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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2020-06-17 Daily Xml
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Fuel Watch Bill

Introduction and First Reading

The Hon. F. PANGALLO (17:17): Obtained leave and introduced a bill for an act to facilitate the provision of information to consumers regarding the price and availability of fuel for retail sale and wholesale, to regulate the retail sale and wholesale of fuel, and for other purposes.

Second Reading

The Hon. F. PANGALLO (17:18): I move:

That this bill be now read a second time.

I am pleased to introduce the Fuel Watch Bill 2020. This bill is based on a similar bill moved by the member for Florey, Frances Bedford, in another place on 4 March this year. Sadly, the government chose to ignore that bill when it was introduced and has left it to languish on the Notice Paper since—that is close to four months.

On 13 May, the government moved its own legislation in another place, the Fair Trading (Fuel Pricing Information) Amendment Bill 2020. This was in response to the Productivity Commission report, which the government received on 18 March. That is close to two months. To remind members, the government committed to introducing fuel price transparency at the 2018 election, which is over two years ago. The best that can be said is that this government has moved at a glacial pace.

Meanwhile, fuel retailers have continued to manipulate the market at the expense of consumers. Pre COVID-19, we saw a price spike in Adelaide petrol prices that was unprecedented, with prices at some service stations jumping over 40¢ per litre in a single day. In January, the RAA estimated rising fuel prices over the last 12 months were costing Adelaide motorists up to $30 extra to fill their tanks. Now, in a period of COVID, when the global crude oil prices have dropped to a 17-year low, in response to the drop-off in demand as the COVID-19 pandemic hits economies around the world retail petrol prices remain stubbornly high.

In April, CommSec found that retail profit margins are at a record high of 22.73¢ per litre, close to double the average level seen over the past two years. In times past, we would call that profiteering. It is evidence of a fuel market that is utterly stacked against consumers, a market that is dominated by a few large retail chains who predate upon motorists and the smaller independents who are their rivals in the market.

To understand fuel prices, consumers need to have the time and skills of a stockbroker, an extraordinary expectation which stacks the deck squarely against fuel consumers. Not only has the government been incredibly slow in acting to fulfil its own election commitment, but the bill they have introduced is substandard. If enacted, it will deliver a fuel monitoring scheme that will let the price manipulation by retailers continue unabated.

In simple terms, the government's bill will deliver a fuel price monitoring scheme that only the major petrol chains will benefit from. Government members will counter it is the scheme that the Productivity Commission report recommends. That, of course, would be a gross misrepresentation. The commission considered two options in its report.

Option one is based on the model applying in Queensland and several other jurisdictions. This model, referred to as Fuel Check in the report, requires fuel retailers to lodge information about retail fuel prices whenever they change their price, with the data aggregated and available on a portal and able to be used by motorists via an app. Option two is based on the model applying in Western Australia. This model, referred to as Fuel Watch in the report, requires fuel retailers and wholesalers to lodge their fuel price at 2pm each day, with that price guaranteed for the next 24 hours.

The commission makes the point that the choice of which option to implement is a matter for government and parliament. Indeed, the commission makes it very clear that its report does not make any recommendations. I quote from that report:

The Commission was asked to investigate potential models for improving the transparency of fuel prices in SA and improving the information available to motorists when buying fuel. It was not asked for recommendations.

To be fair to the Attorney-General, she has not sought to claim that this report supports the government's preferred model, but it is not clear why she has chosen the Fuel Check model over the Fuel Watch model.

In analysing the available evidence, the commission concluded that both options would deliver around $3 million to $8 million in net benefits for consumers each year, and the commission also states that these benefits are likely to grow over time with increased use of fuel price information by consumers. What the commission fails to explore in any depth is which model will deliver the most benefits for consumers. The only point of difference the report identifies is based upon information provided by retail chains, some of which has been provided in confidence and which is readily rebuttable.

The most tendentious argument raised by the major petrol chains is that there is no evidence to support the effectiveness of the Fuel Watch model. The fact that the Fuel Watch model is based on a scheme which has operated for nearly two decades in Western Australia and consistently delivers the lower retail fuel prices in the price cycle for Perth motorists is blithely ignored.

I understand that the suggestion that the Fuel Watch model delivers the same benefits as the Fuel Check model is utterly rejected by the Western Australians. Rather, they believe Fuel Watch delivers far higher benefits for consumers. Indeed, in Western Australia the Fuel Watch scheme is not only supported by consumers but also by industry, including peak groups such as the Motor Trade Association.

Despite this evidence, the major petrol chains have pointed to a pilot scheme in Queensland which has made scarcely a dent on Brisbane fuel prices, which remain the highest in the country, both on average and at the peak of the price cycle. What we know about the Queensland scheme is that, after two years in operation, it has hardly dented prices in Brisbane, the capital city which has the highest average petrol prices and the highest prices at the peak of the price cycle.

That should come as no surprise, as the Fuel Check model only guarantees prices for half an hour. That does very little to remedy the rampant price manipulation which has become so routine in our metropolitan petrol market. 'But this model has also been delivered in New South Wales and the Top End!' the major petrol chains will respond in a positive way for it. Yes, in both jurisdictions consumer take-up has been pathetically low, and there has been no discernible impact on price manipulation behaviours that the worst of retail chains routinely indulge in.

Simply put, this is a model which has repeatedly failed. Doing the same thing time and time again in the hope that it will one day work is not the smartest way to approach public policy. With one in five Perth motorists buying at the lowest price in the price cycle, it is clear the Western Australian Fuel Watch scheme has long proven its value to price-sensitive consumers. It achieves this while also giving fuel retailers a decent profit margin.

