15 January 2015
Transcript - #2015006, 2015

Interview with Stephen Cenatiempo, 2NM Today, Hunter Valley

SUBJECTS: Price of fuel, ACCC Fuel Monitoring Report

STEPHEN CENATIEMPO:

Federal Small Business Minister Bruce Billson, he joins us now. Minister, Good morning.

MINISTER BILLSON:

Steve how are you? And good morning to you and your listeners.

STEPHEN CENATIEMPO:

Whose fault is this?

MINISTER BILLSON:

There are moving parts in the petrol industry and I have said previously how petrol prices move around is one of the great mysteries of life - and what we need is to better understand the forces at play. The account you provided is the same as what I have observed and many motorists have observed- that the price of crude oil has come down.

We have seen in some areas good discounts, good price reductions being passed through to motorists.  And in other places those reductions have been modest at best and appeared at a glacial pace- so this is why I have given a new direction to the ACCC to produce its broader price monitoring reports quarterly so that it is more timely and we are more able to see where these irregularities appear.

But secondly a new power, a new tasking for the ACCC is to do a deep dive into specific markets where these curiosities emerge: to shine a very bright light on what is going on and make sure motorists are being looked after.

STEPHEN CENATIEMPO:

But Minister what does that mean? Monitoring the situation is not going to help. We know what the situation is and we know where the problem is. It is in the bush.

Now it is all well and good to say that this is all very mysterious as how the petrol price in Sydney has arrived at and there is the Singapore exchange and all of these things to take into account, but we are simply talking about the difference in price between what somebody in Macquarie Fields in Sydney pays and somebody in Muswellbrook in the Upper Hunter pays.

MINISTER BILLSON:

Yes I think you are right that we know there is something going on but I do not think you are right in saying everybody knows what it is. This is half the problem, and this direction I have given the ACCC empowers them to actually go to the players in the petrol supply chain to force them to produce documentation, find out who is making big margins and potentially price gouging our consumers.

Why is it in some areas where there are strong independent fuel retailers that competition is bringing good value for motorists? In other areas where you might just have one or two of the big players, they kind of look at each other and unless one or the other is taking a lead you do not see the price reductions come down. Now that is the deep analysis that is required.

In some cases it may provide evidence of anti-competitive conduct, that is a part of this important work, but in other cases it may well explain someone in this supply chain is making a behemoth margin. There is an opportunity for someone else to get involved, or as we have seen in Armidale, when the heat is put on through the local media and through the kind of analysis we are describing, miraculously you see a change in prices.

STEPHEN CENATIEMPO:

Minister why is this not already happening? Is that not the ACCC’s job as it stands?

MINISTER BILLSON:

Well they had a previous tasking by the previous Government which was for an annual report on what had happened in the previous years. Now that is a gripping read if you want to know what happened 12 months ago but that does not help motorists here and now.

That is why I have re-tasked the ACCC to do more timely work to deal with these movements, understand what is happening in the supply chain, but then to follow through. If they find these irregularities and these curiosities, then to go deeper. Do the deep dive, understand what is at play. That will at least shine a very bright light and inform consumers.

It may also reveal anti-competitive or unconscionable conduct that can be pursued further. But above all, it is making sure that consumers, that motorists can count on efficient pricing in fuel which is not what we have seen in some areas.

STEPHEN CENATIEMPO:

So you are saying that once the ACCC has done this deep dive as you call it, there will be legislation to pull companies into line?

MINISTER BILLSON:

There is legislation there now. They key thing is evidence. The key thing is having the data, the material to see where there may have been a breach of the law. In other areas Steve, and we have seen some in your listening area where there may be a single supplier of fuel, that individual has enjoyed that position because they are making very healthy profits, a very substantial margin - and the analysis might reveal that if you have not got any competition, you do not get the most efficient pricing.  And that will encourage independents to enter markets where there are these big profits being secured purely because some of the players can do that because there is no competition on them.

STEPHEN CENATIEMPO:

What are independent retailers saying to you though Minister? I mean they are the people that are bearing the brunt of this…and really it is the small business out there that is suffering. What are they saying to you?

MINISTER BILLSON:

A couple of things. They have said good on you going after these …. (cuts out)… that have seen a distortion in the fuel market, that have seen parts of integrated businesses shifting profits from say a supermarket operation into a fuel retail business so as to wipe out the competition and then have a freer rein on pricing. That has been the feedback.

