infrastructure. Fuelwatch, as I see it, is just fiddling while Rome burns.
The kind of strategy I am talking about is what Australians want to hear from their government—a strategy that says there is a whole-of-government approach that is internally consistent. Infrastructure Australia with its building fund will roll out public transport systems and the freight links that we are talking about. We then go to Resources and to Education and say, ‘Let us invest in commercialising those technologies which give us self-sufficiency, keep our best brains in Australia and get the jobs out there in rural Australia.’ We go to Agriculture and say, ‘Adapt to climate change. If you can’t continue to do what you are doing on your land now because of the temperatures and the climate then let us farm renewable energy.’ The Greens position is that we will support Fuelwatch because, on average, we think it will not do any harm and it may do some good, but it is fiddling while Rome burns. I implore the government to see that there is a big picture here. This is a political gesture towards a problem which is going to come back as the oil price goes up to $150 again, before they will have made any decisions about how to address it, and we will have another inquiry at that point and be no further advanced.
The incorporated speech read as follows—
During the great fire of Rome in AD 64, the historian Seutonius tells us that the Emperor Nero played the lyre while his city burned. And in the best imperial tradition, our pretentious Prime Minister is similarly engaged in a game of trivial pursuit during a crisis.
The American economy is in a shambles. The European markets are in utter disarray. The ASX has plummeted farther and faster than at any time over the past three years. Business confidence throughout Australia is the lowest in over a decade. The prosperity of millions is at risk like at no time since the Great Depression.
And what does the Prime Minister offer us? What solution to our economic woes does Kevin 07 provide in 08? Well, among his overseas jaunts; among his speeches at the UN, and his hobnobbing with the global glitterati; the Prime Minister has offered us a panacea to our petrol pump pain.
This Hail Mary manoeuvre goes by the name of Fuelwatch. But Fuelwatch is nothing more than bread and circuses. It is nothing more than a gigantic distraction. The Prime Minister’s Fuelwatch policy is like the chariot race scene out of Ben Hur. The only difference is that it is the Australian people who are in danger of being devoured, not by lions, but by the bear market.
Before last year’s election, Kevin Rudd promised new thinking on the question of fuel costs. Wayne Swan promised to “crack down” on “skyrocketing petrol prices.” During their election courtship dance to win the votes of the Australian public, Rudd and co. promised effective action to reduce prices at the pump. But now that those votes were firmly in their party’s pocket, the Labor Government is trying to pass off a mere website as a solution to this problem that has inflicted so much pain to Australian hip pockets. The government contends that this scheme will ease the squeeze on motorists by informing the public of where fuel prices are lowest in their area. And petrol stations would be obligated to set their prices for a 24 hour period, on pain of a hefty fine.
In other words Fuelwatch is a giant government-mandated price-fixing scheme. And price-fixing constitutes the antithesis of competition. The Coalition Critique of the Labor’s interim report on Fuelwatch in the Senate Economics Committee explained this basic economic principle as follows:
“Fuelwatch, with its requirements to fix a price a day in advance and then to hold that price for 24 hours, does not make the market more competitive, and tends to a higher average price.”
Now, few have ever argued that the former trade union hacks who dominate the Labor government are endowed with a sense of economic sophistication. Few have ever argued that economic management is the ALP’s strong suit. But even economic semi- literates who occupy the government front bench should be aware that constraints on competition will raise prices rather than lower them. Even an economic dilettante like Treasurer Wayne Swan should understand that anything that reduces the flexibility of the fuel market will only make petrol dearer.
And then there are the gaping inconsistencies in the government’s claims about the benefits that Fuelwatch will supposedly provide. First you have the Prime Minister, who asserted that the scheme would bring about a reduction of 1.9 cents per litre in the “relevant weekly average price margin.” Then Labor’s petrol Tzar, Pat Walker, who walked off the job after only four months, claimed that the national implementation of the scheme would lower prices by 5 cents per litre. And finally, you have the Treasurer himself, who is peddling the Fuelwatch fish story that motorists will save $10 per tank, which works out to a whopping 20 cents per litre. So which is it? 1.9 cents per litre? 5 cents per litre? Or 20 cents per litre? This government is the political equivalent of the gang that couldn’t shoot straight. They can’t even get the lines straight on their Fuelwatch sales pitch.
But I must note that all is not entirely lost where the Rudd Government’s economic comprehension is concerned. There is at least one member of the Labor ministry who understood that Fuelwatch is a triumph of style over substance. There is one member of Kevin Rudd’s front bench who understood that the Fuelwatch scheme would harm Australian consumers rather than help them. And Labor Minister for Resources, Energy and Tourism Martin Ferguson was not reticent about his concerns.
In a confidential letter published last May by The Australian, Ferguson warned his colleagues that Fuelwatch would fail working families and hurt the small business sector. But the publication of Martin Ferguson’s letter was merely the first Fuelwatch related leak.
Pretty soon Kevin Rudd’s Fuelwatch agenda began to look like the hull of the Titanic after that meeting with the iceberg. Channel Nine’s Laurie Oakes came into possession of internal cabinet documents that cast serious doubt on Fuelwatch. Now, I don’t wish to digress from the topic of this debate into what these leaks say about the modus operandus of the Rudd government. But there must be something seriously wrong for such serious breaches of confidentiality to occur so early in a young government’s tenure.
Yet beyond the question of how these documents reached the public domain, it is far more germane to see precisely what they say about Labor’s Fuelwatch initiative. Kevin Rudd’s own department, the Department of Prime Minister and Cabinet, said: “econometric modelling undertaken by the ACCC is somewhat inconclusive with respect to the overall pump price, but indicates that a small overall price increase cannot be ruled out”. And the Department of Resources, Energy and Tourism expressed concern that “the scheme will reduce competition and market flexibility, increase compliance costs and has more potential to increase prices.” No wonder that Department’s own Minister, Martin Ferguson, had second thoughts about the wisdom of Kevin Rudd’s Fuelwatch media stunt.
The Prime Minister claims that Fuelwatch is modelled on a similar government scheme in Western Australia, which Kevin Rudd claims was a raging success. But local fuel market analysts tell a different story.
“It was the introduction into Perth of Woolworths and particularly Coles which actually triggered the price war that occurred in Perth,” said West Australian analyst Alan Cadd. And so we see that it was competition, rather than the heavy hand of government mandates, that caused petrol prices in Perth to drop by 2.5 cents per litre.
Labor’s Fuelwatch media stunt is an insult to the intelligence of the Australian people. It is a gratuitous boondoggle that has already cost the Australian taxpayer thousands, perhaps even millions of dollars. The Fuelwatch media stunt is entirely unnecessary because the private sector has already moved to provide free information on fuel prices to anyone with a computer.
MotorMouth Pty Ltd. is a company that was established in July 2000 in response to the demand by Australian motorists for information on the fluctuating prices of unleaded petrol. It was initially set up to cover the major routes within a 15-kilometre radius of the Brisbane CBD. Ralph Waldo Emerson once quipped that if you build a better mousetrap, the world will beat a path to your door. And the quality of the service provided by the MotorMouth website caused many thousands of Australian consumers to travel the pathways of the internet in search of a better deal.
The MotorMouth is entirely independent from the oil companies. And its website declares that its core objective is the provision of information to consumers to facilitate informed decision making on petrol purchases. Increased demand for MotorMouth’s petrol price monitoring service soon triggered its expansion to the Gold and Sunshine Coasts, Sydney, Melbourne, Adelaide, Hobart and Perth.
MotorMouth is simply a voluntary conduit for consumer information. It has no power to fix prices and impose fines like Kevin Rudd’s Fuelwatch media stunt. And thus the private sector MotorMouth serves to nurture competition while Labor’s government Internet white elephant serves to neuter it.
So it turns out that Kevin Rudd’s great innovation to provide salvation for Australian motorists isn’t so innovative after all. It turns out the private sector beat the Prime Minister to the punch by years. It turns out that MotorMouth trumped Kevin Rudd’s bigmouth by a large margin.
There is a saying that fools rush in where angels fear to tread. And the Rudd Government is rushing, with great fanfare, through a gaping door left wide open long ago by MotorMouth Pty Ltd.
But this is a classic pattern with this Rudd Labor government. This is a government values form over function; chicanery over honesty; and the appearance of action over the reality of action. And it has no hesitation about claiming credit for the hard work done by others. This whole scheme is a hoax, a put up job, a gigantic humbug that richly deserves to be described as Kevin Rudd’s Fuelwatch media stunt.
With this government I am reminded of that scene in the Wizard of Oz where Dorothy and her companions discover that things in the Emerald City aren’t as they first appear. “Pay no attention to the man behind the curtain,” says the Wizard while he is exposed as a fraud.
But you can rest assured that we in the Coalition will pay close attention to what goes on behind the curtains of this government. That is what we were sent here to do by the Australian people who elected us.
The incorporated speech read as follows—
Can I start by saying emphatically that I support fully the spread of better information on petrol prices.
However, I will not support anti-competitive price fixing in the petrol market and hence cannot support this bill
Almost 12 months ago, the Rudd Labor Government was elected on the promise that it was listening to Australia’s working families and that Labor had heard they were suffering under the dual yoke of rising grocery prices and increasing petrol prices and that, enough was enough.
It went to the people saying it had a plan to fix the cost of living pressures that grocery and petrol price increases were introducing.
Mind you, it didn’t say what the plan was for either —because, I suspect, it didn’t have one - but it did say that it had a plan.
And many Australians, who were finding the increase in the price of petrol and groceries difficult to manage, liked the sound of someone who said they had a plan.
They didn’t want to know the details, or the realities of how prices of both are delivered, or the effects on petrol prices of international factors, or even the lack of competition in both the wholesale petroleum markets in Australia and the retail grocery market and how that affects retail prices.
All they wanted to hear was that someone could bring the prices down—and that is what the then Labor Opposition told Australians—regardless of Labor’s ability, inability or otherwise to actually implement this promise.
Why are petrol prices so important to Australians? Because many Australians have limited or fixed incomes that are stretched already. Combine that with the importance of the mobility that having their own car provides and increases in petrol costs suddenly start to seriously impact upon their lifestyle.
Of course, there are worse things that can happen to Australian families than having to use their car a little less, or even a lot less. But it is important to understand that the personal mobility provided to Australians by being able to afford to drive their car is significant to most. And the impact on lifestyle by reducing that mobility is not something they want to accept.
As such, and make no mistake about this, the drift in votes to Labor at the last election—a drift that delivered them government—was in a large part contributed to by people who heard Labor say they would bring the price of petrol down and that they expect them to do so.
So where are we at today?
We have before us a Bill that is the Rudd Labor’ Government’s total commitment to addressing petrol pricing—a bill to take a scheme in place in Western Australia and turn it into a national scheme—a scheme that at best in Western Australia has been spectacularly ineffective at reducing prices and at worst, has introduced anti-competitive pressures and largely removed the ability of WA motorists to access their petrol at the bottom end of the price cycle.
Prime Minister Rudd was quoted earlier this year as saying ‘we have done as much as we physically can to provide additional help to the family budget recognising that the cost of everything is still going through the roof cost of food, cost of petrol, cost of rents, cost of childcare.’
At the same time, he went on to say ‘when it comes to things you do not have direct control over, obviously in terms of the global price of oil, then what you can do is simply act in the other areas to make sure that there are some more dollars to draw upon in terms of the family budget’.
At the time, this statement by the Prime Minister attracted a lot of negative press and the justified ire of many Australians
It is not that he is so wrong. The fact is that a lot of what was driving up petrol prices earlier this year were outside the sphere of influence of the Australian Government
What annoyed so many Australians was the fact that this was no different prior to the 2007 election, when he was travelling around the country quite happily telling people that there was a lot that could be done, the then Coalition government wasn’t doing any of it and that a Labor Government would
Yet here we are today with a bill before us that will achieve little, which in fact will most likely reduce competition and increase prices and the overall fuel bill for Australians and, a Prime Minister who says the government has ‘done as much as we physically can’.
I am sure that there are Australians all over the country who expected a little more of Mr Rudd when he told them he felt their pain on petrol costs, who heard him say that he had a plan and who thought the plan would be something more than a half baked copy of a system that had delivered little or no price benefit in Western Australia
I am sure they expected real, tangible lower petrol prices to result from the plan
So given the Prime Minister’s own admission that he considers there is nothing else that can be done, this is it. The pinnacle of the Rudd Government’s plan to reduce petrol prices for struggling Australian ‘working families’ and the sole answer to those problems
I will look in more detail at the proposed scheme in a few minutes, but initially I would like to take a bit of a look at what factors actually influence petrol prices in Australia
This issue has been the subject of countless inquiries by state and federal government bodies as well as private consumer and motorist organisations
The main factors influencing petrol prices at the bowser are well understood and generally not in dispute.
At an international level, they are, the international price for refined petrol and the Australian/US dollar exchange rate.
State government policies and subsidies also can affect petrol pricing, for example, policies relating to fuel quality and petrol retailing arrangements and Australian Government policies and grants (eg as they might index excise and impose fuel standards and set the regulatory environment in which petrol is wholesaled and retailed)—and excise and GST all impact significantly on the price paid in Australia for a litre of petrol.
Of these factors, the Australian government is only able to influence in a meaningful manner, its own policies and the level of excise and GST.
Many of the inquiries into petrol pricing I have already referred to, examine these issues and particularly the first of them—that is the policies implemented at an Australian government level affecting the regulatory environment in which petrol is sold and the level of true competition at both a wholesale and retail level
the government has argued that the Fuelwatch scheme, the subject of the bill before this chamber today, is designed to address the issue of competition in the petrol markets and that the new regulatory environment it creates will promote additional competition.
