THURSDAY 18 June 2020
Bills – Second Reading
Adjourned debate on second reading (resumed on motion).
The Hon. G.G. BROCK (Frome) (16:00): I also would like to contribute to this bill. I would sincerely like to express my great thanks to and admiration for the member for Florey for the great work that she has done since the last election on this issue of fuel price transparency. I have been working with the member. The more we investigate this issue, the more it appears that the major retailers have taken the general public for granted. I have had numerous discussions with the RAA regarding this issue and commend them for their continued campaign. It has been going on for many years, and they have been asking lots of questions.
It intrigues me to see many service stations change their prices, in some cases more than once a day. As the member for West Torrens pointed out yesterday, as a state we are dependent on fuel imports. The member for Hammond also mentioned the issue of reliance on overseas oil and how we should be looking at more of what we have within Australia and South Australia in particular. We no longer have the Mobil refinery at Port Stanvac, which was closed several years ago, so all the state’s fuel requirements are imported and, as I understand it, through a single distribution point at Outer Harbor.
From there, again to my knowledge, it is distributed to the various operators across the state. These operators consist of several oil company brands, mostly major global operators with only a few of the smaller brands, including a couple of independents. From my memory, when a shipment is received into the storage facility at Outer Harbor, all excise and government taxes are paid at the time of the shipment being received. Wholesale landed prices are then calculated on the price of the crude oil barrels at the time of the shipment being loaded at the destination. This forms part of the calculation of the wholesale price, established at the distribution point for South Australian retailers and commercial users.
From there, each distributor is then charged the same wholesale price—well, that is the theory. But this question needs to be clarified: do all retailers get the opportunity to purchase at the same wholesale price, or do the larger operators get a better deal because of their volumes? If so, they should be able to offer lower retail prices. This is one of the reasons why I support the member for Florey’s amendments based on the Western Australian model because, unlike the government’s bill, they apply to wholesalers as well as retailers.
That is the degree of transparency we need to see in the fuel marketplace in our state. It begs the question: how fair is the competition for the smaller service station operators to compete and continue in this field? I drive to Adelaide for parliamentary work and am astounded at the price volatility and variability during my three-hour drive. Sometimes there are price changes, even by service stations with the same owners that are in close proximity, more than once in a single day.
As you come through Port Wakefield, there are three roadhouses that most people know, whether travelling north or south. Out of those three roadhouses, two always have the same price. The other one, which is an independent, United, is always 10¢ to 15¢ or sometimes 20¢ per litre cheaper. You have to ask: how can a small operator the same distance from the supply point still have a cheaper price? I come to Adelaide in the morning, and then on the way back I see the petrol prices at particular service stations have significantly increased from when I travelled that morning.
Did all these sites receive a new tanker of fuel that day? Has there really been a significant change in their underlying costs? What really justifies this kind of price change, or is it just market manipulation? A good question. Surely, if pump prices increase, it should be in response to change costs. That is, when the last delivery is fully used and the site has received a new load of fuel by a road tanker, then the new price should come into effect.
This brings me to another question. When these new loads come from the distribution point at Outer Harbor, is the fuel coming from the same international shipment? That is, is it all coming in from the same location? What price was the global crude oil price per barrel at the time when that shipment was loaded overseas? Bear in mind, I understand our wholesale prices are based on the Singaporean crude oil price and, as mentioned by the member for Florey, the crude oil price recently was at a 17-year low. It begs the question yet again: why do retail fuel prices fluctuate so frequently? Indeed, as mentioned by the member for West Torrens yesterday, the crude oil price was at one stage in the negative.
Ms Bedford: Spectacular speech.
The Hon. G.G. BROCK: It was a great speech.
The Hon. A. Koutsantonis: I was inspired by the member for Florey. You’re my muse.
The Hon. G.G. BROCK: I will start again. Indeed, as mentioned by the member for West Torrens yesterday, the crude oil price at one stage was in the negative. From memory, it was minus $37 per barrel, meaning that producers were paying for people to store their crude oil at that particular period of time. Recently, we have seen retail prices get as low as, I think, 70¢ per litre in Adelaide.
Ms Bedford: 73.
