Barnaby Joyce (Queensland, National Party) Share this | Hansard source

I move:

That the Petroleum Retail Marketing Sites Amendment Regulations 2006 (No. 1), as contained in Select Legislative Instrument 2006 No. 73 and made under the Petroleum Retail Marketing Sites Act 1980, be disallowed.

I have moved this motion for the disallowance of the Petroleum Retail Marketing Sites Amendment Regulations 2006 (No. 1) because they completely disavow the principle set down by the Petroleum Retail Marketing Franchise Act 1980 and the Petroleum Retail Marketing Sites Act 1980—acts that still stand. Furthermore, the primary legislation is currently being considered, so these regulations bring in the intent of the legislation before its proper debate and passage. If you believe in small business operators, you have to allow a place for them to operate. It is no good saying that you must leave it up to the goodwill and trust of the independents’ competition, the major oil companies, to protect the commercial rights of independents, branded operators and franchisees.

These regulations, removing the restrictions on the number of sites the major oil companies can operate from, do not do anything to address the issue that Coles and Woolworths have, in their association with Caltex and Shell, circumvented the intent of the 1980 sites and franchise acts. In fact, the regulations exacerbate the pressure on the independents, branded operators and franchisees by allowing the major oil companies to actively campaign for the soft centre of the market currently protected by the sites and franchise acts. These regulations will allow total vertical integration, and this is never a reason to reduce prices in a marketplace. The fact that this market regulation has been removed is also a major impediment to getting biorenewable fuels onto the market. Independents are by far the most aggressive in this market. This town is a very good example of that. Of the four stations in Canberra that sell biorenewable fuel, E10, three of them are independents.

The change in the regulations will lead to a similar situation to what happened in the United Kingdom, where the independent fuel stations and other small operators were overtaken by the majors, leading to the loss of mum-and-dad operators, who had been beneficiaries of the profit generated from the fuel retailing trade. The closure of regional fuel stations, as happened in the UK, is another consequence of such regulations and one that should be a major concern for those who represent regional areas. The report by the All-Party Parliamentary Small Shops Group in the UK, High Street Britain: 2015, concluded that independent petrol stations were ‘very unlikely to survive’ in this market.

The argument will be put by some that none of the majors wishes to take over the independent, branded operator and franchisee share, but that is a counterintuitive argument to why they are busting their boilers to get these regulations through. The majors have offered no alternative plan as to how they will protect the independent, branded operator or franchisee sector of the market, which will be vulnerable to the regulatory change. We do not have the power under other mechanisms, such as section 46 of the Trade Practices Act, to protect them. If we let this regulatory instrument stand, we will be saying that the purity of a half-regulated market, which it is, is more important than participation by a wide cross-section of retailers. We will look rather hypocritical if we later endorse strict restrictions on who operates where and why in the cross-media ownerships laws.

I suppose it is who has the greater push in Canberra, and it is not the mum and dad operations when up against the might of motor oil companies. I understand that the conservative parties have a reason to say they promote the objectives of big business. I look forward to observing how this chamber will deal with the opportunity that has arisen to protect small family operations from the larger major oil companies. Maybe I am disconnected from this issue in Canberra, but that hardly explains those who have come to my office and lobbied absolutely vehemently to have these protections in place. These people are from organisations such as the NRMA, the Victorian Automobile Chamber of Commerce, the Motor Trades Association of Queensland, the Motor Trades Association of Australia, the Service Station Association, Renewable Fuels of Australia and myriad smaller organisations and operators.

So I am of the strong belief that I am representing key small business organisations that The Nationals in Queensland said we would represent at the election when we gave the promise that we would stand against the overcentralisation of the retail market. What this regulation does is bring about the oligopoly of retailing, which will be held by four oil majors in conjunction with Coles and Woolworths. They have an obligation to extract the best return for their shareholders, so relying on their good will in respect of the rights of independent, branded and franchisee sites to participate in the fuel market is against both their corporate responsibility and their optimum specific return on capital.

