Economy

Never mind the spin – here are 10 real steps to make fuel cheaper

SmartCompany /

The political and media focus on FuelWatch and cuts to fuel excise has obscured a range of measures that could make a real impact on fuel prices, a leading trade practices expert says.

University of NSW associate professor Frank Zumbo says the Federal Government’s proposed FuelWatch scheme will not resolve problems with the competitive structure of the oil industry that led to higher fuel prices.

“There is a lot more that the Government can do to change the fuel market. We need to promote a more competitive fuel industry for consumers and FuelWatch will only scratch the surface,” he says.

Zumbo has prepared a 10-point plan that, if implemented, would result in greater competition in the fuel industry, with key recommendations including:

  1. Open up Informed Sources: The big fuel companies already have what amounts to their own version of FuelWatch, a fuel price monitoring scheme called Informed Sources. Zumbo argues the Government could achieve many of the objectives of FuelWatch by helping consumers access Informed Sources, without the cost and delay of creating the new scheme.
  1. Review the practice of import parity pricing: You might think fuel sourced from Australia would be cheaper than fuel imported from overseas, but thanks to import parity pricing rules, any saving flows to fuel companies rather than consumers. Zumbo says these rules should be reviewed to remove any unjustified gains for the big oil producers.
  1. Make the wholesale fuel market more transparent: Coles and Woolworths get discounts from the fuel companies because they buy in bulk, but the details of their arrangements are confidential. Australian Competition and Consumer Commission scrutiny would ensure competition is not being undermined.
  1. Investigate cosy buy-sell arrangements: Different fuel companies have refineries in different states, but by buying and selling fuel with each other they effectively have a co-operative national network. The ACCC is currently investigating this practice; Zumbo says it is vital the results of the review are made public as quickly as possible.

  1. Increase access to terminal and storage facilities: The fuel companies own the terminal and storage facilities through which petrol is imported into Australia. More regulation is needed to ensure that does not mean the flow of fuel into the country is impeded.
  1. Monitor LPG and diesel prices: The ACCC has been given the power to monitor unleaded fuel prices. Why not do the same for diesel and LPG, given that their prices have increased by as much or more?
  1. Competition laws strengthened: The Government has announced it will do away with the so-called Birdsville amendments to predatory pricing laws. Zumbo, one of the authors of the amendments, argues they should be retained to ensure action can be taken against any predatory pricing in the fuel industry.
  1. Review fuel industry franchise rules: Franchise arrangements in the fuel industry are governed by Oilcode regulations administered by the ACCC. Zumbo says these must be reviewed to ensure independent service stations are able to operate viably and continue to put price pressure on the majors.
  1. Outlaw geographic price discrimination: Why should the same company be able to charge more for petrol on one side of town than the other? Such practices are outlawed in Canada, Zumbo says, and should be prohibited here.

  1. Give courts the power to bust fuel monoliths: The courts should be given tough powers to break up big, vertically integrated fuel companies if their existence is incompatible with a competitive fuel market.

 

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