Sadly, the evidence taken at the Senate inquiry into this matter demonstrated unequivocally that this will not be the case.
Even the Government’s rhetoric surrounding the benefits of the Fuelwatch scheme changed dramatically following its announcement, as the evidence piled up proving that it would not deliver lower fuel bills to working Australian families.
When they announced the scheme, it was all about ensuring motorists would not pay anymore than they had to for petrol.
For example, the Prime Minister was quoted as saying ‘What we want to do is ensure motorists are not paying one cent more than they have to as the bowser what we want to do is ensure that motorists are able to buy the cheapest petrol at the cheapest prices at the cheapest petrol stations at the cheapest times’.
And on 16 April, Assistant Treasurer, Chris Bowen said on the ABC that Fuelwatch would lower fuel prices by 2cp1.
Within a week, in the face of the barrage of criticism and evidence thrown up in horror at the prospect of a national Fuelwatch scheme, the rhetoric of the Minister responsible, Chris Bowen, had dramatically changed.
No longer was he, or the government claiming the main reason for the scheme was price. On the contrary ‘the much more important reason for doing this is to give consumers more information’.
Ah, I see now, when Labor went on the attack about petrol prices before the election, when they aggressively accused the Coalition government of being asleep on the job with petrol and that they would put a ‘cop on the beat’—they weren’t talking about petrol prices —and the difficulties Australia’s ‘working families’ were having with rising petrol costs—no they were promising to give motorists more information!
And I am sure that the many Australians who voted for them because they ‘had a plan’ did so because they thought that plan would ‘give them more information’.
Unfortunately for the many Australians facing real and worrying cost of living pressures as petrol prices remain high and grocery prices and rents keep rising, more information is not what they want or need.
Australians were hoodwinked by Labor prior to the last election —the government promised something they knew they couldn’t, or possibly more accurately, wouldn’t deliver.
The Prime Minister’s statements that there is little that can be done by the Australian government to affect international oil prices is correct.
But he knew that before last year’s election.
Yet Labor deliberately worked towards creating the impression that they would tackle petrol prices head on and make a meaningful difference.
It was a con of a grand scale conducted on the Australian public and the Labor Party should stand condemned.
But as mentioned, there are measures the government can take that can either directly reduce petrol prices, or genuinely lead to pressures that will keep it lower than it would otherwise have been.
A cut in excise is the obvious, easy direct route in lowering petrol prices —such as the 5 cents a litre cut in excise tax as promised by the Coalition.
This would deliver a real cut in petrol prices—and I don’t for one minute accept the intellectually dishonest argument posed by many on the other side of this place, that 5 cents is nothing and would be swallowed up by small changes in the international price of oil, or a fall in the Australian dollar.
This trivialises the challenges faced by Australians in meeting their cost of living challenges.
The fact is that a 5 cent cut in the excise is the one petrol price measure that can’t be taken away by international factors.
No matter what the international price of oil, no matter what the exchange rate, if you take 5 cents off the excise, petrol will always be 5 cents a litre cheaper than it would have been.
This is fact and presents a 5 cent a litre saving every time Australian motorists fill up, for so long as the excise remains at the new rate - for ever—whether petrol is $1 a litre, $1.50 a litre, or $2 a litre.
Sure it is a costly measure in terms of the Government’s budget, but we are in Australia in a fortunate position of having had a substantial surplus—despite the current woes, we can arguably, as a government, afford the measure. But even more so, given the current economic crisis and the almost certain slowing of the Australian economy, taking a few billion out of the hands of the government and giving it back to the people is the economically responsible thing to do.
We have been saying this for some months and the government itself finally acknowledged this with its $10.4bn plan to stimulate the economy for most of this year, the government has been strenuously arguing that we need to maintain a high budget surplus … and their approach to this was to take the money off the people so they can’t spend it, thereby cooling an overheating economy.
Indeed, any of our efforts to stop them taking money from taxpayers lead to an accusation that we were economic vandals.
But the reality is that Malcolm Turnbull, as the then Shadow Treasurer, has been warning the government about the potential effects on the growth of the Australian economy of rising petrol prices and the international financial crisis, since February this year he has consistently called for the government to hold back a little on its zeal for cooling the economy, because these two factors were going to have a major cooling effect and that it would be prudent to take a more cautious approach.
Well, he was right, and this has been acknowledged by the Government as the likely impact of the international financial woes on the Australian economy finally sank in.
It is important to understand that the objective of their $10.4bn package is the very opposite of the objective upon which their entire 2008 Budget strategy was based. It is a complete reversal of policy.
The budget was intended to cool economic growth, this package is intended to stimulate economic growth.
We have told them all year to take it easy on their efforts to slow economic growth in Australia, because there are bigger things at play and, now, finally, they have acknowledged that —but because they had been trying to achieve the exact opposite of what is now openly acknowledged as being required, the government’s efforts to stimulate the economy have to be far more significant than they would if the government hadn’t been trying to contract the economy.
It also highlights how hollow the accusations levelled against us for holding up some of the budget measures are.
If we had let them sail straight through, they would have been in effect out there cooling the economy, slowing economic growth and making it even harder to stimulate the economy as is openly agreed by all, now needed.
Similarly, the economy would need less of a heart starter package, if two of the Coalition policies had been accepted by the Government.
As has been noted by various commentators in the context of our policy to increase pensions, widespread economic stimulation is best achieved by returning taxpayers funds back to them to spend in the economy. The same principle applies to Australians and a cut in the excise tax.
Cutting excise tax will deliver both cheaper petrol prices and help to domestically stimulate an economy facing many factors trying to slow it down—a win win situation —but one the government has yet to adopt—despite its acknowledgement yesterday of the need to backflip on its policy of trying to slow economic growth.
Hopefully they will see the benefit of cutting petrol excise tax soon. Because implementing Fuelwatch certainly isn’t going to deliver economic stimulation, or cheaper petrol.
Rather, it is in fact likely to increase prices through a minimisation of competition and removal of deep discounting during price cycles.
The proposed Fuelwatch scheme is based on the existing scheme that has been operating in WA for some 7 to 8 years.
There are varying claims about the success or otherwise of this scheme, the truth of which is clouded to a significant extent by the variable nature of other relevant factors in the price of petrol in WA and the other states that make it hard to do direct comparisons.
Nonetheless, various learned persons and organisations have looked at the success or otherwise of the scheme using both sophisticated econometric modelling taking into account a wide variety of factors as well as simple straightforward comparisons of outcomes not affected by the variables.
The first major examination of the scheme was conducted by the ACCC in 2002.
Its findings were—to put it simply—damming of the WA Fuelwatch scheme.
In considering the outcomes of the WA scheme, the ACCC states it had regard to the objectives of the arrangements put in place by the WA government and what they sought to achieve
- Greater competition;
- A fairer and more transparent petroleum market;
- Greater price transparency;
- A reduction in the volatility of metro prices; and
- A reduction in the differential between city and country prices.
The data collected by the ACCC in 2002 found that Perth prices increased relative to 3 benchmarks, namely: Sydney and Melbourne prices, the Commission’s import parity indicator and Western Australian maximum wholesale prices.
The ACCC acknowledged that a significant part of the price increase could have been due to higher fuel standards introduced at the same time as WA Fuelwatch, but it also concluded that some of it is likely to be due to other factors, specifically mentioning the 24 hour rule.
With respect to the greater transparency objective, the ACCC concluded that the publishing of petrol prices on the Fuelwatch website did increase price transparency, but also found it introduced unwanted distortions into the market.
In terms of the reduction of volatility objective, the ACCC found that, contrary to wide held views, petrol prices were already relatively stable within a day —with Perth prior to the Fuelwatch scheme only experiencing an average of 1.18 changes per day, and that the change therefore had a minimal effect on volatility.
And finally, the ACCC also found that the city country price differential blew out, totally in the face of the objective of reducing this differential.
The ACCC concluded that on those findings, it was hard to see how that the WA Fuelwatch scheme had been successful, stating that it appeared a number of the Western Australian fuel pricing regulations may have been introduced quickly, without full consideration of their implications or the necessary administrative details for their successful implementation.
Sounds eerily similar to the fast-track approach taken by the Rudd Labor Government in the face of dramatically rising fuel cost earlier this year.
In their panic given the public clamour for them to live up to their promise, they announced the scheme and as petrol prices continued to rise and as the Coalition started to gain the public’s acceptance as the party capable of doing more in this regard, they rushed through legislation to implement their scheme, forcing a number of treasury officials to work 36 hours straight to meet their unreasonable and ill-considered deadline.
The result was again, legislation that was introduced too quickly, and without full consideration of its implications or the necessary administrative details for its successful implementation.
Since then, there have been a number of objective outside examinations of the WA Fuelwatch scheme and the weight of evidence has clearly demonstrated that it failed to deliver lower prices and may actually lead to limiting the opportunities for motorists to minimise their fuel bills.
Of course, the most comprehensive consideration of the effectiveness of the WA Fuelwatch scheme was undertaken as part of the recent Senate Standing Committee examination of the potential impact of the bill before us today.
The overwhelming evidence presented to that inquiry was that there are a number of significant risks to petrol pricing as a result of this bill, that there are a number of very likely scenarios that will lead to higher petrol prices for most if not all Australians and that there is very little evidence, if any, to suggest that motorists will be any better off as a result.
Of course, the majority report —ie the Labor Government Senators —recommended the bills be passed.
However, as noted in the minority report, any objective consideration of the evidence would, at minimum, have to have raised alarm bells that the scheme might actually raise petrol prices as a result of a lowering of competition and that the best that could be hoped for was that it would not harm motorists.
Given the multi-million dollar spend involved—not a great return on investment!!.
Of course, the ACCC in its most recent report to the government, considered and written after the election of the Rudd Labor Government, takes a completely different tune to its past comments and findings.
The ACCC’s methodology on its previous examinations of the WA Fuelwatch scheme were always made public and understandable by peers looking to review those results.
But with this most recent consideration, the modelling upon which they base their findings has been kept secret.
The reason why this is the case has been speculated on ad infinitum and I could put forward some obvious theories myself today—but I will decline to do so.
Suffice it to say, the ACCC prior to the election of a government looking to nationalise the WA Fuelwatch system, had publicly panned that system as failing to deliver the benefits to consumers it was intended to deliver.
After the change of government, it has a different view, but has refused to release—or is not allowed to release—the modelling upon which it says it has based this flip flop.
As the ACCC’s modelling has not been publicly released and can’t be objectively peer reviewed, the unfortunate reality is that the weighting given to their findings must be lower than if it could be objectively tested.
In its 2007 report, the ACCC pointed to a reduction in price of 1.9c per litre in WA, but also stated clearly that a lot more needed to be done before the scheme was rolled out nationally.
The view of independent economists on this report suggested, even though the methodology was not released, that it was clear there were issues with it, including:.
- The ACCC failed to take account of the entry into the WA market of Coles.
- The ACCC has since claimed to have adjusted for the Coles effect, but will not say how it did so.
- The ACCC analysis looks only at prices and not the volume sold at a particular price—for example, a service station with a price of $1.80 but selling no petrol is given the same weight as one with a price of $1.50 and selling high volumes, and.
- The ACCC refused to release its methodology so other economists can fully test its analysis and results.
The ACCC has also been quite inconsistent in its comments about the potential benefits from a national Fuelwatch scheme.
As mentioned, in its 2007 report, it talked about 1.9epl savings in WA as a justification for taking the scheme nationally.
But in May this year, ACCC Chairman told the ABC that Fuelwatch was ‘not about saving motorists money’.
Again, I find such statements incredible.
Remember, the Rudd Labor Government was elected partly on its promise to tackle petrol prices and after announcing the twin measures of Fuelwatch and a dedicated ACCC ‘petrol commissioner’ who has no additional powers, the Prime Minister said there was nothing more that could be done.
And here we have the senior public servant responsible for implementing Fuelwatch and the boss of the petrol commissioner, saying that the government’s measures to tackle fuel prices aren’t intended to deliver lower prices.
Millions of Australians who believed the Prime Minister had a plan to reduce petrol prices must be bitterly disappointed.
So given that the ACCC advice, so heavily relied upon by the government in justifying its petrol price plan, appears to be unconvincing and based on methodology that has not been released for peer review, maybe there was other advice received by the government that clearly outlined the potential benefits to Australians from implementing such a scheme?.
- The reality is of course, that all other departmental evidence the government received was completely contrary to that the ACCC says it provided the government.
In fact, four key relevant departments, including the Prime Minister’s own department and Treasury, advised the government that the scheme should not be adopted and warned of potential negative consequences and that the scheme would push petrol prices up.
Even the Minister responsible, Energy Minister Martin Feguson argued against the adoption of such a scheme as he believed it would be counterproductive to the interests of Australian motorists—especially those in locales with a high proportion of Labor’s ‘working families’, like Western Sydney.
This from the Minister who is advised by the most expert department in Australia on energy policy.
He said that Fuelwatch would put petrol prices up, will decrease competition and will hurt working families … but did the Prime Minister listen to this evidence based advice?
No, he did not.
This document points out:
- 72 per cent of consumers in cities other than Perth always or usually try to purchase unleaded petrol when it is cheapest, whilst 59 per cent of Perth consumers always or usually try to buy petrol at its cheapest—suggesting where Fuelwatch is operating, more motorists are forced to buy petrol at a higher price.
