The price of petrol is one of those issues that just won’t die. Even if petrol prices were to drop it’s unlikely that people would stop blaming politicians for the painful weekly deficit in their bank accounts. It’s a big dent on the household budget and unsurprisingly Australians are looking for a solution which reduces the cost burden and allows them to get from A to B.
The Rudd Government has been forced, as a result of increasing media scrutiny and pressure from the Opposition, to take a stand on this issue. Their solution is to roll out Western Australia’s FuelWatch scheme nationally. The scheme requires petrol stations to publish their prices online a day before they advertise them. The aim is to enable consumers to compare prices between petrol stations in their local area.
Federal Treasurer, Wayne Swan, has argued that FuelWatch holds many benefits for the consumer. ’’What [FuelWatch] really delivers is knowledge and power to consumers. Because at the moment all the power lies with the petrol retailers who get to set and change their prices when they want, and most consumers can't take advantage of that. What we have in this scheme is the ability of any consumer, particularly a price sensitive consumer, to know where the best price is and to access that price on any given day.’
Despite the Government’s appeals, there has already been a public outcry. Many critics have argued that FuelWatch will reduce competition between petrol stations and encourage collusion. The argument is that instead of making the price of fuel more transparent (and therefore increasing competition), petrol stations may find an incentive to match rather then lower their prices, which may actually make it more expensive for the consumer.
Andreas Andrianopoulos, Managing Director of AA Holdings (a member of the Independent Petroleum Marketers Association of Australia), argues that FuelWatch would increase price fixing by the big retailers. ’FuelWatch will be used by Coles and Woolworths to increase their already dominant market power, to the detriment of the consumer and independent retailers…FuelWatch will reduce the opportunities to buy cheap petrol [and] will lead to a continual decline in competition.’
If prices rise as a result of FuelWatch it is lower-income Australians, or the ’working families‘ that Rudd spoke of so often during the 2007 federal election, who will feel the strain the most. On this point Opposition Leader, Brendan Nelson, has been particularly vocal. ‘What Australians need most is a Prime Minister who doesn't give up when the going gets tough and delivers on his promise to bring down the cost of petrol…the Prime Minister is letting down Australians struggling to make ends meet with the rising cost of petrol,’ he said.
This opinion can even be sourced from within the Labor Government. A letter leaked to The Australian reveals that Resources Minister, Martin Ferguson, was concerned that Fuel Watch would affect the Aussie ‘battlers.’
So amidst this raging debate we’re left asking one question. Will FuelWatch cause petrol prices to drop? Rudd has argued that they will, though he has also refused to promise that petrol prices won’t also rise under the scheme. If we look to Western Australia as an example, prices have dropped by only 1.9 cents a litre which equates to $3 off a 60 litre tank of petrol. Quite a disappointing outcome for a scheme lauded for its potential results.
It seems that Andreas Andrianopoulos from AA Holdings may be on the money when he says, ‘FuelWatch is a politically attractive answer and nothing more.’ The Government needed to at least appear to be acting on the issue. Rolling out an existing scheme is far cheaper and easier to pull off than introducing alternative solutions such as cutting the tax on petrol or subsidising petrol costs for lower-income Australians.
In reality, FuelWatch is limited in what it can achieve because the price of fuel is affected by much more then simply how petrol stations price their fuel. FuelWatch attempts to alter the price of fuel at the level of the retailer. But the cost of petrol relies heavily on the global price of oil, which continues to rise as a result of enduring demand. Furthermore, fuel has been one of the main casualties of Australia’s rising inflation rate and fuel will continue to rise so long as inflation increases. Australia’s impending emissions trading scheme (AETS), aimed at reducing greenhouse gas emissions, is also set to raise fuel prices further. The Government has promised to introduce the AETS in 2010 and it has been estimated that this will add an extra 25 cents a litre to the cost of fuel.
Inevitably, the price of fuel is only going to continue climbing. FuelWatch regrettably fails to recognise this. Instead of simply monitoring fuel prices, it is essential that Australia become less fuel dependent. Ways to do this include bolstering public transport systems to make them more reliable and efficient, or making it easier for people to ride bikes on Australian roads. Until Australia manages to introduce cost effective and sustainable solutions such as these, the fuel crisis will continue to deepen.
How do I know this?
Curtis L, Week in politics: Rudd 'whacked',
ABC, 30 May 2008
http://www.abc.net.au/news/stories/2008/05/30/2260846.htm?section=australia
Roskam J, Driving in two directions on fuel,
The Age, 4 June 2008
http://www.theage.com.au/opinion/driving-in-two-directions-on-fuel-20080603-2l9l.html
Rudd accused of avoiding fuel problem,
The Age, 2 June 2008
http://news.theage.com.au/national/rudd-accused-of-avoiding-fuel-problem-20080602-2kp7.html
Yaxley L, Cabinet spilt of fuel watch revealed,
ABC, 27 May 2008
http://www.abc.net.au/news/stories/2008/05/27/2256410.htm
Fears FuelWatch will lead to higher regional prices,
ABC, 4 June 2008
http://www.abc.net.au/news/stories/2008/06/04/2264295.htm
Karvelas P, Nelson takes aim at PM over petrol,
The Australian, 27 May 2008
http://www.theaustralian.news.com.au/story/0,25197,23766705-5013871,00.html
Swan defends FuelWatch scheme,
ABC, 28 May 2008
http://www.abc.net.au/7.30/content/2007/s2258611.htm
Shanahan D, Monitoring will fail say small retailers,
The Australian, 21 June 2008
http://www.theaustralian.news.com.au/story/0,25197,23898029-26017,00.html
