Queensland Premier’s Fuel Price Interventions Draw Heavy Criticism
This week the Queensland Premier, Steven Miles, unveiled a series of proposals aimed at reducing fuel prices across the state, a move that has sparked significant controversy and backlash from industry stakeholders (see here for full coverage). The proposals, particularly the idea of capping daily fuel prices at 5cpl and establishing 12 state-owned service stations that would operate on a cost recovery basis, were widely criticized for being developed without adequate consultation with anyone and for lacking clarity on how they would be implemented or whether they would achieve their intended outcomes.
The Proposed Interventions
The core of Premier Miles’ plan revolves around introducing a 5cpl price cap on daily fuel price increases, which he argues would protect consumers from excessive price hikes.
The idea is the brainchild of the RACQ who floated the idea a few weeks ago, also without any detail of how such a scheme might work or any modelling of what it would do to average petrol prices. At the time of the RACQ announcement, the QLD Treasurer, Cameron Dick, quite rightly responded by stating that there was no legislative mechanism currently available to Australian State Governments to enforce such a measure.
Alongside this, the Premier suggested adoption of the WA Fuel Watch model to increase transparency in fuel pricing and enhance real-time monitoring to foster a more competitive market.
Most controversially, and in the same breath as stating that the Government’s aim was to encourage the entry of more independent servos in the market, the Premier stated that the QLD government would establish 12 state-owned service stations to deliver fuel on a cost recovery basis only. Yes, that’s right, 12 government-owned service stations in a market of around 1780 sites (i.e. just 0.7% of all sites) that would have the effect of lowering average fuel prices across the State.
Lack of Industry Consultation
The proposed interventions have faced immediate pushback from the fuel industry, which was notably left out of the consultation process. Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), has been particularly vocal in his criticism.
In a recent statement, McKenzie expressed frustration over the lack of industry input, stating, “These proposals were developed in a vacuum, with no consultation with the fuel industry. There’s been no clear explanation of how a price cap would be enforced, what criteria would be used to set it, or how it would benefit motorists in the long run.”
The proposal to establish state-owned service stations to compete in the market while simultaneously calling for more independents to enter the market, demonstrates a complete lack of understanding of business investment. “Why would anyone start up a business in a market where the government was going to compete with them on a ‘cost only’ basis?”, McKenzie asked
McKenzie further warned that such interventions could have unintended consequences. “Without a clear understanding of how these measures would work in practice, there’s a real risk that they could backfire, leading to reduced competition and likely higher average fuel prices in the long term,” McKenzie added.
Questioning the Efficacy
The skepticism was not limited to the fuel industry. Leading economists also questioned the efficacy of the proposed interventions.
Shane Oliver, a respected economist who has frequently commented on the complexities of fuel pricing, weighed in on the debate, arguing that government intervention in fuel pricing is unlikely to deliver the desired outcomes.
“There’s a fundamental issue with capping fuel prices,” Oliver noted in a recent press interview. “Fuel prices are influenced by a range of factors, including global oil prices, exchange rates, and local taxes. Simply capping the price doesn’t address these underlying factors and could distort the market, leading to supply shortages or reduced service quality.”
Oliver also pointed out that the history of price caps in other markets suggests that they are often counterproductive. “When you artificially cap prices, you remove the incentive for suppliers to compete, which can lead to less choice and higher prices in the long run. It’s not a sustainable solution,” he said.
Uncertain Benefits for Motorists
The most significant criticism of the Premier’s proposals is the lack of evidence that they would result in lower fuel prices for Queensland motorists. Critics argue that while the idea of a price cap may be appealing on the surface, it fails to address the complex dynamics that drive fuel prices.
Moving Forward
As the debate over the proposed fuel price interventions continues, there is a growing call for the Queensland government to reconsider its approach. Industry leaders and economists alike are urging the Premier to engage in meaningful consultation with stakeholders to develop a more nuanced and effective strategy for addressing fuel price concerns.
“Any policy aimed at reducing fuel prices must be developed in close collaboration with the industry and grounded in a realistic understanding of the market,” McKenzie emphasized.
“Our industry is happy to work with any government of any political ‘colour’ – or any opposition party – on the development of solutions that are practical, sustainable, and help to address growing concerns about the impact of fuel prices on the cost of living of all Australians”, McKenzie added.
“Ambushing our industry with bizarre proposals that have no precedent anywhere in the world, let alone Australia, could reasonably be interpreted as being disingenuous to the stated goal of reducing cost of living pressures”, McKenzie said.
In the meantime, the proposals remain under heavy scrutiny, with many questioning whether they will ever see the light of day in their current form. The QLD opposition has stated that they oppose the proposal for state-owned service stations but would look more closely at the proposed daily price cap.
ACAPMA will also be making formal representations to the state motoring body, the RACQ, seeking access to the modelling that they reportedly claim to have that indicates that a daily price ‘cap’ measure will reduce average petrol prices for Queenslanders.
“In the face of a majority view suggesting that the measure will increase average prices, not decrease them, it is incumbent on the RACQ to release the research they claim to have that suggests the contrary”, concluded McKenzie.
This debate is likely to continue in advance of the October 26 Queensland State Election and ACAPMA will be engaging with both the QLD government and the QLD opposition in the interim.
ACAPMA
