FuelWatch is not an effective means of cutting petrol costs for businesses and consumers according to the peak business group in WA, where the scheme has operated since 2001.
Prime Minister Kevin Rudd yesterday announced the cabinet decision to extend the FuelWatch scheme across the nation starting from 15 December this year.
Under the scheme, petrol retailers will be required to fix their prices 24 hours in advance and inform the Australian Competition and Consumer Commission, which will then provide the information to consumers.
The idea behind the scheme is to make the fuel market more transparent by empowering consumers to go to the service station with the cheapest price.
“This is about more information for consumers to make the market work better,” Rudd said.
But the announcement has triggered furious debate about just how effective FuelWatch will be in exerting a downward influence on petrol prices.
The Chamber of Commerce and Industry Western Australia has watched the operation of FuelWatch in the state for a number of years and come to the conclusion that it does not result in lower prices.
In a research paper prepared last year, CCIWA said that the scheme has been “ineffective or counterproductive” in delivering savings to consumers or businesses.
“The 24-hour rule aims to limit volatility, but in the process it limits price competition between retailers,” CCI WA says.
The view is contested by the Government, however, which cites ACCC modelling showing that the gap between wholesale and retail petrol prices was around 2c less on average in WA under FuelWatch than in other states.
The announcement has also come in for criticism from the Service Station Association, which represents independent service station owners.
SSA president Ron Bowden says the change will make life tougher for service station owners because of decreased flexibility in changing prices and increased compliance costs.
“Before this move is implemented, let’s make sure there’s a net tangible benefit. It’s not clear that there is,” Bowden says.