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17 September 2001 

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Previous reports on petroleum products

1. Introduction

Since the Fuel Taxation Inquiry terms of reference were announced on 8 July 2001, commentators have recalled the very large number of inquiries into petroleum products over the past few decades.

In fact, there have been few inquiries into the issues covered by the Fuel Taxation Inquiry terms of reference.

There are many issues surrounding the supply of petroleum products in Australia, affecting policies at both Commonwealth and State/Territory levels, including:

pricing, notably concerns about perceived high prices, price volatility and city/country price differentials;

competition amongst industry participants;

industry policy, including government policies affecting the exploration for, and production of, petroleum resources and refining capacity;

environmental effects of fuel use; and

taxation of petroleum products.

The Fuel Taxation Inquiry is predominantly looking at taxation (and rebates, subsidies and grants) although the interplay between taxation and the various other issues noted above is recognised in the Inquiry's terms of reference.

Most previous reports into petroleum products have focused on pricing issues. A schedule of pricing reports is at Attachment A. The Australian Competition and Consumer Commission (ACCC) is examining the feasibility of placing limitations on petrol and diesel price fluctuations throughout Australia. Previous pricing inquiries relate more closely to the ACCC's work.1

2. Previous reports on fuel taxation

The most comprehensive Commonwealth studies of fuel taxation issues in the past two decades are contained in two reports:

in 1986, the Industries Assistance Commission (IAC) reported on Certain Petroleum Products - Taxation Measures;2 and

in 1994, its successor, the Industry Commission (IC) picked up the work of the IAC and made recommendations on fuel taxation in its report on Petroleum Products.3

2.1 Industries Assistance Commission 1986

On 31 May 1985, the then Minister for Industry, Technology and Commerce asked the IAC to inquire into and report on the taxation of petroleum products, including the rationale for such taxation, potential taxation bases, the effects of existing taxation and subsidy arrangements on resource allocation, the options for reducing any adverse effects of anomalies or inequities resulting from existing arrangements, and the implications of any recommendations for government revenue.

The IAC observed that petroleum product excises were being levied to achieve two different objectives:

• to provide government revenue; and

• to charge for the use of infrastructure, notably roads.

Fuel excise as a revenue source

The IAC evaluated fuel excise against the standard principles of taxation design: efficiency, equity and simplicity.

It was concerned at the potential for differential rates of fuel excise to distort patterns of fuel consumption and, in its draft report, had recommended a uniform rate of excise for all products under reference. However, this was overtaken by a Government decision in February 1986 to increase petroleum product excise rates significantly - responding to lower world crude oil prices. In its final report, the IAC did not recommend uniform rates since a common ad valorem tax rate of approximately 42 per cent would have been required to avoid a revenue shortfall, including on products such as LPG that had formerly been tax free.

The IAC also noted that the exclusion of electricity and natural gas from taxation could distort patterns of fuel use. This latter issue was outside its terms of reference but was a factor conditioning its view of what could be achieved by uniform rates of excise on petroleum products.

The IAC encountered difficulties in assessing the impact of fuel taxes on resource allocation, partly due to a lack of empirical data to assist analysis of whether the existing system of taxation was favouring comparatively less efficient industries. It hesitated at making findings about the impact of fuel taxation on the international competitiveness of Australian industries, notwithstanding that many of Australia's trading partners had allowed greater reductions in fuel prices following the fall in crude oil prices. The IAC's reasoning was that any revenue lost in reducing fuel taxation would need to be recouped from other sources, with the likelihood that such measures would eventually find their way into the cost structures of the traded goods sector.

The IAC concluded that fuel excise had certain merits as a revenue source. Fuel excise was administratively simple to collect, difficult to evade, had already been factored into personal and business consumption patterns, was a reliable source of revenue because of the price inelasticity of demand, and the burden of taxation was spread broadly across the economy since fuel is an input into nearly all economic activities.

