The deal done to allow petrol discounter Burmah into the Canberra market has cost Canberrans about $6 million, according to ANU economics researcher Sandra Navall. Ms Navall competed an honours thesis on petrol pricing last year. She argues, “”The full costs of enticing Burmah into the Canberra market have been effectively hidden. The immediate savings to motorists are not enough to offset the fall in revenue to the ACT Treasury and the losses to existing service station operators.” Burmah’s entry into the Canberra market 15 months ago has caused on-going controversy.
The Minister for Consumer Affairs, Terry Connolly, has defended the move saying it has brought cheaper petrol and something had to be done to break the stranglehold of the major oil companies. The Motor Trades Association of Australia has argued that the deal with Burmah was unfair because it got a prime site on a trunk route for virtually nothing and resulted in major losses to existing service stations. The MTAA says it was a political stunt which hid underlying costs which would have to be borne by Canberrans generally. Ms Navall calculates that the Government’s gift to Burmah was roughly a 5 cents a litre advantage over other retailers of which Burmah has passed on only 2 cents a litre to motorists. In fortuitous timing the price of crude dropped making the cut look bigger than it was. MTAA has asserted that Burmah is part of Shell in any event. It says that the cut in bowser price did not affect a large part of the market which was on other discount arrangements. Ms Navall said the ACT Treasury would lose land tax and rates revenue from existing retail petrol sites, because the values of the sites had fallen.
She calculates that the difference between the cheaper petrol and the lost revenue and business losses leaves a net loss of $6.4 million. She said the ACT policy was mistaken because it had been based on dissimilar Sydney and Melbourne conditions. “”In Canberra, the advent of high volume service stations has been thwarted by restrictive planning guidelines and entry barriers,” she said. “”In fact, planning policies have encouraged the existence of low volume sites. Most are off main roads, geographically dispersed in suburban shopping centres or groups together in larger commercial and retail areas.” The lease-purpose system restricted dealers from diversifying into non-petrol activities by limiting the range and floor space available for other goods in order to protect other retailers.
ACT petrol sites had obtained high prices because they had, until Burmah, been guaranteed a local monopoly by planning laws. ACT motorists had been caught by a combination of reduced efficiency and by having to fund the interest bills of site owners who paid large sums for local monopoly rights. Ms Navall the Government should have tackled the problem of high petrol prices through a general attack on the planning restrictions. Mr Connolly has argued that the price of petrol stations has stayed high and that closures of petrol stations were usually temporary and new owners came in, often with more efficient practices. He says more independents are on the way.