201412.17

Transcript – Interview with Leon Compton, ABC Statewide Mornings, Hobart

Wednesday, 17 December 2014

Subjects: ACCC Fuel Monitoring Report, fuel shopper dockets

LEON COMPTON:

We’ve been talking a fair bit about petrol prices on Mornings over the last few months as the price of petrol, well the price of a barrel of oil has halved globally and slowly the petrol price in Tasmania has come down, particularly in the last couple of months.

It has come down nowhere near the extent to which the price of the raw import oil has come down and it certainly hasn’t come down as much as petrol has on the mainland but that just seems to be the way it is in Tasmania.

Petrol costs more here. But should it? Apparently the ACCC has the power as of today to do more to investigate the fuel market nationally. But will it?

Bruce Billson is the Minister for Small Business in Australia, Bruce Billson good morning to you.

MINISTER BILLSON:

Good morning to you Leon and your listeners and congratulations on Nola May’s arrival.

LEON COMPTON:

Oh well thank you very much Minister! Let’s talk about the new powers that the ACCC will have as of today.

A simple question for you: you’ve given them the power to investigate specific regions of the fuel market, will you direct them to investigate petrol price in Tasmania?

MINISTER BILLSON:

At this stage we have not settled on the specific regions, fuel types or markets.

That is something that was discussed in a session I had with the ACCC just yesterday, where we were saying what does the current intelligence tell us about where there may be some irregularities, where should we focus our energies?

This will be a work program, that will roll out one deep dive a quarter, is essentially the strategy that we are implementing and state governments, motoring organisations, local members of parliament and broadcasters have all suggested where we should start. That is still work in progress.

LEON COMPTON:

The petrol price in Tasmania doesn’t cycle like it does on the mainland. It is higher than it is on the mainland and we have all of the same competitors operating in the market here.

We’d like the first deep dive investigation to be in Tasmania minister.

MINISTER BILLSON:

I picked up that that may have been where you were coming from Leon, and I certainly understand the reasons for it and have communicated those to the Commission. They will be bringing me some recommendations on where we should look.

The characteristics you have described about higher peaks, higher troughs and slower adjustments when the oil prices go down is a characteristic we are very interested in.

There is also some early signs that where there are vigorous independents taking on the big guys in the marketplace, that that seems to produce benefits for motorists.

We are all about what we can best get done for our motorists. We have listened to their concerns.

The once a year report that used to be produced was fascinating in terms of a retrospective, but was it really timely and responsive enough? We have changed that so we can do the type of analysis that you are advocating Leon.

LEON COMPTON:

Is it possible to argue that the petrol market in Tasmania is just a bit less competitive than it is on the mainland for understandable reasons? The petrol price is and will always be higher here.

What powers have you given the ACCC to actually investigate and if it comes to that, change behaviour?

MINISTER BILLSON:

There is a couple of things. One, the overview that was produced annually, the key element of that will be done quarterly so if there is some early indications of some irregularities there is a chance to respond.

Secondly, this new deep dive power allows the Commission to look at specific markets. That might be a regional market, it might be fuel type, it might be particular characteristics that follow supply chain pressures.

There is powers there to require the production of information. One of the things that I expect we will do is when these deep dives begin, we will probably not announce them immediately so as to signal to people in those markets that it might be a time to behave well. We will probably wait until those data collection processes begin.

Where they reveal some anti-competitive conduct, then that can feed into the ACCC’s broader toolkit, where it can take on further investigations and use further enforcement powers.

But the key thing is to get an understanding of what is at play, what margins are looking like, how the competitive pressures are operating and frankly Leon, why we have given this direction to the ACCC is because we are not convinced that market forces alone are adequate and strong enough to ensure efficient pricing and value for motorists.

So we have given the ACCC new powers to poke its nose into these areas and work out what is going on.

LEON COMPTON:

When will you be deciding, or when will the ACCC be determining, the first visa for deep dive investigation?

MINISTER BILLSON:

I am anticipating I will get recommendations from the Commission early in the New Year.

I have spoken with them about the feedback I have got and the observations I have made and also, pleasingly, the fuel consultative committee, where many of the motoring organisations and other interest groups have fed in their view of what the priority areas and avenues of examination should be.

And we have already had a state government actually say, well, look at our market as well.

That arose out of the analysis about ten days ago, where some work was done on what was happening with the oil price internationally and why in some capital cities the price adjustment was glacial in some areas and in other cities quite nimble and quite quick, and that has also highlighted the need for the changed approach that we have implemented.

LEON COMPTON:

It’s interesting, in Tasmania where there have been clearly the presence of the major supermarket chains, Coles and Woolworths, has had a distorting impact on petrol prices, whether that’s distorting in a good way or a bad way necessarily… and people will argue petrol prices need to be higher here and yet, I would think if you look to the basket of goods from those same supermarkets, they’d be pretty much identical in cost to what people are paying on the mainland.

If it’s true of pasta or bread or milk, why not true of petrol, one might ask?

MINISTER BILLSON:

Good observation. One of the things that we did notice and you would be aware that action was taken against some of the outrageously over the top shopper docket schemes, where those discounts were getting way into the teens in terms of 15, 16 and even up to 20 cents in the dollar.

The analysis was showing that while the people armed with those shopper dockets – and that’s not all your listeners, that’s not all your motorists – were feeling like they were getting a bit of a bargain, we actually saw the bowser price go up and margins increase. This was having quite a distortionary effect on the market.

Since the action to reign in those shopper dockets so that the discount is no more than the profit that is available for an efficient fuel retailer, more than a billion litres of fuel has been sold by independents above where it would otherwise have been. These independents are crucial.

In relation to the actual cost structures, this is why the deep dive gives the power to the Commission to actually look at things like freight costs, volume because volume can play quite a part if you have got different volumes going through different petrol stations, and different margins.

These are part of the areas that the ACCC can now examine on a regional market by market basis or for particular fuel types – LPG is a fascinating fuel type.

When the Saudi benchmark price, which is what the LPG is priced against, when it goes up, almost instantaneously the price at the bowser goes up, when it comes down it’s glacial and we are told there is all sorts of stock in the supply chain.

There are irregularities in the explanations that are provided and that is why we are trying to get deeper into what is going on.

LEON COMPTON:

Minister, with respect, the test we will hold you to is that Tasmania is one of the first places chosen for investigation. Thank you for talking with us this morning!

MINISTER BILLSON:

Good to talk and Happy Christmas to your listeners, and look forward to talking to you again from St Helen’s with my friend Eric Hutchinson next time I’m there.

LEON COMPTON:

Bruce Billson, the Federal Minister for Small Business on 936 ABC Hobart.