In an era where the community is becoming more and more sceptical of government, political leaders are scrambling to do things that give the appearance that they are actually doing something.

The increased focus on fuel price transparency by some Australian State and Territory Governments over the past 12 months is a case in point.

In a notable example, the NSW Government recently introduced a mandatory fuel price reporting regulation known as “FuelCheck”. This Legislation was passed together with new biofuels laws in March 2016 – presumably in an attempt to make the unpopular biofuels laws more palatable to NSW motorists – and took effect in early August 2016.

The new laws were touted by both the NSW Government and the NRMA – the State’s peak motoring body – as a mechanism for putting more pressure on the industry and ultimately delivering lower average fuel costs to motorists.

What these claims neglected to mention, however, is that the move essentially amounted to the NSW Government spending money on the duplication of several commercial information systems that were already in place – systems that provided this information to consumers free of charge and at no cost to NSW taxpayers.

Putting aside the dubious claims by both the NRMA and the NSW Government that this duplication was necessary because it provided real-time price information from all service stations in NSW – claims that are not supported by any current interrogation of the current FuelCheck database (System-wide failure of NSW FuelCheck (22-23 January 2017) – the real question is whether the laws have had any effect on average petrol prices in NSW.

While there is a need to exercise care in drawing conclusions about petrol price movements over short periods (i.e. less than a year), it is fair to say that apart from some shortening of the petrol price cycles in the first few months of operation NSW Fuel Check does not appear to have had any impact on average petrol prices despite 6 months of market operation.

But then why should it have?

While price transparency is a good mechanism for allowing motorists to compare prices, past industry research (ACAPMA’s 2015 Consumer Attitudes survey) and usage of commercial systems suggests that motorists generally compare prices by inspecting fuel price boards in their local area – not by visiting fuel price applications on their mobile phones.

For those that do compare prices across a larger area, the existence of fuel price information systems ( like Motor Mouth, Gas Buddy and Petrol Spy) already make fuel price information readily available via websites and mobile phone applications.

But the real reason price transparency doesn’t impact petrol prices is due to the nature of market competition.

Competition in a given market is largely impacted by two elements – the density of service stations within the market and the structure of the market. Not fuel price transparency.

The first element is heavily impacted by planning laws and market demographics. In a city like Canberra, for instance, current local and national planning laws effectively lock out new businesses from entering the market (as a result of new service station sites rarely becoming available).

Even in cases where new sites may become available, a new business is unlikely to enter the market if they perceive that there are already a large number of service stations in the area (i.e. optimal density).

The second element is a little more complex and relates to the degree to which one or more brands may be dominant in a given market. Where such dominance exists, it is likely to have been developed  on historical grounds – not undue competitive behaviour.

That said, the Australian Competition and Consumer Commission (ACCC) is rightly empowered to ensure that the Australian fuel market is openly competitive.

After more than a decade of producing market investigations – including a series of recent regional petrol market studies – the ACCC has largely determined that the Australian national market (and numerous sub-markets) is operating in a competitive manner with no unlawful behaviour being observed amongst Australia’s fuel retailers.

The reality, however, is that Australia’s motorists will continue to complain about petrol prices being too high. In turn, populist politicians chasing votes will do whatever they can to make it look like they are doing things to address these complaints.

“As a recently retired Federal Minister once said to me, no politician ever lost votes by kicking the fuel industry”, quipped ACAPMA CEO Mark McKenzie.

That being said, you really have to wonder if spending scarce government funds duplicating the fuel price advisory schemes that are already provided to motorists free of charge, is a good use of taxpayer funds. Particularly when there are community calls for increasing government expenditure in areas like health and education services.

ACAPMA will continue to monitor the performance of these schemes to ensure that the costs to the industry – which ultimately flow through to motorists – are minimised as far as possible.

“We will also be working hard to ensure that where schemes like NSW FuelCheck are introduced, that the government dedicates sufficient resources to ensure equality of regulatory impact on all businesses – and that they deliver on their claim of providing current fuel price information for all service stations in their State/Territory”, said Mark.

“Failure to do so risks a distortion of market competition that is not in anyone’s interest”, said Mark.

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