now labor divided over petrol

I wonder if Martin will be called into Mr Rudd's office for a caning.

Matthew Franklin, Chief political correspondent | May 27, 2008
A DEEP split has emerged within the Rudd Government over petrol, with Resources Minister Martin Ferguson warning its planned Fuel Watch price monitoring system will fail working families, crush small businesses and tarnish Kevin Rudd's economic reform credentials.

In a letter to senior colleagues obtained by The Australian yesterday, Mr Ferguson attacked the Fuel Watch scheme as an anti-competitive waste of money and predicted it would leave battlers out of pocket, despite government claims it would lead to lower fuelprices.

"The biggest losers ... would again be working families in places like western Sydney," Mr Ferguson wrote in a letter to Consumer Affairs Minister Chris Bowen, which he also copied to the Prime Minister, Wayne Swan and Finance Minister Lindsay Tanner.

The strongly worded letter emerged as Mr Rudd and Mr Bowen yesterday lauded Fuel Watch, vowing it would "put motorists back in charge" of their fuel costs. And it came as Mr Rudd struggled to deflect a relentless Opposition attack on his refusal to embrace its proposal for a 5c-a-litre reduction in fuel excise.

The letter will also blunt Labor's attacks on disunity within the Coalition over the petrol issue based on the revelation in The Australian last week that Treasury spokesman Malcolm Turnbull had warned Brendan Nelson the proposed cut in the fuel excise was bad policy. Petrol prices have dominated federal politics in the past week, with the soaring global cost of oil pushing prices at the bowser to more than $1.60 a litre.

Capitalising on the consumer concern, the Opposition Leader has put Mr Rudd on the back foot by promising a Coalition government would reduce excise by 5c a litre. Mr Rudd has refused an excise cut and attracted Opposition ridicule last week when he said he had done everything physically possible to help families struggling with the cost ofliving.

As Dr Nelson continued his assault yesterday, the Government promised its Fuel Watch program, based on a West Australian scheme, would allow motorists to avoid expensive service stations by requiring outlets to nominate the price at which they sell petrol for the next 24 hours.

The scheme, which will begin operation late this year, will require the publication of fuel price information on a website.

According to his April 14 letter, written just a day before cabinet endorsed Fuel Watch, Mr Ferguson believes the scheme could force small independent service stations out of business.

"Your assertion that Fuel Watch will be pro-competitive is unsubstantiated and ignored the very substantial evidence that it is anti-competitive," Mr Ferguson wrote. "I remain more concerned about the substantive elements of Fuel Watch, which I believe will seriously damage the Government's economic and regulatory reform credentials."

Mr Ferguson said last night that "as is normal for cabinet process, there are a range of divergent views and the best policy comes out of robust debate". "As part of that cabinet process, I appropriately expressed a view about the merits of the proposal," he said. "The Government decided that a national Fuel Watch (scheme) is appropriate and that it will give consumers the best possible information on when and where to buy the cheapest petrol. I fully support that decision and the development of a national Fuel Watch scheme."

In the April 14 letter, however, Mr Ferguson noted that the proposal had emerged with "no prior consultation" with his office and he questioned Mr Bowen's reliance on advice favouring Fuel Watch given by Australian Competition and Consumer Commission chairman Graeme Samuel.
He wrote that the ACCC had concluded that if all motorists in Perth bought their fuel on the day when it was offered at the cheapest price, they would save 0.7c a litre, and that if they all bought on the most-expensive day, the saving would be 5c a litre.

"I note that if it were correct, the biggest beneficiaries would be the least price-sensitive motorists and the smallest beneficiaries would be the most price-sensitive - working families in places like western Sydney," he wrote.

Mr Ferguson also told Mr Bowen that Fuel Watch would alter fuel cycles, ending the phenomenon of fuel being cheapest on one day of the week and extending the cycle to a fortnight.

Again, the biggest losers would be battlers on the edges of big cities, Mr Ferguson wrote.

He also argued that Mr Samuel had opposed a Fuel Watch-type proposal in evidence before a Senate committee in 2006. "I note that the only thing that has changed since 2006 is the political environment," the letter said.

Mr Ferguson wrote that independent service station owners in Perth had opposed Fuel Watch and that since it had been introduced, some had gone out of business. Major fuel companies had adopted "a rolling price leader strategy", shifting prices on half their sites each day, and independent operators had no ability to spread price risk. "I believe the cost of introducing a national Fuel Watch scheme - some $28.2 million over the forward estimates on top of the significant compliance costs to be borne by industry, many of whom are in small business - cannot be justified," he wrote.

Mr Ferguson, whose department is preparing a National Energy Security Assessment and Energy Security white paper, also wrote that Australia's retail fuel market was "highly competitive" in international terms, with its prices lower than in other OECD nations. His letter said the real threat to price competitiveness in Australia was ageing infrastructure and that Fuel Watch could undermine investment by fuel companies in refining, wholesale and import infrastructure.

Last night, Mr Ferguson said Labor's decision to introduce a Fuel Watch scheme followed "advice from the ACCC that the scheme will help consumers save money by increasing transparency in the retail petrol market and the provision of good advice to consumers which will allow them to find the cheapest petrol available".

He said consumers understood that high petrol prices were "primarily a reflection of record high world oil prices and they expect Government to explore all available options to assist them deal with the rising cost of living". "I believe all consumers will ultimately benefit from a national Fuel Watch scheme wherever they live, in Sydney or any other major metropolitan city," he said.

Dr Nelson yesterday attacked the Government's announcement that it would review the application of GST on fuel prices in an inquiry into taxes to be completed in 18 months.

The Opposition Leader said Mr Rudd was "a quitter" on reducing the cost of living and should cut fuel excise now to give Australians relief at the bowser.

Mr Rudd said global oil prices were at their highest level in history and that fuel cost $2.35 a litre in Britain and $2.91 a litre in France. He said Fuel Watch and Labor's appointment of a petrol commissioner with price monitoring powers would help "at the margins". "The bottom line is there is no silver bullet when it comes to petrol," he said..

Mr Bowen urged the Opposition to support legislation creating Fuel Watch. And he attempted to exploit the emergence last week of Mr Turnbull's email opposing Dr Nelson's plan to reduce fuel excise by accusing the Opposition of disunity.

"On this side of the house we stand for giving the ACCC real teeth and we stand for Fuel Watch, while the Opposition prevaricates," Mr Bowen said.

"They (the Opposition) are not sure whether Fuel Watch will be their policy, and they are not sure if reducing the excise will be their policy at the next election."