Page 3417 - Week 10 - Tuesday, 17 September 2019
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As I mentioned before, it is evident to the committee that the way fuel prices are determined is largely outside the ACT government’s control. However, where the committee believes the ACT government can review its approach or make changes without risking a poorer result for consumers, we have recommended this.
The recommendations that the committee has rejected are, first, to do nothing. While a number of industry submitters encouraged us to go down this path, we rejected this because we found the arguments unconvincing.
The second we have rejected is introducing a mandatory reporting mechanism where service stations are required to lock in the prices of fuel for 24 hours, like the model observed in Western Australia. We were initially sceptical of this; then, as a committee, we were briefly persuaded by this model’s measures. Ultimately, we have rejected it.
One of the reasons for a 24-hour price lock is that it takes away the uncertainty for a consumer. The price at 7 am is the same price that you would pay at 2 pm. But this uncertainty exists where intra-day trading is common. As I mentioned earlier, it is uncommon in the ACT. There is also no guarantee that locking in prices would see lower fuel prices in the ACT; instead they may end up higher, and there is some evidence in Perth to suggest this.
We have also rejected setting a maximum retail margin for fuel companies. Again, this would be an extreme intervention in a market and would likely distort it. One of the most compelling reasons for the committee rejecting this proposal is that many companies are also wholesalers, so they could simply jack up the price at the terminal gate, resulting in no discernible change for the consumer.
Finally, we have rejected providing fuel subsidies for low income households. Again, we were minded that this would only benefit some, not all, that it would be difficult to administer and that it would very likely have a distorting effect on the market.
I turn to the recommendations that we have proceeded with. The first is for the ACT government to continue to educate on fuel prices and determinants in the ACT, and to enhance how it educates Canberrans. As noted earlier, there are a number of persistent myths about how the fuel market works, and how it works particularly in Canberra. The better informed consumers are about how prices come about, the more power goes to them.
We have also recommended that a fuel prices oversight body or position be established and have suggested that this be a standing committee within the Assembly. As noted throughout the inquiry, turning an eye to the market and having it consistently appearing in the media appears to have had some meaningful impact on lowering fuel prices. This standing committee could regularly analyse and report on the function and performance of the market, including price movements and comparisons with like markets.
The committee could also have responsibility for oversight and reporting of any price monitoring system introduced in the ACT. That, of course, brings me to the next
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