Last week, The Victorian Government announced that it would conduct a Parliamentary Inquiry into Fuel Prices in Regional Victoria. To be conducted by the Economic Education, Jobs and Skills Committee, the Terms of Reference for this Inquiry include, but are not limited to, the following:
- examining pricing methodology for unleaded, diesel and LPG fuels in regional Victoria;
- examination of why significant pricing discrepancies occur in some regional communities when compared to metropolitan areas and many other regional areas;
- consideration of best practice approaches and initiatives in other Australian states and territories, with a view of reducing fuel prices;
- examining technology and tools that may enable motorists to compare fuel prices;
- considering the experience and pricing impact upon families, businesses and industry; and
- examining regulatory and legislative barriers that may influence fuel prices.
The timetable for the Inquiry has not yet been announced (and nor has it commenced) but the Committee is required to deliver its report to the Victorian Parliament no later than 1 October 2017. Further information about the Inquiry can be found at: http://www.parliament.vic.gov.au/eejsc/inquiries/article/3144.
Ironically, this Inquiry was announced less than four weeks after the ACCC announced that the City-Country price differential had narrowed over the last quarter (https://www.accc.gov.au/system/files/Report%20on%20the%20Australian%20petroleum%20market%20%E2%80%94June%20quarter%202016.pdf).
In fact, the ACCC observed that average prices in 77 regional locations (approximately 41% of monitored locations) were actually lower than average prices in the five largest cities during June 2016.
The ACCC report also noted that petrol prices were the lowest that they had been in 14 years.
A review of the July 2016 Australian Petroleum Statistics – statistics that are regularly produced by the Australian Government (http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-petroleum-statistics.aspx) – shows that Australia has the fourth lowest retail petrol price and the fifth lowest diesel retail price of any OECD Country.
“Within this context, it is hard to see any justification for this inquiry – other than the fact that our politicians simply aren’t reading the voluminous information produced by the ACCC and the Australian Office of the Chief Economist showing Australia’s fuel prices are both low and internationally competitive”, said ACAPMA CEO Mark McKenzie.
“In fact, it is interesting to note that the only component of retail fuel prices that has not fallen – as global oil prices have fallen – is federal government excise on fuel”, continued Mark.
As shown below, at $1.25 per litre, government tax accounts for 42% of the price paid at the pump in terms of federal government taxes (i.e. excise and GST) paid by the motorist. At $1.00 per litre, federal government taxes accounts for 50% of the price paid by motorists because excise remains unchanged.
“While motoring associations and politicians accuse our industry of not passing on all the benefits of lower oil prices, for some reason no one wants to mention the fact that Federal fuel excise has actually gone up in recent years”, said Mark.
In short, Federal Government excise does not move in line with oil prices and actually increases every 6 months in line with CPI.
In essence, the Federal Government’s share of the retail price is preserved – it does not fall when fuel prices fall. The Federal Government tax take therefore increases as a percentage of the total fuel price paid at the pump as fuel prices fall.
Sure, we can argue about whether our industry is passing on the full savings but if we are going to be honest about it then perhaps some of the consumer angst about petrol prices should also be directed at increases in federal fuel excise over recent years.
In fact, you really have to ask yourself why no-one is speaking about this situation.
“Perhaps this is something that the Victorian Regional Fuel Price Inquiry could examine as Victorian Fuel Retail businesses cooperate with yet another fuel price inquiry”, said Mark.