Despite the fevered rhetoric of some of the submissions made to the Productivity Commission by the major petrol chains and their acolytes, the world has not fallen apart in Western Australia since Fuel Watch was introduced 17 years ago. If we are to believe some of the claims made in submissions to the Productivity Commission, the Fuel Watch model which this bill advances would be an Armageddon for service stations.

Some of the more outlandish claims are made by the same Sydney-based industry lobbyists who slammed the opposition's proposal to protect retail workers exposed or potentially exposed to COVID-19 from loss of income. As far as I am concerned, we do not need to be told what to do by Sydney-based lobbyists when it comes to the interests of South Australian consumers and South Australian businesses. Why on earth would we want to pick up a model from the eastern seaboard with a proven track record of failure?

I am proud to introduce this bill, in partnership with the member for Florey in the other place, because this bill will ensure South Australian consumers will get a fair go. While this bill preserves all the elements of the scheme introduced by the member for Florey in March, it includes some additions which are designed to improve its operation.

Most important of these are two new clauses that are designed to address the high retail fuel prices we have seen in regional South Australia in recent months. These new clauses come at the initiative of the member for Frome in the other place and will be moved as amendments there whenever the government either allows debate on the member for Florey's bill or proceeds to debate its own.

The first of these amendments grants the Commissioner for Consumer Affairs, who is responsible for monitoring fuel prices under the Fuel Watch scheme, power to refer to the Essential Services Commission (ESCOSA) any concerns about price gouging or market inefficiency in retail fuel pricing in any part of the state. This provision allows ESCOSA to investigate whether price controls ought to be applied in a part of the state by applying the provisions of the Essential Services Act to the provision of fuel, as if fuel retailing and wholesaling were a regulated industry under that act. This is a powerful tool to tackle exploitative market practices, particularly in regional areas.

The second new clause allows the Treasurer to establish a fuel subsidy scheme in any part of the state were fuel cannot otherwise be sold at a reasonable cost to consumers. This permits the types of previous subsidy schemes that have been used to tackle high fuel costs in regional areas when they have arisen from time to time. While country fuel prices will often be high due to transport costs, differing contractual arrangements and a tougher retailing environment, the differential between city and country prices should not be so high as to significantly disadvantage or take advantage of country motorists.

Both of these clauses are extra tools that will give government greater ability to stabilise country fuel prices when needed. The bill also includes two further minor amendments to clause 7, designed in part to respond to issues raised in the Productivity Commission report. New subclause 7 requires the Commissioner for Consumer Affairs to seek to minimise costs to retailers in determining how fuel suppliers are to provide information about their fuel prices to the government. In particular, the commissioner must have regard to existing price monitoring and aggregation systems already available.

The effect of this is to encourage the government to use the systems fuel retailers already use and directly responds to the suggestion put by some in the petrol sector that preference should be given to minimising retailer costs by plugging into existing reporting systems. New subclause 10 makes it clear that fuel retailers are not required to lodge a fuel price for days on which they are closed. While this was a rather theoretical idea, given that there are no fuel retailers in the metropolitan area that routinely close for a day, this new clause puts the issue beyond doubt and directly addresses the suggestion put by the Productivity Commission that this could result in a regulatory burden, which would not apply under the Fuel Check model.

Importantly, this new clause makes the suggestion put by retailers of the burdensome cost of a Fuel Watch scheme to bed. It is time for this parliament to choose. As the Productivity Commission has stated, both the Fuel Watch model and the Fuel Check model will result in net benefits to South Australian consumers. The government has chosen to put one model to the parliament.

At a time of economic crisis in the face of a once in a generation global pandemic, it is time for this parliament to choose—to choose the scheme that is proven to deliver for the motoring public, not the failed scheme favoured by the eastern seaboard lobbyists and the big major petrol chains; to choose the scheme that will protect country and city consumers alike and that will ensure local independent retailers are not forced out of the market by predatory price gouging and market manipulation, address escalating fuel prices and empower consumers in a sellers' market heavily skewed to major retailers.

This bill draws on the best aspects of successful interstate models for fuel price monitoring and regulation and adapts them to South Australian circumstances. If this parliament chooses to support the bill, it will empower consumers to choose themselves and to make an informed choice by using the information available.

As the Australian Competition and Consumer Commission has found, Adelaide motorists can save at least $300 a year if they know when to buy petrol at its cheapest. That is exactly why the Fuel Watch scheme this bill adopts is superior to the Fuel Check scheme which the government bill in another place proposes, because to take advantage of prices when they are at their cheapest price-sensitive consumers need to know when to fill up.

In commending this bill to the chamber and asking for your support, I want to thank the member for Florey, Frances Bedford, and her staff. I would urge members who wish for more information to consider the second reading speech of the member for Florey or have a briefing. I also want to thank the member for Frome, Geoff Brock, and the other members of the crossbench in the other place, who have all contributed to and supported this bill. I hope that this bill will have the support of others in this chamber, including the opposition, the Greens and the Hon. Mr Darley.

I urge the government, too, to reconsider their position. You should not oppose something just because it came from the crossbench rather than your own party room. By passing this bill, you will earn accolades for collaboration and a willingness to take on the worst practices we see in petrol pricing. I am sure you will find that the South Australian motoring public will be grateful for this too. I seek leave to incorporate the explanation of clauses for the bill without my reading it into the parliamentary record.

The PRESIDENT: I am advised by the Clerk that you do not actually need to seek leave to do that.

The Hon. F. PANGALLO: I will table it.

Debate adjourned on motion of Hon I.K. Hunter.

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