If the major oil companies get total control of a retail market, they have a corporate responsibility to exploit it so as to get the best return for their shareholders. If I were a shareholder of theirs I would expect absolutely nothing less. This was understood clearly in 1980 when the coalition government brought about the sites and franchise acts. It has always been the intent of the conservative side of politics to protect small business operators. The issue remains the same, but we are now changing. We are moving that which the coalition government set out to protect in 1980.

Since the repeal of this legislation allows the major oil companies the keys to complete control of the retail sector—and experience elsewhere, such as in the UK, says that this is what they will achieve—then naturally enough you are giving the oil majors the chance to put their margins up and maintain them there in the long term. In the current fuel price environment, I do not know whether that is what the public wants or will find palatable, that we are passing a piece of legislation that will give complete vertical integration and market control to the major oil companies, which are already exploiting their position in the market in such a way to extract a return that has brought about an up to 300 per cent increase in their parent company’s share price in the United States. I refer there to Chevron.

The 130,000 retail outlets represented by the Motor Trades Association of Australia have unanimously supported my position. That accounts for $113 billion in turnover annually. Ninety-five per cent of these outlets have less than five employees, which means they are the quintessential small business, non-unionised workforce and, as displayed by this regulatory change, they are not represented or supported by the major oil companies and those who have the major oil companies’ ear. A couple of nights ago on The 7.30 report was a Mr Jim Lamb, who represents only a handful of stations. He is the sole independent I have found who is on the side of this regulation change. I understand what he and all independents fear about the security of price and supply. They live by what the major oil companies supply them. Unfortunately, you do not have to worry about supply if you do not have a site to operate from.

Now, with your supplier also becoming your major competitor in the retail market, all I can say to you is good luck in the long term, especially if your site comes up for renewal. You have to remember that a lot of these sites are on three- by three- by three-year leases. At the end of these three-year leases, the oil companies have the ability to walk in and say: ‘We’re not renewing any more. It is not an obligation. The sites and franchise acts are finished. We’re going to take it over.’ They will know where the volume of fuel is going and they will know the margin they can extract. It will be an absolute fait accompli that they will go through their business plan to find those sites that are currently under lease. People say that there is a greater strengthening in the lease conditions, but there is only a strengthening in the lease conditions if they choose to renew your lease. If they do not renew your lease, they kick you out.

There is nothing in this that guarantees the price for those independents left in the market—which they are buying out—to allow them to compete with the major retailers of fuel. The major retailers of fuel will become the major oil companies. The major oil companies are not going to be selling a product to their competitors at a price that makes them uncompetitive. They will have a competitive advantage because they will be both the supplier and the retailer. There is nothing in this oil code that talks about any protections—no ombudsman or ACCC oversight—in how those oil companies will deal with their independent, branded and franchisee operations. Some will pose the position that the ACCC has an oversight; it has no oversight. The ACCC cannot go on a fishing expedition to find problems, nor can they demand information and, even if they do, they cannot come to a binding resolution.

The restriction on the number of sites that the major oil companies could operate from made it essential in the past to supply independent, branded and franchisee sites. Without these sites, their refineries could not operate at optimum capacity. Now, in the long term—not tomorrow, but in the long term—the major oil companies will be able to meet their optimum capacity without utilising independent, branded or franchisee sites. There is no intention to build new refineries, so there is a limited amount of fuel for the market, and you cannot supply fuel you do not have.

So when the major oil companies tell you that they will be supplying all their sites first and that if there is something left over you can have it at their price—their price they decide to sell to you, which will not be the price they are supplying themselves—they will be telling you the truth. There is nothing in this legislation that can stop that from happening. You may have an instance where they say, ‘There is no fuel for you.’ They will say, ‘If we had it, we would give it to you, but it’s all gone.’ They will be telling you the truth. You as an independent, branded or franchisee site will have a major supply crisis because you will not be able to obtain your fuel at a price that will keep you in the market.