- the RIS also said it is possible that the introduction may have anti-competitive effects.
let me repeat that …
- as the RIS notes, Fuel Watch in WA has ‘harmed the competitive position of independents as it allows large operators to adopt a strategy of rolling price leaders. Operators with small networks are less able to employ this pricing strategy and are therefore placed at a competitive disadvantage in the market’.
- and, ‘the provision of this taxpayers funded service creates greater opportunities for price co-ordination amongst retailers, especially in more concentrated markets;.
- The RIS also stated that the benefits of a national scheme are likely to be very limited in regional and rural areas—where petrol is already higher than metro areas.
Prior to last year’s election, the Prime Minister said he was going to govern on the basis of evidence and the basis of getting the best advice.
Yet here he and his government are, making decisions that fly in the face of the best advice provided to it—all so it can create the dishonest impression it is delivering on its promise to address rising petrol prices.
This is not a government developing evidence based policy, but one that looks for evidence to back its policies.
The stated objective of the National Fuelwatch (Empowering Consumers) Bill is to “provide intra-day price stability and decrease search costs for consumers.”.
It is clearly not intended to deliver cheaper petrol.
Only the Coalition’s promise of a 5cp1 cut in excise tax will do that.
There are many issues and problems with the proposed scheme that I don’t have time to examine in detail today, but I am sure others will, although I will try to mention a few, such as constitutional questions about the scheme’s implementation.
The government plans to use its corporations power to implement the scheme—but it remains unclear how this will work for unincorporated family business owned petrol retailers.
As mentioned, there is no evidence that a national Fuelwatch scheme will lower petrol prices nor that the WA scheme lowered prices there.
Monitoring over many years shows that the average price in Perth is consistently higher than in other mainland capitals.
Also, the weekly price cycle present in Perth prior to Fuelwatch and still present in Brisbane, Sydney, Melbourne and Adelaide, stretched out to a two week cycle upon the introduction of Fuelwatch.
This means that Perth motorists who have to fill up weekly—(and around 76% of Australian motorists do) - and who are looking to find the best price, miss out every second week as the discounting phase only happens once a fortnight.
The fact is that it will not save motorists any money—despite the Government’s clear weasel words designed to create the perception that the bill will relieve petrol price pressures.
Both Minister Chris Bowen and the Prime Minister initially said it would save around 2c a litre, the now defunct petrol commissioner Patrick Walker said it would save 5c a litre, the ACCC originally said it saved almost 2c a litre in WA, but now none of them say it will save money.
The purpose of the bill now is to ‘provide motorists with more information, not savings’.
Again, I say that if this is the government’s implementation of its plan to reduce the price of petrol, by ‘giving more information’, Australians should be very disappointed.
The fact is the scheme proposed in this bill is bad for competition and will drive independent retailers out of business, leaving only the big petrol companies and major supermarket chains in the petrol retailing business.
Evidence from motorist organisations—almost all of them—is that the scheme proposed in this bill will be detrimental to motorists and would create higher average fuel prices and remove much of the opportunity for canny motorists to buy their petrol at the heavily discounted end of the petrol cycle.
It will deliberately iron out the discounting cycle, stopping completely heavy discounting in that cycle, reduce competitive pressures in the market and reduce the opportunities for families to fill up at the bottom of that cycle.
The scheme is nothing more than an expensive con so that the government can say it has done all it can, but it will deliver nothing.
It will cost motorists, not benefit them and accordingly, the bill should be rejected.
Does Fuelwatch work? Who knows? Does Fuelwatch cut the cost of petrol? No-one will guarantee it. Will Fuelwatch save families money? Again, no-one is sure. Will Fuelwatch increase petrol prices? No-one can say. Did the Senate Standing Committee on Economics inquiry prove Fuelwatch was a winner? No. Are there still concerns about Fuelwatch? You bet. Fuelwatch was sold by the Rudd government with much fanfare as the scheme to help Australians struggling to cope with soaring fuel prices. It is no secret families need help with skyrocketing costs of petrol, but we are still unsure if Fuelwatch is the answer. Families in outer suburbs and regional areas have been hardest hit by soaring petrol prices. Lower income families and first home buyers tend to live in the outer suburbs where housing is cheaper, but because of poor public transport they depend on their cars and suffer from punishing petrol prices.
Family First understands how difficult it is for families to juggle soaring grocery prices, interest rates and high petrol prices. They deserve a fairer go from petrol companies and the government. That is why Family First has been campaigning for the past three years for a 10c a litre cut in petrol tax to help families. That is why Family First has campaigned to make sure we have a competitive petrol market. Family First believes the government can give Australians a fairer go with petrol and they can do this by providing real competition for petrol. It was very much a shame that when the Labor Party had the numbers with the Oilcode and the sites act a year or two ago they decided to throw it out and have no restrictions on who can own and operate petrol-retailing stations. What a shame. They knew they had the Family First vote. They knew they had Senator Joyce’s vote. They refused to make sure there was going to be real competition at the retail level. What a shame.
When it came to predatory pricing the Rudd government went softer and weaker, not harder. Family First still believes they should go further with predatory pricing to make sure that pricing is not used to stomp out competition and to see independents disappear. We also believe that the ACCC should have greater powers when it comes to breaking up the cosy club that exists between the petrol retailers and the oil giants. We also believe that we need greater competition at the terminals and the storage facilities. These are things that the Rudd government can actually do to give Australians and their families, who are struggling to make ends meet and struggling to cope with petrol prices, a fairer go, and to bring real competition to see downward pressure on petrol prices.
Family First started off as an enthusiastic supporter of Fuelwatch because we thought it would offer some relief to families. But after the events of the past six months that support is a lot more cautious. Last December the Australian Competition and Consumer Commission published its Petrol prices and Australian consumers report. It followed the 45th or 46th petrol inquiry to have been held over the last 20 years. This report found that motorists in Western Australia had saved 1.9c a litre on average due to the scheme there. On the basis of that report, which started under the then Howard government, Family First supported Fuelwatch as a scheme and a way to offer families some relief from skyrocketing petrol prices. The reported average saving per litre of 1.9c indicated that families could expect to save $300 million a year at the petrol pump.
Fuelwatch sounded like it would really make a difference to struggling families. But by the time the Senate established an inquiry into Fuelwatch, on 17 June, the government was starting to change its mind about the scheme, and Family First had begun to reassess its support. The Senate inquiry presented an opportunity to again examine and consider the merits of Fuelwatch. Family First’s doubts grew as the government’s rhetoric on the Fuelwatch scheme continued to change. The government had been fully behind the Fuelwatch scheme, announcing cabinet approval for the scheme on 15 April and with the Prime Minister speaking about Fuelwatch at a press conference on 29 May. But it seems that after that date the government stopped mentioning the claimed 1.9c a litre difference in price. This significant change in rhetoric was confirmed when the ACCC fronted Senate estimates on 5 June this year and downplayed the price difference. The ACCC said that it was not the price difference that was the important part of Fuelwatch but the improved ability of families to compare petrol prices. The change of emphasis by the government was stark.
Family First participated in the Senate inquiry and found a number of issues of concern arose including the question of whether independent petrol retailers are disadvantaged by Fuelwatch, why the federal government has not released its economic modelling to academics outside the federal government for peer review, whether reports of the Western Australian scheme take into account the impact of the introduction of supermarket petrol retailing and whether reducing price fluctuations actually disadvantages families that go to the trouble of filling up at the bottom of the price cycle. Family First is prepared to consider the Fuelwatch scheme because it may well still help families cut their petrol bills—but no-one knows. But the government’s tap dancing on Fuelwatch and its shifting of the boundaries have failed to give Family First confidence that the scheme will do what it set out to do: save people money at the petrol pump. Given that no-one is prepared to guarantee Fuelwatch will cut the price of petrol and given the concerns raised, it would make sense to trial the scheme for a year in a market where there is some support for the scheme. Family First would support a Fuelwatch scheme if it were preceded by an open and transparent one-year trial so we could be sure that it would provide benefits to families and would not disadvantage small businesses before it was rolled out across Australia. Family First is proposing that both each state Premier and each state peak motoring body would have to endorse Fuelwatch before it would be adopted as a one-year trial in their state.
So what does this mean? This would probably mean Fuelwatch being adopted in New South Wales, where the local motoring body, the NRMA, is supportive. This would give the Australian Competition and Consumer Commission a chance to produce a detailed report after the first year of operation, when we can then properly evaluate the outcomes of the trial. If the outcomes of the trial are good, the Fuelwatch scheme can be rolled out to the rest of the country. Some argue that there has already been a trial in Western Australia. But the scheme in Western Australia was made for the people of WA and not as a test site. The effect of the WA scheme has come under question throughout the inquiry, so it is worth doing a purpose-built trial.
The government has backed away from this scheme, saying that Fuelwatch is not about cutting the average petrol price and saying instead that the real benefit of the scheme is to help motorists compare prices between petrol stations. That backflip concerns Family First and should concern the Senate, because what we heard from experts at the Senate inquiry into the Fuelwatch scheme was that it may, instead, push prices up and squeeze out independent petrol retailers. Let’s be frank: if Fuelwatch is not going to cut the average petrol price, what is the point?
The incorporated speech read as follows—
I rise to speak in support of the National Fuelwatch (Empowering Consumers) Bill 2008. This Bill has flushed out the Opposition and exposed them for what they are really about and what they really stand for.
Here we have a bill that is simply about ensuring consumers get a fair deal in the market place. It’s about ensuring that the cards are not unfairly stacked against Australian motorists because of the way the retail market for petrol operates in this country.
In particular, this bill aims at redressing the significant imbalance of market power that, in recent years, has become heavily weighted to the benefit of the oil companies and the major retail petrol chains and to the detriment of Australian motorists.
If there was ever any doubt that the major oil companies have been having a feast on consumers you just have to look at the gigantic profits that the world’s major oil companies have been making in the last few years. It is estimated that the five major oil companies made a total profit world wide of $123 billion in 2007. This figure is predicted to increase significantly in 2008.
While the increasing cost of petrol has been really hurting Australian families, the oil companies have never had it so good.
This is not a time to be batting on the side of the transport industry. It’s a time to be standing shoulder to shoulder with Australian families and motorists.
But what do we get from the Opposition—nothing less than a full frontal attack on the right of consumers to have the best available information on retail petrol prices in their area - in other words to have access to a fair and transparent retail petrol market.
Any fair minded person would acknowledge that for too long the Australian market for petrol has been characterised by a lack of price transparency between sellers and consumers at the retail level.
This was a major finding of the Australian Competition and Consumer Commission (ACCC) 2007 inquiry into the price of unleaded petrol. As well, the ACCC found that current arrangements allow sellers to react more quickly than consumers to movements in retail fuel prices.
In other words the current arrangements have a significant anti competitive aspect that acts to the detriment of consumers.
It is important to note that, in this regard, as the Assistant Treasurer notes on 21 September 2008, the ACCC has commented that the current situation is “the closest thing to collusion in the petrol market that you can get while still being legal”.
This is not something that a Labor Government is willing to accept on behalf of the Australian community.
The objectives of this bill are to:
- empower consumers to make informed decisions and purchase fuel at the lowest possible price;
- increase reliability and certainty of fuel price information available to consumers;
- reduce consumer search costs;
- address consumer anxiety by eliminating intraday fuel price volatility;
- address the existing information imbalance between petrol retailers and consumers; and
- promote competition in the retail fuel market.
Motorists are fed up to the back teeth with being pawns of the fuel producers and the retail petrol chains and are demanding transparency in the retail petrol market. This Bill will provide this.
Motorists are sick of the games played by the individual major petrol retailers where, if they don’t live in WA, the price of petrol can fluctuate during the day at their local petrol station for no apparent good reason.
What we appear to have is a deliberate game of petrol price confusion orchestrated hour by hour, day by day, week by week, by the major petrol retailers.
This is not just a strategy for individual petrol sellers to increase revenue through increased market share, it is a pricing strategy that has a much broader aim, namely to confuse the punters and to substantially take the edge off effective price competition in the retail petrol market.
Before the introduction of WA’s Fuelwatch scheme, motorists in WA had to put up with intraday petrol price fluctuations at individual petrol outlets.
This is still the situation in the eastern states where the petrol prices you see on the way to work in the morning can be substantially different when you drive home in the afternoon with the intention to fill the tank at the cheapest price you saw in the morning. Fuel delivered at one price and sold at another while still in the tank? How does that work?
Who wins in this situation? It’s a sure bet it isn’t the motorist.
From recent work done by the ACCC it has become evident that the marketing of petrol in Australia by the oil companies and the retail petrol chains is under pinned by a highly sophisticated system of petrol retail price monitoring and marketing techniques.
We know, for example, that the major petrol retailer’s use a sophisticated retail petrol price monitoring service provided by a company called Informed Sources. The company is able to provide its Australian clients with petrol price information from more than 3500 retail petrol outlets every fifteen minutes across the major capital cities.
A service like this wouldn’t come cheap so it must be worth the money. How can it be claimed that this level of retail petrol price monitoring by the major petrol retailers benefits consumers while at the same time the major retailers infer that a national Fuelwatch scheme for consumers would somehow be bad for consumers?
WA has had a highly regarded and successful Fuelwatch scheme in place for 8 years.
The scheme protects WA motorists from being ambushed by petrol price changes, which in other states can occur at any petrol station at any time of the day or night. There is ample evidence that the WA scheme has consistently provided lower petrol prices compared with petrol prices in other state capitals.
