Julian McGauran (Victoria, National Party) Share this | Hansard source

I too want to join in the debate on the Petroleum Retail Legislation Repeal Bill 2006. As other speakers have said, the purpose of the bill is to introduce major reforms to the petroleum industry. The bill will facilitate greater transparency in the wholesale and retail fuel markets. The changes in this bill will lead to greater competition amongst the major players, which must ultimately have a positive effect on fuel prices at the pump. Senator Stephens, from the Labor Party Right, said vigorous market competition is one way to hold down petrol prices. That quote was worthy of my jotting down and quoting here in the chamber. That is a quote you would only ever hear from the Labor Party right wing, which has remnants of sense in regard to economics. You would certainly never hear it from the Labor Party Left, epitomised by Senator Carr.

The bill will abolish the Petroleum Retail Marketing Sites Act 1980 and the Petroleum Retail Marketing Franchise Act 1980. These are important dates to remember. The two acts, which once served a purpose, have now become outdated and ineffective. Frankly, the acts are a hindrance to industry competition and efficiency. Moreover, the acts have become a hindrance to many of the small operators whom they once sought to protect. The sites act sets a quota on ownership of petrol stations by the oil majors. The policy was to prevent the oil majors from dominating the market to the extent that competition would be severely reduced. That was a good intention back in 1980. The policy was introduced to protect and encourage an industry that was predominantly made up of small service stations. But that can no longer be said; today the structure has changed.

The Senate Economics Legislation Committee report on this bill tells us that in 1980 there were some 20,000 service stations and that by 2004 the figure had fallen to 6,649. There has been an enormous shift and change in the industry whilst the sites act and the franchise act have been in place. The structure of the industry has completely changed, and the sites act, for one, is now hardly relevant to its original good intentions. With the adoption of multisite franchising arrangements, whereby a single operator or company will legally circumvent the act with franchise agreements to operate several sites, the sites act has, frankly, become a farce.

The two major supermarkets, Woolworths and Coles, own hundreds of service stations. Unless you are the chosen petrol brand of Coles, which is Shell, or the chosen brand of Woolworths, which is Caltex, you are locked out. What about the other two majors: BP and Mobil? Even they are finding it tough. Talk about catering to the big end of town; it just got bigger with both Shell and Caltex linking up with the two major supermarket chains. I want to refer to the economic legislation committee report on this bill. I will quote from what a Mobil representative said about this. He said:

... Mobil’s ability to respond effectively and in a timely manner to the rapid changes in the retail fuels market has been limited by the constraints placed on us under the sites and franchise acts.

The President of BP was also a witness before the committee. He said:

Reform is important to us largely because we do not have the freedom to operate the sites as efficiently as we can and thus to compete as best we can.

The point here is that these two majors have been locked out by the two major supermarkets. They are at a disadvantage, and that is unfair, in that they are uncompetitive against the other two majors. In the long run you may well get the absurd situation where those two, Mobil and BP, merge or just leave town. If they are unable to establish relationships like the other two majors have, it will have a long-term effect. Talk about catering to the big end of town; it just got bigger.

In regard to the franchise act, as with the sites act it has been superseded by the events in the market since its introduction in 1980. It is a fault of the act that it narrows the definition of what represents a franchise agreement. The act does not extend to small business operators or service station owners who have to deal with the petrol companies; nor does it cover the massive number of supermarket sites, independent operators or commissioned agents—all of whose presence has grown in the market since 1980. Certainly the big changes have come about in the past decade. Given these developments in the industry over the past 25 years, it is crucial that the industry adapts. It would be foolish to stand still and maintain the old structures. This is an industry vital to Australia’s economic wealth and its health and efficiency directly affects fuel prices at the pump. To this end, the government will be introducing the mandatory Oilcode code of conduct to replace the franchise and sites acts. I am very interested in that mandatory oil code of conduct given that at the moment the government is debating whether or not to have a mandatory horticultural code of conduct. That is definitely an aside. So to replace these two acts the government will be introducing a mandatory Oilcode code of conduct so as not to create an ethical void with the abolition of the two acts. To quote Minister Macfarlane’s second reading speech:

The package will recognise the power imbalance inherent in the substantial interdependency between some small businesses operating under the franchise and commission agency agreements and their wholesale fuel suppliers, whether those suppliers are oil majors or independent retail chains.

The components of the Oilcode will be a national terminal gate pricing regime; minimum standards for new fuel reselling arrangements; greater coverage for different forms of agreements, such as commissioned agencies; and a dispute resolution service. I would like to further quote from the minister’s second reading speech to give greater clarity and a surety to the other side in regard to the introduction of the Oilcode. The minister said:

The oilcode regulations will achieve this outcome through three key policy initiatives. It will establish minimum industry standards for fuel re-selling agreements between wholesale fuel suppliers and fuel retailers to provide a baseline for negotiations on those agreements. These minimum standards build upon and strengthen relevant provisions in both the franchise act and the more general franchising code of conduct and will provide greater certainty and protection for all parties to fuel re-selling agreements.

The oilcode will also introduce a nationally consistent approach to terminal gate pricing arrangements to improve transparency in wholesale pricing and allow access for all customers, including small businesses, to petroleum products at a published terminal gate price.

That is something we already have in Victoria, I might add. The minister continues:

This approach will not negate the ability of parties to negotiate individual supply agreements nor will it prevent the offering of discounts by wholesalers.

