So Independent MLA Dave Rugendyke wants the Independent Competition and Regulatory Commission to investigate petrol prices in the ACT. His call comes after Prime Minister John Howard agreed not to take the 1.5 cent a litre additional excise that would flow as a result of the inflation spike caused by the GST. Mr Howard went further and agreed to end indexation of petrol excise altogether. Both Mr Howard and Treasurer Peter Costello called on the states to follow the Federal example. They wanted the states to give back to the motorist some of the GST money they get under a formula that includes an amount to replace former state petrol taxes. A Liberal backbencher is going to introduce a private members’ Bill to that effect, but it will quietly die once all the fuss has died down.
There has been a huge amount of political grand-standing on petrol. Mr Howard resisted forsaking the excise for as long as he possibly could, but so much noise was being generated by talk-back radio and the newly victorious Queensland Premier, Peter Beattie, that he eventually gave way – not because it would make any significant difference, but just to get the critics to change the subject. Alas, for Mr Howard they did change the subject – to his lack of credibility in saying one thing (petrol relief was impossible) one day and the opposite the next day (here is petrol relief).
Mr Howard’s move has made little difference. The 1.5 cents a litre is more than the difference typically found between service stations a suburb apart. It was not possible to tell if oil companies had passed the excise cut on to the motorists, despite the grand-standing by the Australian Competition and Consumer Commission. Moreover, service stations had stock upon which full excise had been paid. Various services stations would run out of stock at different times.
There was a further element to the Howard move to be seen to be doing something about petrol so it is taken off the political agenda. He announced he would be “”asking the ACC to examine the feasibility of imposing a cap on fluctuations in retail fuel prices throughout Australia”.
It is economic nonsense, but will go down well with motorists outside Brisbane, Sydney and Melbourne. People outside those cities – including Canberra – rarely get the benefit of price wars and discounting. Canberra gets more than smaller towns, but like motorists in smaller towns Canberrans are angry that petrol prices are far higher compared to Sydney than the extra freight would warrant. Hence Mr Rugendyke’s call for an investigation.
But what would such an investigation find? It would show that there are enough independent operators in major cities to get cheap fuel and retail it, using higher volumes rather than higher margins to maintain profitability. That is competition giving consumers benefits. Unfortunately, it can only happen if there is a fairly large number of suppliers. Those conditions are absent in smaller places. The price cutting usually ends when demand increases – on public-service payday, on Fridays and at school holidays.
But Mr Rugendyke and Mr Howard’s proposals – if they ever came to legislation – would only result in an end to price wars in the city. They would not end in lower prices outside the big cities. Oil companies are not charities.
The root causes of the higher petrol prices in the past six months or so have been the higher international price and the lower dollar. Indexation of excise has contributed to the long-term upward trend (compared to the price of other goods), but not much to the recent spike over which all the political fuss has been made.
It was the wrong response. People worried about petrol costs should not blame the politicians, but should look to alternative transport or being more frugal with their use of cars.