Furthermore, certain independent branded or franchisee sites will be an inconvenience, so they will not attain the discounts on terminal gate price that the company owned sites can avail themselves of. This legislation talks about terminal gate price. Terminal gate price is very handy, but very few fuel stations buy it at terminal gate price. Everybody receives it at a discount and a variant amount of discount to the terminal gate price, and the discounts are not disclosed. If I want to put you out of business, I will sell it to you at the terminal gate price, because you will probably be the only one in the market buying it at that price. It will become inconvenient to supply these sites out in regional areas and, when they do supply them, they will supply them at a price that will mean it is unviable for them to stay open. They will not get the travelling trade. When they do not get the travelling trade and therefore close down, that becomes yet another service that is removed from small regional towns to add to the banks, railway stations and post offices that have been removed. In these small regional towns, you will get nothing for your house or very little for your house, so you cannot move unless you want to walk away with little or nothing. Now you have a real impediment on your freedom of movement if you choose to stay or have to stay, as opposed to the impediments that are currently on you in leaving.

What I am saying would be grandstanding and emotive if it was not for the findings of the All-Party Parliamentary Small Shops Group inquiry report entitled High street Britain: 2015 that was carried out in the UK. I would like to comment on some of this inquiry’s findings. Amongst its many observations on the disappearance of the traditional local small shops and independent convenience stores, it also reported on the use of discounts by petrol forecourts and argued that this could be considered to be predatory pricing. The report stated that it believed that the big four, which would be the same big four as here, sell fuel below cost until local competition can no longer sustain the loss margins. This is followed by a sharp rise in price at the multiple retailers’ forecourts. ‘Forecourt’ is their word for petrol station.

This is exactly what I predict will happen in Australia. We are talking about the same companies, the same environment. In fact, it will be exacerbated in Australia because of the distances. The Association of Convenience Stores contends that even superficial research into local markets illustrates that price flexing by a major retailer in towns in close proximity to each other exists. Between 1991 and 2004 in the UK, 8,380 forecourts, or service stations, have gone out of business, with hypermarkets—that is, major supermarkets—now selling over 30 per cent of the fuel sold in the UK despite only operating from 10 per cent of the sites. In Australia, the major supermarkets sell well in excess of 50 per cent of the fuel, so our position is worse than that of the UK’s before we exacerbate it further by this regulatory change.

The report stated that the cessation of trading by small retailers close to national multiples seems inevitable. An example of this is found in Cupar, a town in Scotland which, prior to Tesco—a large multiple retailer—had four petrol stations. Now they only have one. We already have issues in regional areas of Queensland relating to the closure or intended closure of fuel retailing outlets. That is a huge inconvenience for the people who live in those towns, because it is a fundamental of life. How are you going to fuel your car when there is not a petrol station in your town? To people who say that is not going to happen, where is the protection in this regulation? There is no protection. There is no intention to give protection, so we have to accept the consequences that are going to flow from this. Every time you go to a regional area and the people say: ‘We had a town. We had a fuel station. Now we just have houses and a pub,’—the pub will probably survive—that is a consequence of this change that we are about to bring about. It is a consequence for which the conservative government in 1980 realised they had to put in a protection mechanism against.

The evidence in this report is a recent and concrete example of the impact of small business operators being pushed out of the market, which in turn affects competition and, as a result in the case of the UK, led to a rise in the price of fuel for consumers. Under the reform processes that are being put forward, starting with the changes in these regulations, Australia runs the very real risk of mirroring what has occurred in the UK. The short-term benefits shall last till independents disappear. Then the long-term malady will be incurable. You will not be able to get independents back into the market once they are gone, nor will there be the political will to do so. The capacity that we need now to get biorenewable fuels into the market will be gone. Why would the major oil companies want to sell a competing product in ethanol? What would possess them to sell their competing product? What would possess them to supply their competition with fuel?

Whether you are considering the future of small businesses—and I made a clear statement in Queensland that I was going to Canberra to represent the interests of small businesses—or the future of services in small towns, I ask this chamber to strongly consider the implications of this regulation in the way you are about to vote. The consequences of this will be that we will have exacerbated the problems that are currently being experienced in regional areas and, in the long term, we will be leading to an oligopoly in how fuel is marketed. If we had changes to section 46 or something so that we could go out there with some form of protection, we could do it, but we do not have those section 46 changes. We have no mechanism for protecting them, so I will not support this regulatory change.