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THE COUNTRYMAN

NEWS

 

Selwyn Johnston

INDEPENDENT COMMUNITY REPRESENTATIVES'

ADVOCATE

(Cairns... Far North Queensland)

 

Thank you for visiting my on-line office. 

I appreciate your interest in the issues that effect not only Queenslanders, but all Australians. 

Please let me hear from you about your views on the issues that matter to your Family, your Community and your State.  

Sincerely,

Selwyn Johnston

 

One person, with the support of the community, can make a difference

 

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AUSTRALIA'S FUEL PRICES… THE GREAT TAXPAYER RIP-OFF!

Fuel prices throughout the world vary greatly, from 3 cents a litre at the pump in Iran where it is subsidised, to $2.38 per litre in the UK where excises and VAT amount to about 75% of the cost. The prices vary from place to place so the figures given here are indicative as at mid September 2007. There is also a difference between the ULP petrol and Premium but so as not to unnecessarily complicate the picture the ULP prices only will be quoted. In addition all prices have been converted to Australian dollars to maintain consistency. Premium means RON 98, though Premium octane varies here. 

The UK has the highest ULP prices in Europe with a litre of ULP selling for about $2.38/L at the pump while Greece has the lowest at $1.62/L. Diesel presents a similar picture again with the UK having the highest pump price of $2.33 while Greece and Luxembourg share the lowest prices for diesel at about $1.65/L. In the USA the ULP retails for about 91 cents [Australian] and diesel for 94 cents. 

Australian fuel prices are based on the Singapore refined price, [referred to as TAPIS] and, based on a three day rolling calculation; the price has in recent days been around 59.75 c/L. 

That approximates the tax-free price of ULP at the pump in the UK. How this price relates to a realistic retail charge cannot be ascertained but it would be reasonable to assume that the difference in the prices relates firstly to Government taxes or levies, and secondly to the level of demand either real or created for the products. The level of demand is also manipulable given the production mix at the refinery level. Also given the number of litres of fuel that are sold each day it is easy to imagine the massive profits that can be delivered by being a couple of cents over the odds for any period of time. 

While we will never know the actual cost of a barrel of oil on a ship in any port, it is impossible for us to do anything but accept the figure quoted. We accept that the oil industry is not all upside but if one in three wells were successful overall then three times the set up cost of a well could be amortised in such a way as to create a really high return for what would be described as a fairly calculable risk. 

Which highlights the dilemma regarding fuel prices in Australia. What it does say is that we have to accept that free of taxes at the pump our ULP should cost about 97 cents, which is 59 cents including service station costs plus 38 cents excise. 

The price of diesel is yet another matter as it should be far cheaper than petrol but as refinery techniques have improved and become more efficient it has not benefited the diesel price in the way that it would have previously because of the ability of refineries to readily manipulate product output. 

Three things are of interest to the Australian fuel user. 

Firstly is the actual price of the product be it ULP, premium or diesel. Secondly are the wild fluctuations in prices at the pump and as mentioned earlier this, if excess profits, could amount to an enormous one-day gain. Thirdly, there is the price of diesel as compared to ULP and Premium. 

At present the Australian Consumer and Competition Commission [ACCC] is doing the rounds of Australia talking with industry groups regarding the price of fuel but it will not look at the diesel prices. Just what will come out of that inquiry can only be guessed at but by the very fact that there is an inquiry indicates there is something to be concerned about or at least that the public need placating over. Probably that concern starts with "Parity Pricing" which means that irrespective of the product a country has the pricing of that product to the market will be at world parity prices. 

World parity prices are set by the market, some say the major oil companies, and although that price is published at least daily and varies inexplicably it is really only the oil companies that know the well costs, transport costs, refining and distribution costs and the like for any product in any place at anytime. 

The claim is made that the price of oil depends on demand and there is little doubt that it does to some degree. But trading in oil by people who neither hold the oil nor are ever likely to do so, and in fact are only dealing on paper has a distorting effect on the parity price. 

Parity pricing was initially introduced to facilitate exploration and while exploration is still a speculative and risky business today's technology has considerably reduced the risk. Parity pricing is further exacerbated by the cartel nature of the industry making independent overall costing almost impossibility. 

However for a continent like Australia, with some considerable oil resources of its own the problem should not be difficult for a Government agency such as the ACCC. Provided of course that the agency was given the authority and the resources to do so, to develop a reasonable range within which the price of the various types and grades of fuel should vary. For the ACCC to be undertaking its present investigation without considering diesel is an absolute nonsense. 

Which raises the point of the will of the Government and it seems as though there has never been a recent Government that has had the will [they have the ability] to take on such a task. Why is it that say premium unleaded petrol should vary in price from the regular product by an amount of 5 to say 10 cents. Why is diesel, once half the price of petrol now dearer in many places for much of the time? And why during the course of a week and the price of any or all classes of fuel vary by up to 10 cents/litre. 

These are the questions that we should be putting to our parliamentary representatives and to which we should be getting answers. Why isn't there in place an open and predictable accountability system such that we can calculate the price we should be paying for fuel and be able to understand it. The old "Trust Me" attitude just won't wash any more and many politicians will become aware of this at the next election. After all if there is nothing to hide why go to the trouble of hiding it. 

We know and understand that demand is a factor; we know that freight is a factor as is the case with obtaining the crude and refining. But many of these are really fairly stable factors. So it's up to the Government who are, after all, charged with looking after our interests, and is the only entity with the power and resources to do so, to at least make a start by reviewing the terms of reference of the present ACCC inquiry. It could do this immediately by introducing diesel into the field of the inquiry. That would at least bring an element of reality to it and potentially some sane and complete answer to the people. 

After all it's later on that all these things form part of the "record" that a government presents to the voters as reasons for extending their tenure.

 

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Written and Authorised by Selwyn Johnston, Cairns FNQ 4870