Nonetheless we have this farcical situation where we have West Australian Liberal Party federal MPs and Senators openly panning the WA Fuelwatch scheme in direct opposition to the policy of the newly elected State Liberal Government. The new State Liberal Government has promised to retain the scheme which was an initiative of a State Liberal Government in 2001.
WA Liberal Senators and MPs are so far out of touch with reality it’s not funny. It’s a disgrace. They have shown no regard for the interests of the West Australian public in this matter. They are obviously more interested in serving the interests of the multi-national oil companies and the major petrol retail chains.
You can be sure I for one will be making sure that WA voters know what sort people they have representing them in the Australian Senate from the Liberal Party.
With the WA scheme WA motorists on any day are able to find out where the cheapest petrol is in their area. They know that the price won’t change during the day at the whim of the retailer.
In WA, the fuel prices for every petrol station are all available the night before on all TV channels. This promotes consumer choice and allows West Australians to know and choose the cheapest fuel.
In other words they do not have to play an hourly game of lottery with the oil companies and the petrol retailers on how much they are going to be slugged when they need to fill up their vehicle’s fuel tank.
It not insignificant that the Royal Automobile Club of Western Australia, which has been advising and supporting WA motorists since 1905, and which has more than 600,000 members, has given its strong support to the WA Fuelwatch scheme on the basis that it benefits consumers and helps to keep fuel prices competitive.
“Fuelwatch has been in place in Western Australia for seven years, and RAC’s support is based on analysing its impact in that time”.
David Moir went on to say:
“The RAC completely supports WA’s Fuelwatch and the benefits it passes on to consumers.”
Six days later in the Other Place the WA Liberal Party Member for Stirling in a speech on this Bill had this to say about the WA Fuelwatch scheme, and I quote;
“I will leave aside the fact that those opposite keep quoting the RAC in Western Australia in support of it, even though the RAC in Western Australia is actually opposed to this scheme”
How’s that for gall on the part of the Liberal Party.
How can you trust anything the Liberal Party has to say on this matter when it is willing to blatantly verbal a non partisan, non profit organisation that has been fearlessly representing the interests of motorists in WA for over 100 years?
You have to ask yourself why the Liberal Party is lining up with the position and interests of the major oil companies and retail chains against the interest of consumers.
You would be forgiven for thinking that is something very suspicious about the direction that the Opposition is trying to take the debate on this bill.
Again there has been a lot said by the Opposition about the price of petrol in WA compared with other States that don’t have a consumer information scheme like WA’s Fuelwatch.
The peak motoring body in Australia, The Australian Automobile Association, publishes on its website monthly average petrol prices going back to 1998. These petrol price monitoring statistics are collected by FUELtrac, a well established and reputable independent organisation.
The petrol price monitoring data provided to the Australian Automobile Association by FUELtrac show that for the past five years up to June this year, the aggregate monthly average price per litre for unleaded petrol in Perth was below the aggregate monthly average price in Sydney, Melbourne, Adelaide, Canberra and also Brisbane when the Queensland government subsidy is factored into the Brisbane petrol price.
I ask again in the face of this independent petrol price monitoring data, why is the Liberal Party so opposed to the WA Fuelwatch scheme and to the introduction of a similar national scheme? Why are they lining up will the oil companies in this matter?
The Liberal Party deserted Australian working men and women with their disastrous industrial relations legislation and now as an encore they are turning their back on Australian consumers and Australian families that rely on their motor vehicle for essential transport every day of the year to get to work and to get their children to school as well as sport and recreation activities.
The Federal Liberal Party continues to demonstrate it has learnt nothing from the last Federal Election.
When the oil company’s poor cold water on providing motorists with transparent and easily accessible retail petrol price information you know for sure that, unlike the RAC of Western Australia, the oil companies aren’t concerned about the interests of individual motorists.
This is clearly illustrated by evidence given at the public hearings of the ACCC’s 2007 inquiry into the price of unleaded petrol. At the public hearing in Melbourne on 5th September 2007, Brett Davidson, the Retail Pricing Manager for BP Australia implied that BP didn’t like WA’s Fuelwatch 24 hour price regulation. BP thought it was a bad thing because it put BP in an uncertain position.
When pressed by counsel for the ACCC about this, the BP representative acknowledged that the 24 hour price regulation resulted in a little more guessing by BP and a little less guessing by the consumer.
Also the ACCC found that the refinery-marketers considered the WA Fuelwatch scheme as problematic because it prevented intra-day price movements.
It’s apparent that companies selling petrol into the retail market would much prefer open slather with the retail price on an hourly basis if they can.
Hence from the evidence collected by the ACCC Petrol Price Inquiry, it is difficult not to come to the conclusion that competition has two different meanings when it comes petrol retailing.
For the refiner-marketers it is all about maximising profit in the market by skilful manipulation of retail petrol prices on, if necessary, an hourly basis and on an outlet by outlet basis, in order to nullify competitive forces in the market and to put the consumer on the back foot as far finding the cheapest petrol price.
For the consumer, the expectation is that competition means he or she will be paying the fairest price that a truly competitive market can deliver. It is quite amazing that the Federal Liberal Party refuses to recognise these simple facts and is not willing to stand up for consumers.
The stance by the major oil companies and the national petrol retailers, which apparently has the backing of the Federal Liberal Party, needs to be exposed for what it is, an unqualified case of commercial, if not ethical, double standards.
What right do the suppliers and retailers of petrol have to deny consumers the same level of access to retail price information that petrol suppliers and retailers themselves already have.
This bill is about assisting Australian families and motorists to get a fair go in regard to the petrol retail market—nothing more nothing less. It deserves the support of all Senators.
I strongly commend the bill to the Senate.
The incorporated speech read as follows—
Fuelwatch will revolutionise the way in which Australian motorists go about purchasing fuel for their vehicles.
It’s an ingenious scheme originally introduced by the West Australian Liberal Government in 2001 to provide consumers with the information they need to get the best deal at the petrol pump.
I find it ironic that the Liberal party is now so very keen to abandon its association with one of the few truly successful schemes it had introduced while in Government.
If only the Liberal party could be as critical of their experiments that actually failed, such as the Workchoices fiasco and the Iraq war misadventure, as they are with the Fuelwatch scheme then they might one day finally hit the target. As it is, they are spraying their shots very well wide of it at the moment.
Under Fuelwatch, specified petrol retailers will need to notify the Australian Competition and Consumer Commission of their price for fuel for the next day by 2pm each day.
These retailers will be required to sell fuel at their notified price by 6am the next day and maintain that price for a 24 hour period.
Failure to notify the Australian Competition and Consumer Commission of their notified price or to change the price of fuel once it has been set will incur a civil penalty.
The Australian Competition and Consumer Commission will then publish the results, usually in time for the evening television news as is the case in Western Australia, and this will allow consumers the opportunity to determine where to buy the cheapest fuel in their area
They will also be published on the internet.
Fuelwatch gets rid the guesswork for motorists looking to fill up the tank. It’s the best way for motorists to get the best-priced fuel. Like many people, I reckon that car-sickness is something that a motorist gets when he or she has to fill up the petrol tank. Fuelwatch may not be the perfect cure-all for this malady, but it will certainly go a long way towards easing the pain of prices for fuel.
As I have mentioned before, the Fuelwatch scheme is already well-established in Western Australia. It successfully provides consumers with a website, email and phone updates, and television stations display the retailers with the cheapest fuel in the area in a similar way the location of speed cameras for the next day.
After two years of operation the West Australian Government expanded Fuelwatch to include an additional 24 towns and five local government districts on top of the Metropolitan and regional areas already covered. This has been greatly appreciated by the Western Australian electorate.
The WA Fuelwatch website proudly boasts that today it covers all petrol retailers in the metropolitan area and approximately 80% of rural areas.
West Australians have had the opportunity to assess the impact of Fuelwatch and have clearly decided that it is a good scheme for motorists and that it provides real value to consumers.
If the scheme is as bad as the Liberals say it is then why has it not brought doom and gloom upon West Australia?
Why has the new Liberal Premier, Colin Barnett, not moved to shut Fuelwatch down within the first few weeks of being elected?
The answer is because the Fuelwatch scheme actually works! And you can bet your bippy that there would be an outcry amongst West Australian motorists if there were any move to take it away. Mr. Barnett knows Fuelwatch is a winner. Why don’t his Federal counterparts?
What we have is the farcical situation where the Federal Liberal party and State Liberal parties are at odds with one another as to whether the Fuelwatch is good or bad.
But rather than discuss the contradictions of the Liberal party I’ll return to the reasons why Fuelwatch will provide Australia motorists with a better deal at the petrol pump.
Motorists are fed up to the back teeth with being forced to pay high prices. About the only thing they can be assured of is that the skyrocketing profits of oil companies always appear to rise faster than the cost of the fuel they put in their cars.
However, the main strength of Fuelwatch is that it will empower consumers to make informed decisions about where to purchase fuel at the lowest possible price. Consumers will have a choice based on facts.
It does this by levelling the playing field between petrol retailers and consumers by providing both parties the same information on the retail price of petrol.
The Senate Economics Committee report on Fuelwatch made the observation that under the current system there are significant information asymmetries between petrol retailers and consumers that benefits the former at the expense of the latter.
Petrol is a household staple. We can’t do without it. Petrol is essential for millions of Australians to go about their normal lives.
However, unlike any other household staples, petrol prices are extremely volatile. Imagine the confusion and consumer anxiety if the price of bread, milk, eggs, vegetables and meat jumped around as much as the price of petrol currently does.
Petrol retailers are able to exploit the current confusion and lack of information that consumers have —so they can raise and lower prices at a moment’s notice. Motorists see on the TV news services each night, and read in the newspapers each morning, about the plummeting price of oil per barrel. Yet rarely do they see corresponding falls at their local service station.
Petrol retailers pay substantial fees to companies like Informed Sources to provide them with up-to-date pricing information, and this puts them one step ahead of the poor old consumer.
Fuelwatch eliminates this advantage! Fuelwatch puts consumers and retailers alike on an equal footing.
This scheme will also benefit retailers because they will no longer need to pay hefty fees to obtain up-to-date pricing information - and they will be able to spend less managerial time trying to respond to many different prices during the day.
Instead, petrol retailers will need only make one decision—how much they will charge for tomorrow’s fuel—and then they can go on to focus on other duties.
Under the present system, the only way consumers have to compare fuel prices is to drive around noting down the price as they go along.
Even then if they realise that the cheapest petrol was at the first station they passed down the road then by the time they’ve gone back the price may have changed anyway.
Fuelwatch therefore substantially reduces the search costs for consumers. Rather than driving around inefficiently to determine the fuel prices —and wasting precious fuel in the process - they can just look up the best deal in their area and immediately know where to go.
While the Fuelwatch scheme will improve the information available to consumers letting them find the best deals in their area, the scheme also has the advantage of reducing the wild intra-day price fluctuations that frustrate so many motorists.
One of the most frustrating things about the price of fuel one gentleman told me, was how he would drive past petrol stations on the way to work but when he tried to fill up on his return trip the price had jumped by 10 cents a litre. This is outrageous, and there’s no way this could happen under Fuelwatch during a single 24-hour period.
Prices will be locked in for 24 hours.
Michel Atkinson, incidentally, believes a bicycle is the most efficient machine ever created, for he rides everywhere - and obviously understands that by converting calories into petrol, a bicycle gets the equivalent of about two thousand kilometres per litre!
Under Fuelwatch, motorists will even have the opportunity to go home, watch the evening news, and work out whether they should fill the car that evening or wait until the next day.
With the extra information that consumers will have under Fuelwatch, there will ultimately be more competition in the market.
More competition in the market means a better deal for consumers and will help make the Australian economy more efficient.
On any day of the fuel cycle, whether on the more expensive days or the cheaper days, motorists will be able to determine the best price via the internet, the newspapers, or television news services.
The National Fuelwatch scheme is estimated to cost $20.9 million over four years from 2008-09 to the end of the 2011-12 financial year.
It is expected to have annual running costs of $4.6 million.
But one of the very good things about this service is that it is not only going to be of great help to motorists, but is going to save petrol retailers significant amounts of money also.
It costs the retailers next to nothing to participate in the scheme, except the costs of a local phone call to the Australian Competition and Consumer Commission to let them know the nominated price for the next day.
This is in stark contrast to the present system whereby petrol retailers have only two options to find out the price of their competitors petrol.
They can either pay substantial fees to companies like Informed Sources, who pay their staff to drive around recording petrol prices in capital cities, or they can drive around their local neighbourhoods themselves to determine the prices of fuel.
Eliminating the need for both options will free up significant resources for petrol retailers. They will be able to focus on other more important aspects of their business, including service.
There have been some concerns raised about the role of independent petrol retailers under the Fuelwatch Scheme.
In particular there have been concerns about the potential for predatory prices and anti-competitive behaviour that may —and I stress may - be exacerbated under Fuelwatch.
As the majority report noted, large petrol retailers could adopt a ‘rolling price leaders’ strategy, whereby large retailers have different outlets having the cheapest fuel for different areas at different times.
That particular chain would then consistently make the top 10 list of cheapest sites and then unfairly create the impression that that particular retailer had the cheapest fuel.
This would put smaller operators at a disadvantage because they would be less able to employ such a strategy.
However under Fuelwatch such a strategy could be less effective.
Consumers will be able to check which outlets of the large petrol chain is offering the cheapest fuel and not go to the more expensive ones.
So the large retailers would no longer be able to rely on information asymmetry about which outlet was offering the cheaper fuel and would also be unable to quickly raise the price of fuel if they start making a loss.
