I thought it was worth getting the Federal Minister for Small Business, Competition and Consumer Affairs, the man who has been able to give the ACCC these extra powers to look into petrol pricing, and have a chat.
Bruce Billson is his name, Federal Minister for all those things. Minister good morning.
Chris great to speak with you in this New Year.
Happy New Year to you and yours as well. However it has not been a happy new year for motorists largely in regional parts of Australia, despite seeing massive media coverage for the prices plunging in capital cities.
It has actually underlined the very reason why I have given the ACCC additional horse power and tasking to actually go and look deeper into what is going on in particular markets, particularly in the regions.
We have seen in some capital cities, and it is different for different capital cities, and really the magic seems to be where you have got very competitive and vigorous independent retailers keeping the big guys honest, that seems to be where the biggest price reductions have occurred.
But then we look across the regions, we see some where the decline has been welcome but only a fraction of what was seen in capital cities and some of the tired explanations about fuel in the tank and stock and these sorts of things just do not ring true.
There is something else going on and that is why we have tasked the ACCC to have a quarterly monitoring of what is going on in the capital cities and major regional centres.
Look at margins, look at what is happening with the price of oil, look at what is happening with retail prices and what is being published at terminal gates in terms of the wholesale price and get a clear picture in a more timely way of what is happening on a quarterly basis.
Then a new tasking that says where you find things that are not explainable or seem to not ring true, dive deeper. Find out what is going on and what the rationale or arguments are for these curiosities in price movements.
That is all well and good, and I do not wish to sound ungrateful or impatient on behalf of motorists here, but how long will it take for that kind of power to start having an influence on what regional (basically everywhere outside of Sydney) is paying for its petrol.
We have already done other things that have made a start. Getting a handle on shopper dockets, which for people that like them they feel they are getting a great discount and if you do not use them there was actually a growth in margins at the time those shopper dockets were there, so that is part of it.
We have already also started with the quarterly monitoring reports and I imagine we will release some of that work early in the New Year.
To be honest with you, from our discussions and others, it has generated an awful lot of examples that have come to me and the Commission that target which regions, which markets should be the early candidates to do the deep dive work.
I know the Riverina is one area; I had information in from Tamworth last night about what the retail prices were there.
Interestingly, there is even a change in the way diesel is being managed and marketed where for primary producing industries more than half the amount of diesel used in the whole year happens during those weeks of harvest, and there is some stuff going on there as well. We have got plenty of good content on where those deep dives should start.
They will commence early in the New Year. Depending on what they are I might not announce the particular regions until the work has commenced, so we do not foreshadow to areas where we think something odd is going on and that they change their ways just because they know we are looking. But we will make those announcements.
I am getting a recommendation from the ACCC about where petrol pricing is at its most curious and irregularities seem to be evident and that is where we will put the bright spotlight to work out what is going on and make sure motorists and consumers are being looked after.
What is the timeframe for that?
We met just before Christmas, we compared our shopping lists, my list from feedback from you and your listeners and colleagues – Michael McCormack has been hot to trot on this, so has Barnaby and a number of others so they have not been shy in coming forward with pointing to examples in their regions – and the ACCC from its work and its monitoring also has some areas of curiosity.
That work program for the coming year, I will get a recommendation on that probably in the next week, we will settle on that a few days later and then we are away.
Okay, I will have to speak to you when you have got that list of towns, when you can publicise it because I would bet you if you announce that you were going to investigate the fuel prices in town X the fuel prices in town X would suddenly fall quite dramatically.
That is exactly right and that is why we will be thoughtful in the way we make that information known so we can get right to the heart of what is going on.
It certainly seems that in some areas there are behemoth margins being extracted at the cost of motorists and frankly there might be some rife opportunities for new entrants to come in and say I can give better value to our motorists.
A range of possibilities arise out of that deep dive and that is why I have introduced that new tasking for the ACCC.
… Bruce Billson, you have mentioned the supermarket companies a couple of times. We rang one of them yesterday because we thought let us actually see if they can explain to us, and it is something you and I have spoken about in the past, how it is that a bar of chocolate can cost $2.50 in Double Bay and $2.50 in Broken Hill or why a packet of biscuits can cost $1.55 at Albury and $1.55 at Lismore.
We had asked them can you explain that, and they said ‘We do not comment on fuel prices, we do not want to put someone to talk to you, we just follow the local market’.
This seems to often be the explanation – that it is what it is, which does not really tell you a whole lot. I noticed even in today’s media in some of the national newspapers there are questions being asked of freight companies that service the major supermarket chains just what they are doing as a consequence of the fuel price reduction.
Because they are certainly in a position to negotiate hard, and I am always told that they do, to extract every bit of value they can out of their suppliers. And I would have imagined that you would see a broader freight cost reduction which should bring some benefits but that is part of the mystery that surrounds fuel, particularly in regional areas, where the freight task represents an additional cost yet it is surrounded by so many mysteries and is so opaque.
That is why I thought it was important to give the Commission some new tools and new tasking.
Minister I know your time is tight this morning so a couple of quick questions if I can get a very quick answer.
One –is there any justification, bearing that the price of oil has dropped by more than 50 per cent in the last six months, for anywhere to still be charging north of the $1.30 a litre for petrol?
I would be very surprised and curious to hear the explanations for that. Where you are talking about big regional centres where the volume of fuel and the amount that is held in stock is no factor.
If you are talking about somewhere thousands of kilometres away from a terminal, then that is a different proposition and interestingly I have also heard from the boating fraternity that they have not seen full value coming through when you want to fill up your boat on some of those marine related fuel areas.
So there are some particular characteristics which would add to cost but in the general run of things, particularly for the regional centres that you and I are concerned about and talking about, that spread seems really hard to justify.
Indeed, I know there are groups springing up, there has been one in Canberra recently on Facebook where people are now starting to monitor petrol prices themselves. Should it have come to this?
I think it reflects the fact, and it is frankly something that is not discussed enough, consumers are incredibly powerful in this conversation.
I mentioned earlier what a great contribution competitive independent fuel retailers make to fuel pricing. Where they are around you see the big guys seem to dial back their pricing. Where they are not there and you are left with one or two of the majors, then you see these large margins.
So with that initiative in Canberra for instance, they are telling Canberra motorists where the best value is and encouraging people to take their hard earned dollars there.
Another thing we have introduced is the ACCC producing information on the so-called price cycle. That one where the price seems to follow waves, and in some cities it is a longer cycle than others.
They are providing information to motorists saying if you are going to fill up – today is probably a better day than in a couple of days’ time given the trajectory of the price cycle. Motorists are empowered, their hard earned dollars can really change behaviour, I think what is happening in Canberra is really good actually and should be encouraged.
I know some of the motoring organisations are also getting on board. I think there is a real opportunity here, and I know I have spoken to some fuel retailers where you could collect the data from fuel cards and actually process that in real time and spit out the information on an app that actually says for where you are the best priced fuel within X period of travel time.
That is one of the ‘information asymmetries’, as the economists describe it. That is, the fuel companies know to the nanosecond what is happening with the price of petrol, whereas you and I we might need to motor around in our ride to try and find what it says on the price boards.
So we are at a bit of a disadvantage in terms of knowing exactly what is going on. Actions like what has happened in Canberra, I reckon that is fantastic but it reminds us at the end of the day the consumer dollar is a powerful influence in all of this.
Indeed it is, Bruce Billson, always good to speak to you, thanks for talking to us.
Take care Chris.