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FuelWatch to fight back

A REPORT by the Australian Competition and Consumer Commission that found Western Australia’s FuelWatch program had reduced retail competition and had likely increased Perth petrol prices will be formally addressed by Department of Consumer and Employment Protection assistant prices commissioner Barbara Macnish later this month.

The ACCC terminal gate pricing arrangements in Australia and other fuel pricing arrangements in WA report found that the 24-hour rule (under which petrol retailers are required to fix their prices for 24 hours) is likely to have reduced rather than increased competition.

The report claims Perth petrol prices have increased by 2.5 cents to 3 cents a litre against various benchmarks.

“A significant proportion of this increase could be attributable to the higher fuel standards in WA but some of it is likely to be due to other factors such as the 24-hour rule and a reduction in competition as a result of the fuel standards,” the report says.

According to Ms Macnish the ACCC report was not supported by market evidence and the assertion that FuelWatch has had minimal effect on the variation of fuel prices is simply not true.

“The ACCC have made quite bold statements,” she said.

“In respect to a number of claims they have not provided evidence and have relied on comments made by the industry.

“There were a number of factual errors or omissions.”

The ACCC report and industry sources suggest that the FuelWatch program can be manipulated as a marketing ploy.

Industry sources said companies would price low-volume sites cheaply in order for their name to appear on the TV screen or newspaper.

The sources suggested that having the company name on the screen could generate sales to its businesses in higher-volume sites. This is in spite of the fact that prices at those sites were set higher.

It is a claim that Ms Macnish refutes. 

“We did an analysis of that recently because the ACCC had that criticism and they suggested oil majors could manipulate the system but they do not support that with evidence,” she said. 

“On the first of May 2003 88 independent retailers were in the cheapest 100 sites.”

However, Ms Macnish said, an analysis of the locality of the cheapest fuel sites had not been conducted.

She said daily price fluctuations had ceased and Perth petrol prices were still competitive.

“If you look at our prices compared to Melbourne or Sydney in the first quarter of this year they are 1.8 cents higher than Sydney and 2.57 cents higher than Melbourne,” Ms Macnish said.

“But if you look at the cheapest 100 sites we are 0.6 cents lower than Sydney and 0.08 cents higher than Melbourne.”

Independent operator Gull Petroleum executive director Neil Rae said the company’s ability to compete had been curtailed by the rule.

Mr Rae said the company could no longer provide the cheapest, or at worst, the same fuel price offered by its competitors to its customers.

Caltex government affairs man-ager Frank Topham said the 24-hour rule had reduced competition in the WA market.

“If you leave the market alone then the consumer will get the benefit.”

p See the Gull Petroleum story on page 13

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