The independent smaller businesses have been saying making sure those discounts are within the range of an efficient margin for a fuel business enables all fuel businesses to compete, but there is a billion more litres going through independent retailers.

They know we are for real. We have put the resources into the ACCC. Action has been taken where there is evidence of unlawful and anti-competitive conduct and they have also welcomed what we have done with this change of direction. Providing more timely information and importantly, the chance to dive deeply into aspects of the fuel market that do not seem to be making any sense and where consumers are not having their interests protected.

STEPHEN CENATIEMPO:

When are we going to see a resolution to this though? When are consumers going to see the boards out the front of petrol stations change?

MINISTER BILLSON:

We have seen some change already as I mentioned earlier in the Armidale example. We have already seen some changes in terms of what is happening with fuel pricing distortions as a result of very substantial shopper dockets that saw margins actually increase. Whilst people were comforted they were getting a big discount, they were getting a discount off a much higher petrol price to begin with. That has already happened.

We have seen the independents step up in many markets putting real pressure on the big guys and in some of the capital cities we have seen new entrants like Costco in Canberra keeping the big fuel retailers honest and then we have seen when Costco shuts, the fuel price goes up.

So there are things at play there. The motoring organisations have welcomed this change in approach. There is also some new technology that I think will help too Steve where you can get pricing information off fuel cards, feed that into an app, tell the motorists where the best value is. All of that is happening as well because there are many moving parts in this fuel pricing debate.

STEPHEN CENATIEMPO:

Minister I have information that says the ACCC is only going to look at areas where there is four or more players in a market. How is that going to help small towns like Denman and Sandy Hollow and Merriwa where there is only one service station in town?

MINISTER BILLSON:

I think your information is wrong Steve.

STEPHEN CENATIEMPO:

Ok so we are going to really go to the individual…

MINISTER BILLSON:

Absolutely. Where there are four or more players in town you have got every prospect of competition. Where you have got fewer players in town that is exactly where we tend to see the kind of concerns that you and I are discussing so I do not know where you got that information from but it is dead wrong.

STEPHEN CENATIEMPO:

Ok. Alright I will accept that. How much of an impact does taxation play on our fuel prices at the moment?

MINISTER BILLSON:

It plays a part. We have got I think the third lowest rate of taxation in the developed world on our fuel, but we are very dependent on our fuel. So taxation plays a part and that is the role of a quarterly report: to put out there exactly what the level of taxation is on our fuel. That is why we are informing consumers what the factors are at play having an impact on fuel prices. Taxation is part of them.

We are by no means up at the high end, we are actually down at the lower end, but that is one element. Obviously the price of oil, what OPEC is doing in response to the North Americans discovering more oil and meeting more of their domestic needs,  that is what is driving the changes now where we have seen 4-year lows in petrol prices.

So there are many factors at play and for your listeners, another key area for me is in the diesel area. I understand about half of all the diesel consumed at any given year in horticultural and agricultural districts is around harvest time, yet we need to make sure that diesel supply is reliable and affordable after we have seen shortfalls in some areas of the market which  has had a real impact on primary production.

So there are a range of fuel factors. We could talk about LPG. When the Saudi benchmark price goes up LPG seems to go up in a nanosecond, but then it comes down it seems to come down at a glacial pace. There is a whole range of issues in there Steve and that is why we have changed this direction to the ACCC and I have given them a new tasking.

STEPHEN CENATIEMPO:

So the report today from the ACCC was the first of these quarterly reports, is that right?

MINISTER BILLSON:

The release today was the announcement but the first quarterly report will come out in February. That will be the first of those reports and that will set the tone where we will get more timely information about what is happening in the major capital city markets in 160 regional centres around Australia. What are the influences at play? Who is making big margins and why? And then we have got the scope for the deep dive to go in and very closely where there are curiosities and irregularities in pricing that are harming consumers.

STEPHEN CENATIEMPO:

Well Minister we might talk more in February then about what the scope of that dive is going to mean once that report comes out.

MINISTER BILLSON:

Happy to do so Steve. Take care.

STEPHEN CENATIEMPO:

Appreciate your time this morning.

MINISTER BILLSON:

Alright mate bye.