The Hon. G.G. BROCK: Okay, corrected. The member for Florey says 73. But it was only momentary and the average price has remained, to my knowledge, at about $1.08 per litre for the last 45 days. Of course, there are costs that have to be factored in, including commonwealth government excise of 42.3¢ per litre, shipment costs for import to South Australia, retailers’ profit margins, road freight costs to regional locations across the state, plus their profit margin.
The member for Florey mentioned that in April CommSec found that the retail margins were at a record high of 22.7¢ per litre. I have found a later report in May that retail profit margins are now even higher than this. It is now at 24.6¢ per litre—a record high profit margin. That is around double the two-year average. I note a report by the ABC’s Philip Lasker and Michael Janda of 5 May, as follows:
Petrol has not been this cheap since 2004, but many motorists watching the global price of oil plunge feel like it should be lower still.
Figures from the Australian Institute of Petroleum, quoted by CommSec, show that the national average price of unleaded petrol last week fell to 98.3¢ per litre.
Metropolitan prices fell to an average of 94.9¢, while regional prices dropped to 105.1¢ per litre.
But wholesale prices have been dropping even more into the low 80s—the lowest levels in around two decades.
That means the retail petrol margin—the difference between what the retailer pays for fuel and the pump price the motorist pays—is now at a record 24.6¢, according to CommSec.
The article is very informative and goes on to comment on the high prices being experienced in various eastern seabord capitals, including Brisbane and Sydney, both of which have Fuel Checkstyle price monitoring schemes which the government proposes in this bill. In Brisbane and Sydney, prices were hitting $1.20 per litre on the long weekend. The article goes on to state:
Mr Felsman noted the particularly extreme example of Adelaide, where prices surged 33 cents in a matter of days last week, before easing back somewhat.
Mr Felsman is CommSec’s senior economist. Further on, the article refers to Mr Geoff Trotter who operates the petrol price monitoring company FuelTrac. Mr Trotter believes motorists in Australia are being uniquely gouged by fuel companies. He says:
The difference in some capital cities between petrol stations relates to where they are in the pricing cycle.
It’s helped oil companies achieve a higher margin than they otherwise would have achieved.
The price cycle is unique to the Australian petrol market. It doesn’t exist in any other market that I’ve ever seen.
It’s fake to the extent that the increases don’t bear any relationship to any change in the underlying wholesale price.
I consider anything above 99 cents a litre over the top in terms of profit margin and anything below 99 cents would be a fair price for the oil company, for the dealer and certainly for the motorist.
Regarding the unique Australian petrol market, I certain do not see supermarkets putting up their prices and dropping them down on a daily basis. They are set. Petrol comes in at a set price; therefore, the profit margin should be realistic. In my area within Upper Spencer Gulf, prices have only gone below $1 per litre on a couple of occasions, unlike in Adelaide, where it has been below $1 per litre on many occasions. Even so, the 45-day average price for Adelaide prices is still $1.08, which is well above where it should be were the market not dominated by the major retailers.
I know that there has to be a freight cost of getting to regional locations, but this increase in costs compared with Adelaide prices is hurting not only the general public but also our regional business operators, who in many cases need to get their raw products from Adelaide and transport them to their facility, manufacture their products and then transport their product back to Adelaide for distribution to the larger market in Adelaide or interstate. In many cases, it could be far more economical and competitive for them to relocate to Adelaide or interstate if they want to achieve far better profitability. They elect to stay in the regions because they want to create work within the regions and they understand the value of the regions.
Many years ago, there was a fuel equalisation scheme which established regional zones in an attempt to minimise the difference in fuel costs between the country and the city. By stabilising metropolitan prices, we can also stabilise regional prices. This will allow far more opportunities to establish businesses in regional South Australia and in turn diversify the spread of the population instead of concentrating in the Adelaide metropolitan areas. That is why I will be moving amendments to this bill during the committee stage.
Even though the regions may not have a large share of the population, we need to remember from where the majority of the funds or royalties comes into the government coffers: the regions. Upper Spencer Gulf and the northern section of the state are not only going to be tremendous contributors to royalties for resources and minerals, but very importantly, to renewable energy for the state and future growth. I commend this bill to the house