Sean Nicholls, 02 December 2015

Motorists are being warned they could pay up to 8¢ a litre more for petrol – or as much as $1.4 billion extra at the pump – if the state government proceeds with measures to boost the amount of ethanol sold in NSW.

Small retailers says they will be forced to introduce the price hike over three years to recoup the cost of upgrades if their current exemption from having to sell ethanol-blended fuel is scrapped without compensation of up to $326 million.

In NSW, major retailers must try to ensure ethanol accounts for 6 per cent of all petrol sold, via the E10 blend. Retailers with fewer than 20 sites are exempt.

But ethanol accounts for only about 2.7 per cent of all petrol sold in NSW.

The issue will be considered by cabinet before the end of the year and as early as this week.

Understood to be under consideration is banning the sale of regular unleaded petrol; removing or changing the exemption for small retailers; and forcing retailers to blend ethanol with premium unleaded.

In 2012, Barry O’Farrell’s Coalition government backed down on a plan to scrap regular unleaded fuel following a backlash after leaked cabinet advice said it would drive up petrol prices.

Mark McKenzie, chief executive of the Australasian Convenience and Petroleum Marketers Association, called on the government to compensate retailers if the exemption scheme is scrapped or altered, without which retailers would pass upgrade costs onto motorists.

He said an 8¢ a litre hike for three years would cover the estimated $326.6 million upgrade cost to retailers not currently selling E10, but “more realistically” they would seek partial recovery of up to $204 million by lifting prices by 5¢ a litre.

However, the rest of the industry would likely take advantage by lifting their prices by slightly less, so the estimated extra cost to motorists at the pump is put at between $295 million and $468 million a year for three years.

Greens MP John Kaye pointed out that Australia’s largest ethanol producer, Manildra, has donated $4.3 million to the Liberals, Nationals and Labor since 1998 and had 20 meetings with nine Baird government ministers since September last year.

“Motorists and small businesses are being shackled to the profits of a major donor in the name of claimed environmental benefits that don’t exist,” he said.

A Manildra spokeswoman said it had been “advocating for the enforcement of the bipartisan legislated 6 per cent fuel ethanol mandate” which “creates local jobs that cannot be exported or outsourced, creates cleaner, healthier air and strengthens our national security”.

Innovation and Better Regulation Minister Victor Dominello said the government “is considering ways to better support the ethanol mandate in a way that is fair and prioritises consumer choice”.

Extracted in full from the Sydney Morning Herald.