So if such a strategy was taken by the supermarket chains it could prove very costly indeed.
This is one reason why the Standing Committee on Economics majority report recommended that
“The Government undertake close liaison with independent fuel retailers to monitor the operation of Fuelwatch. The impact on the competitiveness and market share of independent fuel retailers should be an important part of the one-year review of Fuelwatch which the Government has already promised.”
The majority report notes the strong difficulties facing independent retailers - such as competition from the large supermarket chains that have entered the market in the past few years and the economies of scale that these larger fuel retailers currently enjoy.
It is not the intention of this bill to make doing business more difficult for independent retailers. It is to make life easier for them—and for the motorists who buy their fuel.
In summary, I would say this:
The vast majority of Australians, apart from those very lucky ones in Western Australia who benefit through Fuelwatch, are sick and tired of playing what has become Australia’s latest and most expensive game—“Find the cheapest fuel”.
They want direction. They want help. They want to save money—irrespective of what the holier-than-thou Liberals may think.
They are tired of scouring their local neighbourhood checking prices. Tired of driving around in circles examining prices and then making their decision —only to discover that the cheapest service station has hiked the price and it’s now 3 or 4 cents per litre higher than it was when they first saw it 30 or more minutes earlier.
A national Fuelwatch will provide them with the guidance they need.
The Liberals, with their backward thinking, would have us go back to the horse and buggy days. Labor, with its progressive thinking, believes Fuelwatch is currently the best way forward,
I commend the Bill to the Senate, and believe that—through Fuelwatch, pedestrians will no longer include those people who thought they had a couple of gallons left in the tank, but who—sadly didn’t—because they failed to have sufficient money to fill their car.
The incorporated speech read as follows—
The Rudd Government is determined to do everything it responsibly can to put downward pressure on petrol prices and ease cost of living pressures on working families
There are about 15 million vehicles on our roads and 90% of homes with at least one car in the garage —so petrol is an inescapable cost for many, many Australians
In these difficult economic times, motorists are very keen to find the cheapest petrol in their area.
On any given day there’s roughly a 20 cent difference the cheapest and most expensive petrol in Australia’s capital cities.
A difference of 20 cents per litre is worth $12 on a 60-litre tank of petrol
In the context of a tight family budgets, that is a very significant difference
However, as thing stands, motorists have no sure way of finding the cheapest petrol in their area
They are left scratching their heads on where to find the cheapest fuel and when price hikes are to occur
If Senators support this Bill that will change
No longer will a motorist drive past a petrol station in the morning only to return in the afternoon to find a ten cent per litre jump in the price of petrol
Motorists will be able to find out, with certainty, where petrol is cheapest in their area and when petrol is going to rise the next day, and they will have up to 15 hours to buy before the rise and thus save money
Fuelwatch will ensure that motorists will be able to make an informed decision about where to buy the cheapest petrol, at the cheapest petrol stations, at the cheapest times.
In addition to the introduction of this legislation, the Rudd Government has also undertaken two other significant initiatives aimed at ensuring that working families do not have to pay a cent more than they have to for petrol
Firstly, the Minister has provided the Australian Competition and Consumer Commission (ACCC) with tough new powers to conduct formal monitoring of petrol prices, costs and profits, and to report its findings to the Government every year for the next three years.
This will help improve retail price transparency and understanding of retail price movements
Secondly, in March 2008, the Government established the role of Petrol Commissioner to the ACCC.
The Petrol Commissioner’s responsibilities include the oversight of the ACCC’s formal monitoring of unleaded petrol prices in Australia as well as providing an annual report on its findings.
The Petrol Commissioner is able to scrutinise documents and other information from any participant in the petrol supply chain whenever it is deemed necessary to ensure pricing is consistent with international benchmarks
The Petrol Commissioner is also responsible for advising the Government on whether any further powers for the ACCC in this area are necessary or desirable.
The Petrol Commissioner will also oversee the introduction of the National Fuelwatch Scheme envisaged under this legislation
The Rudd Government is convinced that there is a need to promote competition and transparency in the retail petrol market
The fact is that the ACCC has found that an imbalance in fuel pricing information between petrol retailers and consumers exists at the retail level
Current arrangements allow sellers to react more quickly than consumers to movements in retail fuel prices.
The capacity of consumers to take advantage of the most competitive, lowest prices in their local area is limited by intraday fuel price movements (sometimes as often as three or four times per day) and the amount of effort and search costs motorists are willing to incur
In the current market large petrol retailers purchase information on competitors pricing every fifteen minutes.
This means that many of those selling fuel have access to detailed information that tells them in virtual real time what their competitors are charging
With volatile petrol pricing, retailers can use this information to maximise profits
They can, in effect, swap prices on a secret website that consumers have no access to
Consumers, on the other hand, rely on a range of media and websites—not always accurate or up to date—or the existence of the usual fuel cycle to buy on ‘magic’ Tuesday for the cheapest petrol.
Sellers know that that motorists generally don’t know if they are getting the best price or not, which reduces the incentive to offer the lowest possible price
The Fuelwatch scheme, incorporating the 24 hour rule addresses this issue.
For this reason, the Senate Economics Committee, of which I am a member, believes the 24 hour rule is an integral part of the Fuelwatch scheme
It is this rule that allows consumers to plan and to have certainty that they will get the cheapest price.
It is this rule that allows consumers to vote with their wallets —rewarding those who offer good prices and putting pressure on those who do not
It defies common sense to argue, as the Opposition has done, that there is no need to freeze each petrol stations prices for 24 hours to get the benefits of Fuelwatch
To argue that pricing information on the internet alone is enough
Information without a price freeze in no information at all—because that information can change the second after a consumer looks it up
In short, the current information imbalance results in consumer detriment due to the negative effects on competition and consumers
And the primary aim of Fuelwatch is to address this imbalance between petrol retailers and consumers
Contrary to the rhetoric of those opposite, the objective of the government in introducing this legislation is not, and never has been, to guarantee lower petrol prices
Phillip Coorey noted in the Sydney Morning Herald on the 16th of April, the day after the National Fuelwatch scheme was first announced by the Rudd Government, that the Government had made clear that it was not introducing the scheme in order to guarantee reduced fuel prices
And the Rudd Labor Government’s position on that point has not changed since
Labor acknowledges that the price of petrol in Australia is largely determined by international factors
Rather, the Government’s objective, from the beginning, has been to put consumers on the level playing field with retailers
Our objective is to empower consumers to make informed decisions and purchase fuel at the lowest possible price by:
- increasing the reliability and certainty of fuel price information available to consumers; and
- reducing consumer search costs
Nevertheless, it is a fundamental principle of market economics that competition drives down prices and that an information imbalance between buyers and sellers is detrimental competition
It follows that, if you believe in market economics, reducing the information imbalance between consumers should increase competition and thereby help to keep prices as low as possible
As Malcolm Maiden commented in the Age on the 2nd of August, that’s why players in most modern markets accept that regulation to improve the availability of price information is both necessary and inevitable
To quote Maiden:
- The suggestion that the Government is somehow oppressing supermarket groups or petrol retailers by publishing price information about items as fundamentally important to household budgets as food and petrol is laughable.
- Any market worth its salt allows price discovery.
- It is why the Australian share market, for example, has moved from a system of periodic disclosure to one of continuous disclosure, why those wishing to buy and sell are able to access market depth information that show what shares are being offered and at what price, and why insider trading is banned around the world.
In short, Malcolm Maiden’s argument is that if the fullest practicable price disclosure is good enough for the share market, why is not good enough for the retail petrol market
That is a very good argument
And unless Senators opposite can tell us why petrol consumers are less entitled to price disclosure than those who invest in shares, they should support this bill
There is an old saying that the proof of the pudding is in the eating and seems to me that that saying is particularly apt in this case
The fact is that, in my home State, petrol consumers have been eating Fuelwatch for almost a decade and they find it very much to their taste
Surveys conducted by the Western Australian Government and those conducted by the Royal Automobile Club of Western Australia demonstrate that many, many petrol consumers use Fuelwatch and that they generally appreciate the benefits of the service
Its view of Fuelwatch, however, accords very closely to that of the both the Rudd Labor Government and the Western Australian Government
The RAC believes, that the major benefit of Fuelwatch is, and I quote form their submission:
That consumers can ‘take advantage of the lowest prices as:
- They can easily find the location of the lowest price
- They know that the price will still apply when they get to the site concerned
The RAC is convinced that sufficient consumers take advantage of service as to keep a downward pressure on prices and that the existence of Fuelwatch enables consumers to buy fuel at a favourable price on any day of the fuel cycle.
The Submission of the Department of Consumer and Employment protection in Western Australia points out that data drawn from the Fuelwatch database in Western Australia provides the most comprehensive picture of retail fuel prices available in any retail petrol market place in Australia
And on the basis of this data, the Department has concluded that Fuelwatch puts downward competitive pressure on fuel prices by enabling motorists to make informed decisions about fuel purchases
Not only does the RAC in WA recognise the benefits of Fuelwatch and the validity of the data provided by the Western Australian Fuelwatch scheme, so, do both sides of politics in WA
The scheme was introduced by the Liberal in WA and retained through two terms of Labor Government for one reason only —because it works
The recent change of Government in Western Australia, provided the Liberals in my home state with a ready made opportunity to review the effectiveness of Fuelwatch and to dispense with it if there was evidence that the system was not working
Mr Buswell, prior to the Western Australian election was a self professed sceptic in relation to Fuelwatch
And, not surprisingly given his scepticism, since the election he has sought advice from his department about the effectiveness of Fuelwatch
However, on the third of last month, the Western Australian reported a quote ‘Backflip by Buswell on Fuelwatch’ based on the advice he has received from his department
Mr Buswell was quoted as saying that the advice he had received, ‘proved that Fuelwatch was working effectively’.
Furthermore, again contrary to his previous position, he said that ending the 24 hour rule would ‘undermine the integrity of the system.’
Fuelwatch is here to stay in WA because it works and in these difficult economic times I hope and trust that the Senate will see fit to ensure that the hard pressed working families in rest of country can also enjoy its benefits.
The incorporated speech read as follows—
I rise today to support the National Fuelwatch (Empowering Consumers) Bill 2008 and the National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008.
As the titles states, this Bill is designed to empower consumers.
It is important to consider this aim in context, because the Rudd Government has kept this motivation at the forefront of our efforts … That is to empower Australian motorists.
Despite the recent and long awaited fall in global oil prices, over the last few years petrol prices have skyrocketed in Australia and this rise has placed massive pressure on household budgets.
A large part of household weekly expenditure is paid at the pump. Children need to get to school or sport; parents need to get to work and all need to get home again.
… Australians are now acutely aware of the cost of petrol when deciding where they need to travel … be it the local shopping centre or a trip to town.
The price of petrol is so intertwined with the daily lives of Australians that few are completely immune, it is difficult to think of life without the weekly trip to the pump.
This need however fuels another reaction at the petrol bowsers from consumers. What Australians can’t stand … what they resent more than anything… is being taken advantage of … and, unfortunately, for all they face this reality weekly.
Australians still and will always believe in the fair go. They feel that everyone should have an equal chance to deal with things as they find them … but what we see in the petrol market is one group of Australians with that chance and another group… a much bigger group … without the same opportunity.
No one is suggesting that if a petrol retailer’s costs go up they cannot raise the price of fuel. Similarly, if the demand rises it is their choice to take the risk of raising prices and the others prerogative to follow or not. This is the essence of market driven competition…
But there is another aspect of competition it’s the ability of those at the pump to make their choices effectively and in their own best interest. Unfortunately this choice has up until now, been extremely limited.
It is this diminished opportunity that the bill before us today addresses.
Current situation - market inadequacy
Currently, many petrol retailers in Australia subscribe to a service provided by the company “Informed Sources”. This company provides a mechanism where by subscribers can access information about petrol prices… around the country… accurate to 15 minutes.
Such information allows petrol retailers to stay on top of price shifts by competitors and react to them. Understandably this information is invaluable to them… …and they pay for it accordingly.
If a retailer raises their price they can know within a quarter of an hour whether their competitors are following. If they don’t, they can drop the price back and not risk losing market share… so far so good for consumers.
However, the reciprocal situation also applies. If a retailer sees within 15 minutes that one of their competitors has raised their price, they can do so as well. In this way as the information is passed so too does the price increase.
This leads to less competition… less transparency… and little or no benefit for consumers.
Without the same immediate information the consumer’s choice is considerably weakened. The consumer cannot be expected to travel between service stations to compare prices… even if they did it may have change by the time they return.
What this situation amounts to is a disparity of information between retailers and consumers on a daily… in fact quarter hour basis…
This is a market inadequacy.
In any case where a market does not have full information or where such information is available only to a portion of those taking part … vulnerability to manipulation becomes a serious concern, the market will tend towards lower competition, and consumers will ultimately suffer.
If petrol retailers were meeting face to face… or even calling one another… and discussing where they would set their prices this would be collusion and illegal.
That a third party is involved in the form of a website is the only thing that currently saves petrol retailers from this dire conclusion.
The competition watchdog, the ACCC, calls this industry practice ‘as close to collusion as you can get’ warning bells should be ringing for all of us.
This is a straight forward proposition. Retailers currently have a clear, comprehensive and up-to-date view of the market and consumers do not. Retailers have the ability to play their part prudently and consumers cannot.
For competition to flourish both of these groups must have full and reliable information.