Finally, the oilcode will establish an independent downstream petroleum dispute resolution scheme to provide the industry with an ongoing, cost-effective dispute resolution mechanism as an alternative to taking action in the courts.

So any changes the government can facilitate—with the cooperation of the industry, of course—that support the industry to operate more efficiently are welcome, particularly in these times of high petrol prices. I can say that there are very few more consistently hot button issues in politics than the price of petrol, and for good reason because petrol prices go directly and swiftly to household budgets. It is worthy of note that Australia has the fourth lowest tax regime on petrol of the OECD countries, surpassed only by Canada—just—the USA and Mexico. Nevertheless, I recall that in 2001, when the price of petrol shot up to 85c a litre, a price which seems pretty reasonable now, there was an enormous public backlash against the government in regard to its indexation policy—ironically, a policy initiated by a Labor government.

However, we listened to the public in 2001 and abolished indexation. It is worthy to note that, if indexation were still in place today, the excise tax would be 54c, not the current 38c. I should also add that in 2000, with the introduction of the GST, the federal government implemented further measures to cap and reduce—or suppress—the price of petrol. When the GST was introduced in 2000, the level of excise on petrol and diesel was reduced by 6.7c per litre. Again, in 2001 the government reduced fuel excise by a further 1.5c per litre and, as I said before, in the same year abolished indexation.

In the time available, it is worthy to note that the existing excise tax is 38 cents. Whether it is 80c, 85c or $1.40, the federal tax is static. It is important to say that the federal government receives no windfall from higher petrol prices. In fact, the higher petrol prices are, the more the market reacts and consumes less. Therefore, at the federal level the tax take is less. It is the state governments that receive the big windfall out of this because of the 10 per cent GST on the petrol prices at the pump. You never see them making any commitment to reduce the taxes—not in the last decade—as this government has.

It was a Labor government which refused to sacrifice its budgets and reduce the petrol tax take, but the truth of the matter—as it is known by this chamber and is also generally known and accepted by the public—is that petrol prices are affected by world prices. Though, if you listen to the opposition, you would really think it was this government which dictated the price of a barrel of oil. What I have just said with regard to the tax regime being the fourth lowest in the OECD and the measures the government has taken over the past decade to reduce its take of petrol taxes puts a lie to the Labor Party claim.

The current high petrol prices yet again highlight the energy challenges facing Australia and our need to reduce reliance on oil and develop an alternative fuel market. To this end, only last month the Prime Minister brought down in parliament the government’s energy initiative statement, announcing new measures to further accelerate investment in alternative fuels and to provide Australian motorists with cheaper fuel options. The headline announcement was that the government would ‘bring forward the previously announced rebate for the purchase of new LPG vehicles for private use’. The statement further said that the government will:

… contribute $1,000 to the purchase cost of a new factory-fitted LPG powered vehicle.

In addition, the Government will provide a grant of $2,000 to the cost of converting vehicles to LPG for private use.

The energy statement further states:

While savings will depend on fuel consumption and driving habits, the Australian LPG Association estimates that, on average, the fuel bill for a six cylinder vehicle travelling 15,000 kilometres a year would be cut by $27 a week, or more than $1,400 a year ...

Ethanol blends—which have so often been debated in this chamber—can also make an important contribution to meeting Australia’s transport fuel needs. The Australian government has spent over $55 million to date in production grants to effectively offset the excise on ethanol production in Australia. We have already implemented a range of measures to help companies achieve a target of at least 350 megalitres of biofuels production in Australia by 2010. This government has worked hard to restore confidence in ethanol after the disgraceful campaign waged by the Labor Party 18 months ago or thereabouts.

In question time in the House of Representatives and in the Senate, Labor asked question after question, discrediting and slurring the ethanol industry just for base political purposes to the point that the public really did react against the ethanol industry and the possibility of it ever starting up in this country. They really did scare the public, and we have spent an enormous amount of time and resources to restore public confidence in that industry. And what do you know: Labor are now on board with the ethanol industry. They have done the complete circle. Suddenly, they now think the ethanol industry is worth supporting. They would be right in that respect—of course, they are. At least they see a winner in the ethanol industry. In June this year, Minister Macfarlane held a roundtable conference in Canberra of all the ethanol players. The news coming out of that conference was extremely encouraging indeed for the future of this industry. I will read from part of the minister’s statement:

A national roundtable on ethanol has heard that production of transport ethanol in Australia will have jumped by more than 50 per cent in the last 12 months, from almost 23 million litres in 2004-05 to an expected 36 million litres by June 2005-06.

That is very encouraging to this government, which has been steadily building up the confidence of people in accepting ethanol in their cars, after the disgraceful Labor Party campaign against ethanol.

The reports from the ethanol sector at the roundtable meeting included: BP plans for a hundredfold increase in ethanol sites over the next two years; United Petroleum will increase ethanol retail sites from 67 to 130 by the end of 2006; Woolworths proposes to enter the ethanol market, with 50 sites by 2007; Caltex is to double the number of ethanol retail sites by the end of 2006; and Australian Farmers Fuel has 52 stations selling ethanol and biodiesel blends. So, as you can see, the ethanol industry is getting on its feet and production is increasing.

As I mentioned before, the recent government support for the ethanol industry has been not only through capital grants and research and development grants. We have also given it a honeymoon on excise till the middle of 2011, scaling up to 2015, after which this fuel will be on a competitive footing with other fuels. In short, the news is good in the alternative fuel market, if for no other reason than that petrol prices are so high, thus making alternative fuels even more competitive. (Time expired)