Wednesday, August 13, 2008

Fuelwatch Fizzles… What now?

Before it has even made it out of the starting blocks, it appears that Fuelwatch has fizzled. Always controversial, the plan to require petrol outlets to list their prices 24 hours in advance was apparently the best that the Federal Government could do to help ease the petrol price pain. According to the study by the A.C.C.C., it would have led to savings of almost two cents a litre. Hardly a massive saving, but perhaps it would have been worth it just to annoy the oil companies.

Unfortunately, there has also been evidence to suggest that those modest savings might prove to be illusory, and that the scheme might actually help to push prices up, not down. Worse than that, it has also been suggested that it could undermine competition by unfairly disadvantaging small independent operators. If they go out of business, then of course the way is clear for the big boys to put their prices up as much as they want.

It was for these reasons that independent Senator Nick Xenophon of South Australia decided to oppose Fuelwatch. Without his vote, it will not happen. The door is still open for the Government to make modifications to the scheme addressing his concerns, but it has to be asked if it is really worth it. The end result is that the government is left with nothing on the table to fight fuel costs, which was after all one of their election promises.

Meanwhile, the opposition plan to cut 5 cents a litre from the tax on fuel is not much better. That would save the average motorist less than $2 a week. Big deal. The only thing that has any hope of reigning in the price of petrol is opening up the wholesale market to wider competition and breaking up the so called “comfortable oligopoly” of the oil companies. After all, that’s just a polite way of saying cartel.

Failing that, the only other recourse is to impose greater market regulation, something which is heresy to today’s economists. But with the way things are going, with a significant downturn, and the first hints of a discussion of “new protectionism”, I wouldn’t be completely surprised if regulation ended up back on the table.

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