The Rudd Government has a plan and is committed to ending these inequalities, that’s why we have already established the position of Petrol Commissioner with effective monitoring powers. But Fuelwatch goes even further….
Fuelwatch will help end the discrepancies that exist in the market and the scheme achieves this goal in the simplest and most efficient way… by giving consumers the information they need to make informed choices.
The legislation places an obligation on petrol stations to publish petrol price information on the Fuelwatch website… giving consumers the information they need well ahead of the time they need by 4pm, the day before the prices will be seen at the pump.
The information is readily available to the public as well as the retailers. For the first time in this industry there will be a level playing field for consumers to flex their purchasing power properly.
People want to buy petrol where it is cheapest. The chaos created by consumers in Wester Sydney last month… when 99c fuel was on offer speaks volumes about the desire that exists in the community to make choices about where and when they buy their petrol.
If possible the majority will hunt out the cheapest price for fuel. They will plan ahead… structure their travel times and routes around the purchase of fuel.
The Fuelwatch website will help with this too, allowing consumers access to maps which will allow a quick and easy formulation of a travel plan… that includes a trip past the cheapest pump.
The need for reliability is of central importance to this debate- consumers require full and reliable information on petrol prices. If the reliability of information is not fit for purpose then that information is diminished.
There has been extensive discussion in the other place about the commitment rules which underpin the Fuelwatch scheme.
There is no need to throw our hands up in the air in alarm. It is much ado about nothing…
In a situation where retailers are informed about changes in price by competitors within 15 minutes of the change there is frequent and large intra-day volatility of prices.
… And inevitably leads to frustration and anxiety for consumers who have planned their day around a certain price at a certain location … only to find the price has change dramatically on very short notice.
As I said previously, there is nothing more enraging to consumers than the feeling that they are not being given a fair go… not being given an opportunity to exercise their purchasing power.
Fuelwatch will give consumers a fair go. It allows certainty of petrol price information. It is no good to report prices to consumers at 4pm the day before with no more than a guarantee that those prices will be available at exactly 6am the next morning.
Similarly, a continuous update system like that of “Informed Sources” does not advantage consumers who have to plan ahead. Unlike petrol retailers consumers cannot adjust quickly to a change in price and therefore would draw no benefit from simply having greater knowledge of the volatility.
The fact is that a reporting system without the committal rules would be of little benefit to consumers while providing retailers with a similar anti-competitive arrangement that they now enjoy under “Informed Sources”.
These provisions are a logical good policy response to a serious imbalance in the petrol market.
Good policy also means assessing, where possible, how the policy has operated in the past.
Western Australian Fuelwatch:
The Fuelwatch model is not untested. It has been effectively operating in Western Australia since 2001.
The ACCC examined Fuelwatch WA as a benchmark for recommending a broader national application.
The first thing to note about the Western Australian example is that 83% of motorists surveyed were attracted to the idea of no intra-day fluctuation.
In other areas there has been clear support for the scheme overall. The NRMA a motorist advocacy group has lent their voice to Fuelwatch stating that NRMA research has shown that motorists using services such as Fuel Watch can save approximately $200 per year on their fuel costs.
I also note that during the recent Western Australian election, not one Liberal or National party member was opposed to the scheme.
So it appears to me that Western Australian motorists are happy with Fuelwatch… which is important… it is important because it proves the policy works-, therefore giving consumers the peace of mind and confidence that the playing field is level… like it should be.
There has also been some discussion and debate especially from those on the other side of the Chamber about whether a Fuelwatch scheme will lower prices.
It is important to reinforce that the purpose of the scheme is to level the playing field through dissemination of reliable information designed to encourage competition.
That being said, the Western Australian example once again provides important hints as to Fuelwatch’s effectiveness in this area.
The ACCC found that on average petrol prices in Western Australia were 1.9 cents lower following the introduction of Fuelwatch.
Listening to the Assistant Treasurer explain how Fuelwatch will benefit motorists, he makes a sound case.
The pricing spread—that is, the difference between the lowest and highest petrol price—can be around 20 cents a litre in the same areas of a city on the same day. For instance …
- In Perth this September, the average difference between the highest and the lowest price for unleaded petrol was 18.1 cents per litre.
- Perth motorists, on a 60 litre tank, who used Fuelwatch, could therefore have saved on average up to $10.80.
- In Sydney, where there was an average pricing spread of 19.7 cents a litre—if we had a Fuelwatch scheme, motorists could have saved up to $11.40 for a 60-litre tank.
For the Liberals and the member for Wentworth who we know is out of touch this saving is no big deal. But to motorists in city areas an average saving of around $10 or $11 a tank is worth shopping around for.
Liberals and the Big End of Town:
So what then is the opposition trying to achieve with their bid to block this bill? And more importantly what is their solution to the problem.
Time and time again in this Chamber we have seen the Liberals and Nationals side with multinational corporations and the ultra- rich over working families and those doing it tough.
We saw it in the Luxury Car debate where the Liberals tried to block the revenue measure in favour of Porsche drivers who would save around $22,000 when purchasing a vehicle.
Not bad if you can fork out the capital for a car like that, but not particularly helpful if you are buying an average family vehicle.
They teamed up with the mixed drinks industry on the Government’s Alcopops measures and to this day still oppose the policy in an attempt to try and help the large distillers.
And true to form we saw them siding with large multinationals on the condensate tax exemption.
The Liberals were content, it seems, to let a company boasting massive profits continue to benefit… from a tax concession designed in 1977… to help the regions in the North West Shelf project get established.
If the Liberals vote against the bill before us they will be voting for market inadequacy, a power imbalance and no relief for consumers. We all will know whose side they are on.
And what is their great plan to get more competition into the petrol market? Who would know? The Member for Wentworth has been Opposition Leader for almost two months and has not announced one single policy or plan.
On the issue of petrol all we have is confusion …
One minute the Member for Wentworth is like his predecessor supporting a cut in petrol excise, and then the next as recently as this weekend says he will discard it. The member for Wentworth has no ideas and no solutions on petrol, all he has is rhetoric and bloody minded opposition.
The Rudd Government refuses to go down that path and will stand up for motorists.
Fuelwatch has proved successful in Western Australia. There is no “Informed Sources” type arrangement in WA because none is needed. The information for retailers is there… the information for consumers is there… and the market operates effectively with increased competition and benefit for consumers.
This bill is designed to broaden that benefit to the rest of the country.
All of us want an even chance to act in our own interest. It is reasonable to expect that information so necessary to consumer choice be readily available.
Fuelwatch is a clear and efficient way of disseminating pricing information. It is working in Western Australia. It will work on the national stage.
For these reasons I add my support to this bill and urge members opposite and around this chamber to accept the severity of the problem, acknowledge the fairness of the solution, and act decisively to support consumers in these tough times.
The incorporated speech read as follows—
Our position when it comes to assisting the public is clear. Under Fuelwatch:
The Government firmly believes there is a need for greater competition and transparency in the petrol market.
Motorists should not be left wondering where to find the cheapest fuel and when price hikes are to occur.
The National Fuelwatch Scheme will help motorists buy the cheapest petrol, at the cheapest times.
Under the National Fuelwatch Scheme, petrol stations in metropolitan and major regional centres will be required to:
- Notify the ACCC of their next day’s prices by 2pm the day before;
- Maintain this advised price for a 24 hour period; and
- Apply the scheme to unleaded petrol, premium unleaded petrol, LPG, diesel, 98 RON and biodiesel blends.
The petrol price information collected from these petrol stations will be made available to consumers through:
An email and SMS alert service informing subscribed consumers details of the cheapest fuel in their area;
A national toll free number where motorists can locate the cheapest petrol in the area they are looking to purchase fuel: and
A National Fuelwatch website with station by station, day by day and suburb by suburb petrol price information.
On any given day there is roughly a 20 cent difference between the cheapest and most expensive petrol in Australia’s capital cities. Fuelwatch can help motorists find the cheapest petrol in their area. A variation of 20 cents per litre is worth $12 on a 60-litre tank of petrol.
The Government requires the support of the Opposition and the Independents to get Fuelwatch through the senate. If Fuelwatch is supported in the Senate, the scheme will be up and running by the 15th December this year.
Public hearings were held in Karratha, Perth, Brisbane, Rockhampton, Adelaide, Sydney, Melbourne and Canberra.
The most compelling evidence which has come from the State which has tried and tested a scheme such as Fuelwatch is naturally Western Australia.
It is interesting to note the Liberal WA Government introduced Fuelwatch, inconsistent to the opposing position of the Federal Liberal Opposition.
On the evidence the Economics Committee heard as follows:
Fuelwatch in WA is really about transparency. It has never claimed to be an answer to the worldwide shortage in fuel that we are experiencing at present. It is really about letting consumers know about prices in the next 24 hours, and, if they choose, enabling them to make decisions about where they will purchase their fuel.
On average at the time of the hearing consumers were saving between 13c and 14c for most types of fuel in Perth.
Interestingly data over the last six months in particular, as fuel prices have increased, the attention paid to Fuelwatch has significantly increased. People are increasingly using WA Fuelwatch as a source of information.
Information was provided suggesting that Fuelwatch has not had a detrimental impact on pricing in WA relative to the eastern seaboard over several years. In the month of June evidence suggested that the average price for petrol was 3c cheaper than in Melbourne, 4.2c cheaper than in Brisbane without the subsidy 2.4c cheaper than in Sydney and 2.6c cheaper than in Adelaide.
At the time of the hearing in Perth there was certainly some information that suggested that fuel prices in Perth are more attractive than they are elsewhere.
Even Senator Abetz at the Perth hearings appeared to support the benefits of Fuelwatch. In a question to Mr Rayner of the Department of Consumer and Employment Protection, Western Australia he stated:
Senator ABETZHansard Fuelwatch Inquiry
“Mr Rayner, on The 7.30 Report on 29 May 2008 you stated that Fuelwatch saves the consumer the effort of driving around looking for the cheapest prices. I think that is right, …”
Mr Mike MULLINS, General Manager, Gull Petroleum WA
Mr Mullins1 think consumers are best served when there is vigorous competition in the market, - - .
What Fuelwatch has done is provide readily available information into fuel prices and held them constant so that that information can support purchases, and I am sure there is a segment of the market that values that.
Mr Mullins went on to say “somewhere in that mix Fuelwatch has added some value, and others are probably blissfully unaware that it even exists”.
Mr David MOIR, Executive Manager, Member Advocacy, Royal Automobile Club of Western Australia
“I guess, unlike a lot of the other people from whom you will be hearing over the course of your inquiry, it is no benefit or loss to the RAC if Fuelwatch is or is not introduced on a national basis, provided of course that we retain the existing scheme in WA.”
The RAC was there in its capacity representing their member base, of 680,000 members in Western Australia.
The biggest value that Fuelwatch does provide is as a community or consumer education tool. In other words, it encourages good competition by feeding that element of economic theory, which is buyer information and seller information.
At the moment, without some scheme such as Fuelwatch, which provides locked in proactive information about the range of prices available on any given day, consumers are largely in the dark about what price they should be paying.
On question in relation to changing the price of fuel within the 24 hour period, Mr Moir stated:
“The other concern we have about giving retailers the opportunity to change within the 24-hour cycle is that it takes away the rigour that they have to go through at the moment in setting a price.”
They can, if they wish, set a fairly high price and then just wait and see what their nearby competitors do and then, if they choose, drop the price.
This is what happens in other states and there is nothing inherently wrong with that in a purely unregulated market, but if you are going to have a Fuelwatch system that is intended to inform consumers, you need to have some certainty that, having told them what the price is, they can actually go and buy it at that price.
On the impact of independents, In WA we heard Mr Moir from the RAC of WA state “We have not seen any evidence that Fuelwatch has been a detriment to independent retailers in Western Australia”
WA Fuelwatch has been in place for seven to eight years. If they were struggling before Fuelwatch came in and if Fuelwatch imposed unreasonable demands or costs on independents that made it difficult for them to survive, you would imagine that in the seven to eight years that Fuelwatch has been operating a significant number would have left the industry. There was no evidence presented that made us aware of that the proportion of independents in WA is any different or the rate of decline of independents post-Fuelwatch is any different from the rate of decline of independents pre-Fuelwatch.
In fact, we understand from the Department of Consumer and Employment Protection that in fact the number of independents may have increased slightly during that time.
Ms. Driscoll, Commissioner for Consumer Protection, Department of Consumer and Employment Protection, Western Australia position was:
“Of course, one of the key criticisms and allegations about Fuelwatch has been that it impacts on the composition of the marketplace in terms of retailers. That has not been our experience in WA. The sole operators or independents have increased in proportion in WA. Previously they were in the order of two per cent of the marketplace and are now six per cent of the marketplace. Independent chains have continued to be approximately 13 per cent of the retail marketplace. I think, importantly, it is also relevant to point out that the independent chains have continued to have extremely competitive prices, often the cheapest, and as a consequence have maintained their market position while also being very competitive in that field”.
Mr Samuel from the ACCC in Melbourne hearings said on the Effect of Independents: - - - “If you want that assurance let me say that the experience in Perth, as it has been elsewhere, is that the smaller independents have tended to consolidate into larger groups, be they the larger retail groups like the United’s, the Gulls, the Neumann Petroleum’s, or the larger groups supplied by wholesalers such as the Liberty group and the like.
He stated that Fuelwatch had an adverse impact? The answer to that is no.
Independents have been smart entrepreneurs in developing their businesses in a manner where they are able to use initiatives such as expansion of groceries, food items and more importantly mechanical repair work.
