09/01/2001 - 21:00

Law hurts bit players

09/01/2001 - 21:00


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NEW legislation requiring the price of fuel at the bowser to be fixed for 24 hours has given the big oil companies a free kick against independent service station operators.

Law hurts bit players
NEW legislation requiring the price of fuel at the bowser to be fixed for 24 hours has given the big oil companies a free kick against independent service station operators.

The legislation was introduced to stop fuel prices fluctuating and close the gap between regional and metropolitan fuel prices to 3 cents per litre.

But some industry insiders believe it will make it easier for the majors such as Shell and BP to undercut independent operators and force them out of business.

They say this will cause fuel prices to go up as competition is reduced, rather than down as the WA Government hopes.

Even the majors believe the legislation could force some independents out.

Shell senior advisor external affairs Vincent Cosgrove said the Perth petrol price was running 10 cents per litre below the wholesale price in some places.

“Some of the small operators will soon have their backs against the wall,” he said.

Mr Cosgrove said the fluctuating nature of petrol pricing brought Australia the lowest pre-tax petrol prices of any OECD nation.

But some independents hope the second part of the legislation that requires the maximum wholesale fuel price at the terminal to be fixed for 24 hours will give them a chance of survival.

This part of the legislation, due to come into effect either later this month or early next month, is designed to increase wholesale fuel pricing transparency.

State Member for Mitchell and chairman of the Parliamentary Committee that prepared the report on fuel pricing which led to the new legislation, Dan Sullivan, said setting the wholesale fuel price would “help squeeze some fat out of the oil companies’ margins and help stop them giving discounts to selected sites to try and squeeze out the independents”.

Independent service station owner Arthur Rosenwald said the new legis-lation was a step in the right direction.

“It will help to stabilise the price a bit, but it makes a complete gamble of the whole thing. You have to put your price in for the whole day and wait and see what happens,” Mr Rosenwald said.

“The way things are at the moment, the oil companies can sell to us at the price they want to unless they have a prior commitment.”

Mr Cosgrove said the Government’s attempt to regulate the wholesale price would destroy competition and raise prices.

“The Fair Trading Commissioner wants to include a reasonable rate of return for both the wholesaler and the retailer,” Mr Cosgrove said.

“At the moment the industry makes about 2 per cent return and a reasonable rate of return is 8 per cent so the wholesale price would go up.”

Mr Cosgrove said Shell had been posting a daily wholesale fuel terminal gate price on its website www.shell.com.au/petrolpricing for some time.

Times have been tough for independent petrol station operators since the industry was deregulated in the early 1990s.

Mr Rosenwald said the removal of the rostering system “was another nail in the coffin for independents”.

“We agreed to it on the basis that all other shops would be allowed to open on Sundays but that certainly hasn’t happened,” he said.

“A lot of us can’t afford to be open on Sundays or 24 hours a day.”

Due to the deregulation, many of WA’s service stations became convenience stores with petrol bowsers attached, something the independents say they cannot copy.

Service Station Development Corporation head Col Stratton said the majors were selling cheap fuel from their service stations in the same suburbs independents were operating.

“It’s state against state and suburb against suburb,” Mr Stratton said.

“The agreed margin for a petrol station is 6¢ a litre to cover costs such as rent, wages, pumps and underground tank maintenance. But most independent operators are trying to survive on a margin of 2.5¢ to 3¢ per litre.

“On Stirling Highway, from Mill Street to the Fremantle Bridge, there used to be 26 service stations. Now there are just seven.”

Mr Stratton said the removal of laws requiring two thirds of WA’s service stations to be independently operated and the remaining one third to be run by the major oil companies started the rot.

He said the Sites Act was supposed to have replaced this legislation. The Sites Act is supposed to limit the number of service stations the major oil companies have.

“The oil companies have gotten around this by setting up large multi-site franchises,” Mr Stratton said.

“Virtually no other country in the world would allow this to happen to their independent businesses.”

Mr Cosgrove said service stations and not Shell set the bowser petrol price.

“We provide discounts on the wholesale fuel price to our franchised service stations so they can compete,” he said.

“It’s about being a leader or a follower. We have to provide support to our retail service stations so they can attract customers.”


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