Mr Stephen MARSHALL, State News Director, WIN Television Rockhampton, Queensland
Introduced a fuel-watch segment, which was basically designed to just inform people about fuel prices during the day.
Every day in the markets of Far North Queensland—which is Cairns, Townsville, Rockhampton, the Sunshine Coast and Toowoomba—our crews, who are out all day, are basically collating prices from petrol stations in their region during the day and, of an evening.
Mr Samuel—Chairman, Australian Competition and Consumer Commission comment at the Melbourne Inquiry on Fuelwatch:
Mr. Samuel Chairman of the ACCC reported on the econometric modeling of Fuelwatch. The econometric modelling was designed to do one thing: it was designed to compare the pricing of petrol in Perth before and after the introduction of Fuelwatch with the pricing of petrol in the eastern seaboard states, including South Australia, before and after the introduction of Fuelwatch. It does just that.
The purpose of the econometric modelling was to see whether or not Fuelwatch’s introduction in Perth had done any damage to consumers. It concluded it had not. That is the purpose of the econometric modelling. It is what the data demonstrate.
To dispel the myths on the econometric view Professor Harding presented in hearings, it was the observation of Dr. King from the ACCC indication that Professor Harding violates the first law of statistical inference, or the first law of econometrics, in his second submission he picks and chooses his data. That means that his second submission has no statistical validity. Every test he does in there is, from a statistical perspective, wrong.
Furthermore, Dr. King’s observation of Professor Harding’s bias submissions was, he looked at the east coast data and he said, `Well, I don’t like Adelaide. Adelaide appears to verify Fuelwatch.
In terms of relative prices, the price in Adelaide—the relative petrol price in Adelaide—goes up relative to Perth around the time of Fuelwatch. I’ll throw that out.’ He then turns to Melbourne. He says, ‘Oh gosh, the relative price of petrol in Melbourne goes up compared to Perth around the time of Fuelwatch’s introduction. I will throw that out.’ He then turns to Sydney and he then says, `Ah, Sydney seems’, and to quote him, ‘more stable. There is a stable relationship.’ In other words, that is what he is looking for, and he then runs his tests on that.
It means that every test Professor Harding carried out from that moment had no legitimacy as a matter of statistics.
Mr Samuel went on to assert:
Fuelwatch is designed to give motorists all that information, to tell them where they can save not 2c, not 2.6c, not 1.9c, but where potentially they can save the difference between $1.34 and $1.61, or at least get below that average of $1.43, rather than pay the $1.61 and then having frustration, confusion and anger at the fact that they feel they have been ripped off because they had not realised that around the corner or elsewhere down the highway there was another service station selling at potentially 25c less than the one at which they bought their fuel.
Mr. RENOUF, Director, Policy and Campaigns, Choice Magazine
Choice has long supported the idea of a Fuelwatch scheme. We called for it and we are pleased that the government has adopted it. I guess the point is to talk about why we support it.
In addition to the evidence, which suggests that there is likely to be some modest price benefit to consumers most of them, but perhaps not all—the important thing about Fuelwatch, or some similar scheme, is that it promotes transparency in the market, gives consumers certainty, and reduces the search costs that they currently face in trying to work out where to find the cheapest petrol. Those costs include not just time; they also include money in the form of petrol driving to places that they did not want to be.
There is a lot of evidence to suggest consumers do not like intraday price changes and that they want to know where they can go on their way home to get petrol at a price that they expect and anticipate.
Supporters of Fuelwatch:
NSW Liberal Leader of the Opposition Barry O’Farrell, March 30th —Media Release
“Fuel Watch will put motorists —not the oil companies —back in charge.
“It will also ease some of the wild fluctuations in weekly pricing which frustrate motorists so much. This will ease the burden on families and pensioners by helping drive down petrol prices. This is about putting the interests of motorists’ wallets ahead of oil company profits.
It will put an end the common frustration for motorists of driving past a petrol station only to find when they return hours later the price has jumped by ten cents a litre.
The Western Australian Liberal Government
The Western Australian Government web site promotes their Fuelwatch as, providing prices for all types of fuel from most WA retailers and from 2:30pm each day we give you tomorrow’s fuel prices! This means you can always find the best price for fuel in most areas potentially saving you hundreds of dollars each year.
Fuelwatch WA Survey Results
Year 2007 and contemporary survey figures and comments from consumers in WA as conducted by the Department of Consumer and Employment Protection showed:
- In 2007 73% of those surveyed reported they used Fuelwatch, of these 65% satisfied;
- Comment, “stick with issues that affect Tasmania and those that you have some competent knowledge about”;
- Comment, “please consider your statements more carefully into the future”;
- Comment, “In spite of negative comments, I believe the Fuelwatch service is invaluable”;
- Comment, “I was appalled to hear on the radio yesterday some Senator saying that the WA Fuelwatch system had not done anything to reduce petrol prices. As is the case with many of these people who think they know but do not, there is more to the apple than meets the eye.
When it comes to choices the Rudd Government is transparent. We on this side of the chamber have no issue in allowing people to make choices, in particular working families who are making ends meet in tough times.
Choices on whether or not they purchase their fuel on the way to work or on the way home, without having to worry of the extreme fluctuations in prices at the pump.
Choices on which petrol station they can purchase the cheapest fuel at the cheapest time.
When it comes to choices the sceptics on the other side of the chamber only know of one and that is Workchoices.
Do they need to be reminded that Workchoices put them out of Government.
Do they need to be reminded that Workchoices was overwhelmingly rejected by the majority of Australians.
Under the past Governments position the only choices they were able to offer were Workchoices.
Insidious legislation from a past era which provided only one choice the “take it our leave” position.
Like Workchoices the opposition is now trying to deny people the right to have choices in purchasing fuel at times and locations of their choice.
Under Fuelwatch rather than guessing the best time and the best place to buy petrol consumers will know where and when to buy the cheapest petrol in town.
Motorists will be able to map out their trip —for example, from work to home —and see the prices being charged by all of the petrol stations along that route.
Motorists will also have a warning of pending price hikes and be able to plan their petrol purchases accordingly.
With the Fuelwatch scheme, motorists will be able to access information on petrol prices through:
- An email and SMS alert service informing subscribed consumers details of the cheapest fuel in their area;
- A national toll free number where motorists can locate the cheapest petrol in the area they are looking to purchase fuel: and
- A National Fuelwatch website with station by station, day by day and suburb by suburb petrol price information.
- Fuelwatch ensures that motorists will be able to make an informed decision about where to buy the cheapest petrol, at the cheapest petrol stations, at the cheapest times. No longer will a motorist drive past a petrol station in the morning only to return in the afternoon to find a ten cent per litre jump in the price of petrol.
- The government is committed to delivering responsible economic management. Fuelwatch will only provide further stimulus to the economy to assist working families in making informed decisions where to purchase fuel at cheaper prices.
- Those opposite really do need to decide. Are they going to continue to be economic vandals or are they going to get behind Labor’s economic packages, like Fuelwatch so that it can protect those who need it in these difficult times?
I thank the witnesses, in particular those who appeared before the Economics Committee Inquiry into the introduction of a National Fuelwatch Scheme and provided valuable information.
The incorporated speech read as follows—
I rise today to make my contribution on the National Fuelwatch (Empowering Consumers) Bill 2008 and the National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008.
The Minister for Competition and Consumer Affairs, Mr Bowen, during his second reading contribution aptly described this bill as one aimed at assisting motorists “… in buying the cheapest petrol, at the cheapest petrol stations, at the cheapest times.”
Indeed, the primary aim of the National Fuelwatch scheme is to empower consumers, by providing them with the necessary tools to make an active choice when it comes to filling up their tank.
The Scheme is also designed to bring an end to the wild intraday fluctuations in prices that currently occur and provide intraday pricing stability.
In light of unpredictable world oil prices and the global economic crisis, the power of stability and choice take on an even more valued meaning.
And as most of you would be aware the Economics Committee recently handed down its final report on the bills.
The final report supported the findings of the interim report handed down earlier this year in recommending that the Senate support the passage of the National Fuelwatch Scheme.
The Committee noted that a National Fuel Watch scheme if passed would “empower’ consumers and give them “…access to useful information about today’s and tomorrow’s prices —not just yesterdays.”
We have all seen over the last five years, oil prices soar and a significant increase in the cost of petrol. That is why it is so important to do everything reasonable in our power to assist motorists get the best price at the bowser.
As petrol prices have increased so has the strain on the weekly family budget. Consumers are now faced with the reality of each time they make their way to the bowser having to fork out $70 and over sometimes to fill the family vehicle with fuel.
The Rudd Labor Government understands that the rising costs of living are having a damaging effect on many Australians weekly budget.
That is why the Government, on the 15 March, in response the ACCC’s report, proposed this initiative and why we are here today to debate the National Fuelwatch (Empowering Consumers) Bill 2008.
And as the title of the bill attests, the National Fuelwatch scheme will do exactly that—it will empower consumers to make informed decisions.
Motorists will be given the information required to empower themselves to make smart decisions to shop at the petrol station which is offering the cheapest priced fuel.
For too long Australian consumers have been forced to sit back and be the victims at the mercy of the big petrol retailers.
The Government’s proposed National Fuelwatch scheme aims to bring this to an end by promoting greater transparency and addressing the imbalance that currently exists between consumers and big oil companies.
The scheme will empower consumers to seek out the best priced fuel in their local area, and motorists will be able to base their decision on real time information.
The National Fuelwatch scheme will arm consumers with the necessary price information to help them make smart decisions about where to purchase their petrol from.
Evidence submitted by the ACCC during the course of the Senate Economics Committee inquiry into these bills, also suggested that the introduction of Fuelwatch may also encourage a greater degree of healthy competition between retailers as buyers become better armed to shop around for the cheapest price.
The National Roads and Motor Association in their submission to the inquiry supported the ACCC’s comments, stating that “ by having to quote fixed fuel prices for a 24 hour period petrol retailers will have to make better judged and more competitive choices on fuel price?
This information available to consumers under a National Fuelwatch scheme has the potential to provide substantial savings, motorists will be in a position where they are able to knowingly access the cheapest petrol in their local area.
The Government believes that an initiative that provides some real savings to people, especially in the current global economic climate, can only be a positive thing.
These Bills will introduce a number of key requirements that would occur under a National Fuelwatch scheme.
Specified petrol retailers would be required to notify the Australian Competition and Consumer Commission (ACCC) of their next day’s fuel prices by 2:00 pm each day
Petrol retailers must then sell at their notified prices from 6:00 am the next day and maintain these notified prices for a 24 hour period.
Failure to notify or maintain the notified prices by petrol retailers is a civil penalty.
The ACCC will be responsible for implementing and administering the National Fuelwatch scheme, as well as investigating and bringing civil proceedings against those who breach the bill.
The Senate Economics Committee recommended that the data collected by Fuelwatch be made available by the ACCC to independent researchers to allow open analysis of the scheme.
The Committee also recommended that there be a designated review of the scheme after 12 months to monitor effectiveness and any impact on independent retailers.
This bill is a necessary step to help bring transparency back into the retail petrol market, the practical reality to date has been that the average motorist has little or no means of comparing the price of fuel at the various outlets in their local area- short of driving around each and every one!
We all would be aware of the impracticalities associated with the exercise of actually driving yourself around to each and every petrol station in your local area.
Not to mention the significant costs involved with undertaking such an activity, which would significantly outweigh any financial benefit the consumer may experience from finding the cheapest petrol in their local area.
The Governments National Fuelwatch scheme is based on the successful model currently operating in Western Australia.
The scheme will allow for fuel monitoring to take place via the Fuelwatch website, text messaging or an email message giving motorists information of the cheapest petrol in a particular area with a minimal amount of fuss.
Currently the lack of a means of comparison has meant that the majority of Australian motorists have, up until this point, been at the mercy of petrol retailers.
In fact up until this point, apart from motorists living in Western Australia, and those with access to ad hoc WA style fuel motoring systems, Australian motorists have had no practical means of comparison when it comes to fuel prices and little or no choice about how much they pay at the bowser.
The Federal Government’s proposed Fuelwatch Scheme aims to bring this blind uncertainty to an end.
If passed the Fuelwatch scheme will equip Motorists with the reliable price information they need to make decisions when it comes to how much they pay at the bowser - something all in this place should support.
The proposed Fuelwatch scheme is a direct result of a report received by the Government in December 2007 from the Australian Competition and Consumer Commission - the Petrol Prices and Australian Consumers: Report of the ACCC inquiry into the price of unleaded petrol.
The report made a series of recommendations relating to the Australian refining/importing, wholesale and distribution petrol markets and the Trade Practices Act 1974.
It also importantly recommended that the current imbalance of information between buyers and sellers in the fuel market should be addressed. Specifically it found that this imbalance between retailers and consumes occurs at a retail level.
The report also found that the capability of consumers to take advantage of the lowest and most competitively priced fuel in their local area is currently limited by fluctuations in the price of petrol; with the movement in price sometimes taking place three to four times a day.
Meaning the amount of effort and search costs consumers are likely to incur significantly inhibits them from taking advantage of the lowest petrol prices available in their local area.
However the Governments National Fuelwatch scheme will remove those barriers by providing this information to consumers via a simple click of the mouse.
As outlined in the Explanatory Memorandum by the Assistant Treasurer Mr Chris Bowen the introduction of a National Fuelwatch scheme, if supported by those opposite, will provide the following benefits to Australian consumers;
It will empower consumers to make informed decisions and purchase fuel at the lowest possible price.
It will increase reliability and certainty of fuel price information available to consumers.
It will reduce consumer search costs.
It will address consumer anxiety by eliminating intraday fuel price volatility.
It will address the existing information imbalance between petrol retailers and consumers.
It will promote competition in the retail fuel market.
The benefits to consumers from the Government’s proposed Fuelwatch are evident, by introducing a scheme which requires petrol retailers to lock in a fixed price for the sale of petrol over a 24 hour period consumers will receive the benefits.
Information will be available which details to consumers the location of the petrol station in their local area which has the cheapest fuel for the 24 hour period.
Such a scheme will see the elimination of consumers having to needlessly drive around their local area searching for the petrol station which offers the cheapest priced fuel.
This information will now be presented to motorists in a range of ways, either via a website, text message or email.
Fuelwatch will also help to create healthy competition between local petrol retailers, if one station is aware of a rival station down the street offering fuel at a cheaper price, then they are far more likely to reduce the price of their petrol in an effort to attract more customers.
A National Fuelwatch scheme will also solve the problem of intra day price movements in some instances petrol stations vary their price quite considerably during the day
The National Fuelwatch scheme will alleviate this intraday price movement, consumers can be safe with the knowledge that the price they see advertised at the petrol station in the morning is the price that they will be able to access at night on their way home from work.
The Governments proposed Fuelwatch scheme will not allow for these intra daily price fluctuations to occur anymore.
As I mentioned earlier there is already a working example of a successful fuel price monitoring service operating in Western Australia, making it a perfect example of how a National Fuelwatch would operate.
The Western Australian Fuelwatch scheme was introduced in January 2001 in response to a parliamentary select committee report.
The WA model monitors the price of petrol, diesel and LPG within metropolitan Perth and 52 other regional areas covering around 80 per cent of retail outlets across the state.
Each day by 2pm petrol retailers are required to provide the petrol, diesel and LPG prices which they will place in operation from 6am the next day for a period of 24 hours.
These fuel prices are readily available for consumers to access via logging onto the Fuelwatch website, they are reported on the evening television news and they are also published each day in the main morning newspaper.
Many people are also taking up the option to receive text messages or emails detailing the cheapest petrol prices in their local area.
A survey conducted by the WA Department of Consumer and Employment Protection has shown that over 90 per cent of WA motorists are aware of the states Fuelwatch scheme.
The study has also found that presently 300,000 people are accessing the Fuelwatch website per month. Over 32,000 people are receiving daily emails outlining the cheapest fuel in their region, and 60 per cent of people indicated that they actually use Fuelwatch.
These figures demonstrate how popular and widespread the use of Fuelwatch is in WA, it has provided consumers with real information so that they can make informed choices about where to buy their fuel from.
The Fuelwatch scheme has also received considerable support including from Choice’s CEO Peter Kell, who in a letter to Minister Bowen in January stated that
And I quote “Choice… would strongly support the introduction of a national scheme based on the WA Fuelwatch model by the Government”
Indeed, Tasmania’s peak motoring body, the RACT also reiterated the strong need for a petrol monitoring system in Tasmania, while giving evidence as part of the Senate Economics Committee’s formal inquiry into Fuelwatch Scheme.
The RACT General Manager told the inquiry that it “… supported the Western Australian style Fuelwatch…” and its support was based on “… the need to provide reliable price information… to Tasmanian motorists.”
The final report by the Senate Economics committee released on the 14 October into the proposed National Fuelwatch scheme, outlined many positive recommendations as to the value Australian motorists would gain from the introduction of a National Fuelwatch scheme.
The report found that and I quote
“Consumers using Fuelwatch will save themselves time and money by knowing which petrol stations have the lowest prices. Even consumers that do not use the scheme can indirectly benefit, as having better informed consumers seeking out good prices will reward retailers who lower prices for all customers’”.
The report also found that retail prices of petrol in Perth have fallen in comparison to prices of eastern capital cities. No alternative factor was found as an explanation for the drop in the price of fuel in Perth.
The Economic committee report into the National Fuelwatch (Empowering Consumers) Bill 2008 recommends that the Senate fully support the introduction of a National Fuelwatch scheme.
As has just been highlighted, the Senate Economics committee report into the National Fuelwatch Bill 2008 has many benefits for the adoption of such a scheme.
The scheme will help provide far greater transparency and competition in the petrol market. Real competition between petrol retailers can only be a good thing for many Australian consumers currently suffering under the weight of the global economic crisis.
No longer will motorists be left driving around scratching their heads searching for a station offering the cheapest petrol. Because Fuelwatch will lock in fuel prices for 24 hours ensuring that intraday price fluctuations can not occur.
It is worth noting that on any given day there is roughly a 15 to 20 cent difference between the cheapest and most expensive petrol available to motorists in Australian capital cities.
A difference of 20 cents per litre when filling up a 60 litre tank of petrol equates to a saving of $12, over time this becomes a significant amount of money, the Government’s petrol monitoring scheme will help consumers make these savings.
Because Fuelwatch will provide easy to access information so consumers can make the best possible decisions about where to purchase the cheapest petrol from.
I therefore call on all senators to support the Government’s National Fuelwatch scheme.
I would like to close the debate on behalf of the government. Firstly, I thank senators who have taken part in the debate on the government’s National Fuelwatch (Empowering Consumers) Bill 2008 and the National Fuelwatch (Empowering Consumers) (Consequential Amendments) Bill 2008. The National Fuelwatch bill will introduce a national Fuelwatch scheme—Fuelwatch—to promote competition and transparency in the retail fuel market. The government’s policy objective in introducing a national Fuelwatch scheme is to address the existing imbalance in retail price transparency between retailers and consumers, along with reducing intraday pricing volatility. The ACCC, in its report Petrol prices and Australian consumers, raised concerns about the relative imbalance in pricing transparency between consumers and petrol retailers. The government considers Fuelwatch to be the only option that will address both the existing imbalance in retail fuel price transparency and consumer concerns about volatility in intraday prices.
The bill addresses the existing imbalance in retail price transparency by introducing a requirement for petrol retailers to notify the ACCC of the standard retail price for each kind of motor fuel they offer for sale the next day, and for the information to then be made public. Fuelwatch allows consumers to ascertain the cheapest fuel price in their area, but it also provides consumers some certainty about buying fuel at the cheaper price. Consumers will be able to access daily price information on the ACCC’s website, or through other mechanisms to be determined by the ACCC, such as an email or SMS text-messaging service. In terms of coverage, the bill provides that Fuelwatch will apply to all petrol retailers that offer motor fuel for sale. It is intended that initial coverage of the scheme will apply to all metropolitan and major rural and regional areas from commencement. These areas will be prescribed in the regulations. Further, to ensure that other regional and rural areas have the opportunity to participate in Fuelwatch, the bill enables the Minister for Resources and Energy to make further declarations to select other localities to be covered in the scheme.
I want to now turn to some issues raised in the debate. Before I do, however, I want to make one fundamental point—and this is relatively unusual for any new initiative of any government—we actually do have an existing Fuelwatch scheme that has been tried and tested and has been found to have a positive impact. We actually have a working model, and it is over in Western Australia. I just want to make that point, because it is unusual in policy terms to have a working model already in existence to which we can turn to provide proof—in this case, supporting proof—of a national scheme which we intend to introduce. So, if the Senate will allow it to, Fuelwatch will deliver real outcomes for consumers. It will address information asymmetry in the petrol market and allow consumers, with certainty, to buy the cheapest fuel in their area. How, otherwise, does a consumer find out where the cheapest fuel is available? How do they do it, short of driving around suburbia and inspecting petrol stations to see where they can get the cheapest fuel, or having some sort of informal price contact system, such as ringing a neighbour who lives opposite a petrol station? Practically speaking, it is very, very difficult. Then, of course, you do need certainty, having been informed that this particular petrol station has cheaper fuel than another station, that you can purchase that fuel at the price that is advertised. This is fundamentally what Fuelwatch is doing for Australian consumers. It addresses the information asymmetry in the petrol market and allows consumers, with certainty, to buy the cheapest fuel in their area. And that has to be an improvement on the current circumstances that face consumers in this particular market. As I have said, Fuelwatch is working well in WA. There is clear evidence the scheme has reduced price margins in WA relative to those in eastern states. There is no evidence to suggest, as has the Liberal opposition, that such a scheme will increase prices.
Senator Joyce went further—and this is a very unfortunate trend that is being established by some members of the Liberal-National Party opposition—and got into personal abuse and false claims about the motivations of individuals in the bureaucracy. Senator Joyce asserted that the former petrol commissioner, Pat Walker, ran away from Fuelwatch. That is simply not true. Mr Walker is a big supporter of the scheme because he has seen how well it works in Western Australia, and he has experienced the real benefits of the scheme. Let me share with you a few quotations from consumers in Western Australia. Mr Jacob, in Darlington, WA, says:
Dear Prime Minister, As a devoted user of Fuelwatch in WA I am very pleased that you plan to ensure that motorists in all states will be able to access information about who sells which fuel type at what price. The Opposition’s policy clearly reflects the lobbying influence of the big oil companies.
Gavin, in Duncraig, WA, says:
Dear Kevin, Please forget what the Opposition … is saying about Fuelwatch. It works in WA and will work nationally.
Alistair, from Lesmurdie, WA, says:
Dear Mr Rudd, I am an aged pensioner and have used Fuelwatch via my email address for several years. There is no doubt that I have saved hundred of dollars in this period. Sometimes the saving can be 10 cents. The argument put by Dr Nelson—
obviously he is referring to the former opposition leader—
Andrew, in Winthrop, WA, says:
Dear Prime Minister, As a Western Australian, I have benefited enormously from Fuelwatch in terms of savings and so does a great number of Western Australians. I do wonder what the fuss is all about when it has helped us so much.
So we have numerous people in WA who have identified it as a benefit to consumers in WA. And interestingly, the Liberal Party in WA supports Fuelwatch. The Liberal Party, now in government, is not going to abolish Fuelwatch in WA. They support it because they have recognised the benefits that Fuelwatch will confer on consumers.
With Fuelwatch we want, in essence, to make shopping for petrol no longer a guessing game. We want to remove some of the uncertainties that I referred to earlier. If we take yesterday morning in Perth, for example, the pricing spread—that is, the difference between the lowest and highest petrol price—was 21c per litre on a 60-litre tank of petrol. That would represent a saving of $12.60 on the tank if it were replicated in eastern Australia. The option is not available to motorists outside WA. Let’s be clear: the biggest supporters of Fuelwatch are the consumers themselves. The consumers are empowered. They make the decisions. That is what the purpose of Fuelwatch is. The biggest opponents of Fuelwatch are big oil, vested interests and the Liberal and National parties—at least, at a federal level.
Senator Abetz says it is false. The opposition are opposing Fuelwatch. They are going to vote it down. Senator Abetz should get on the phone to the new Premier in the Liberal government of Western Australia.
Senator Abetz, get on the phone and ask the Liberal Party in WA, now in government, why they are not getting rid of Fuelwatch in WA. They support it. Yet at a federal level the Liberal Party do not support Fuelwatch. They should get on the phone and learn the lessons and the benefits of Fuelwatch in WA.
In our view, the opposition are being typically negative. They have a go at anything positive that this government will do, in a whole range of areas. When we put forward something that not only is positive for consumers but will benefit consumers, and where there is a good working example in Western Australia, the Liberal opposition, in typically negative fashion, oppose it for no good reason. So the only place that motorists will receive the benefits of Fuelwatch, if this bill is voted down, is WA, under a Liberal government. There is great irony in that.
As I understand it, in the vote that will occur in a couple of minutes on the second reading of this legislation, regrettably the measure is likely to be voted down. It is going to be a sad day for consumers in Australia. We have advanced the arguments for Fuelwatch and its positives: the consumer power, the downward pressure on fuel prices, the advantages to consumers. We have a good, longstanding working example in Western Australia, supported by both the Labor Party and the Liberals—
Senator Abetz says it proves nothing. As I said earlier, it is unusual in public policy terms to actually have a working example that has been proved successful at a state level in WA—
Senator Abetz keeps saying, ‘No, it hasn’t.’ As I said, he should get on the phone to his own political colleagues in WA. The new government in WA, the Liberal Party—the Liberal-National Party, I should say.
I am not sure you know it is better, because you are fast discovering that you get treated like doormats over in WA, Senator, from what I have been reading about how the Liberal Party are treating you—but that is another issue for another day.
We have a good working example in Western Australia, and are the new Liberal-National Party government in Western Australia going to get rid of Fuelwatch? No. They have promised to retain it, because the Western Australian Liberal-National Party government have recognised, rightfully, that for many years Fuelwatch has been a good scheme on petrol pricing for consumers.
It will be interesting to watch the vote of the WA Liberal-National Party members in the Senate when we vote shortly. They come from WA and their state political colleagues are supporting and will maintain support for Fuelwatch, but they come across the Nullarbor, get rolled by the Liberal Party over here—squashed by the Liberal Party and the National Party—and will vote against what their state colleagues in WA have done and have promised to maintain. What hypocrisy! What a negative, carping approach to a positive program to assist consumers in Australia!
Like the continual interjections from Senator Abetz: negative, carping, having a go at anything, not analysing the success of the program we are putting forward on the evidence that is available—that is, WA. As I said, if this legislation is voted down as a result of the Liberal-National Party failure to understand the issues and their failure to examine the evidence and look at the positive outcomes, it will be a sad day for Australian consumers. Shame on you, Senator Abetz!
That these bills be now read a second time.