However, the IAC found that fuel excise rates - particularly on petrol and diesel - were too high and should be reduced. It was concerned that a range of consumption decisions - from location of homes to location of industries - would be affected if existing rates equivalent to 70 per cent ad valorem were maintained.

The IAC made a strong 'in-principle' argument for levying taxes on end consumption rather than intermediate inputs to production but recognised that intermediate exemptions were not feasible while petroleum product excises remained such a significant source of revenue.

Fuel excise as a charge for infrastructure

The IAC found that petroleum product excises were not an appropriate mechanism to charge for road and aviation infrastructure and that direct charging for road and aviation infrastructure should be pursued as soon as considered practicable.

In particular, there was a low correlation between fuel use and the costs of road usage such as road damage or congestion.

The IAC pointed out that direct pricing would assist in efficiently allocating funds to maintenance and upgrading since relative revenue flows would indicate priorities. By comparison, indirect pricing through fuel taxation would promote inefficient use of infrastructure and undue attention to fuel economy. The IAC noted that public reaction to certain road user charges could be negative if petrol excises remained high.

The IAC noted that the separation of funding and supply decisions - whereby fuel taxes are levied at the Commonwealth level but road infrastructure decisions are made at the State/Territory level - made it even less likely that fuel taxation would have a beneficial effect on road supply.

Other issues

The IAC also proposed:

• the dismantling of LPG price regulation and minimum duties on LPG imports;

• the abolition of the Petroleum Products Freight Subsidy Scheme; and

• administrative enhancements to excise arrangements - including:

    - the standardised timing of payments for all commodity taxes;

    - the indexation of petroleum excise by a fuel price index rather than the Consumer Price Index (CPI); and

    - consideration of moving, in the medium to long term, towards levying petroleum product excises in ad valorem rather than specific rate terms.

Government response

In March 1988, the Government announced that, in light of the prevailing budgetary situation, there was no prospect of altering the duty structure applying to petroleum products; the Government decided to maintain specific rates of excise and indexation by the CPI. The Government agreed that the changes recommended by the IAC could only be considered in the context of broader changes to the taxation system.

The Government supported the Commission's proposal that direct charging for road and aviation infrastructure should be pursued as soon as practicable; the decision to abolish excise on aviation turbine fuel for use in jet aircraft and to replace it with direct enroute charges was announced in the May 1988 Economic Statement.

Changes to the eligibility criteria and administration of the Diesel Fuel Rebate Scheme were also announced, but the proposal to abolish the Petroleum Products Freight Subsidy Scheme was rejected.

The Government had already announced the dismantling of LPG price regulation and moves to free the market in LPG. The Government accepted the IAC recommendation that LPG be dutiable at minimum rates and decided to remove the customs duty on various imported gases from 1 July 1988.4

2.2 Industry Commission 1994

On 5 May 1993, the Assistant Treasurer asked the Industry Commission (IC) to report on the petroleum industry, specifically 'institutional, regulatory (including environmental and safety) and other arrangements subject to influence by governments in Australia which affect the efficient allocation and use of resources, and ... courses of action to remove or reduce any identified inefficiencies ...'.5

The IC made recommendations to Commonwealth, State and Territory Governments covering issues such as the surveillance or regulation of petroleum prices, the repeal of the Petroleum Retail Marketing Sites and Franchise Acts, and the withdrawal of cabotage.

It made two (2) recommendations relevant to fuel taxation and rebates, namely that:

• the Commonwealth Government should modify the Diesel Fuel Rebate Scheme to include rail, marine and mining applications, but not residential use other than in remote locations,6 and that all rebate rates should be increased to 100 per cent of the tax; and

• the Commonwealth Government should initiate a comprehensive review of taxes on intermediate inputs.7

Fuel excise as a charge for infrastructure

The IC affirmed the view of its predecessor that fuel taxes are not closely related to the cost of using roads and are not as efficient as available alternative methods to charge road users.

In an earlier report on urban transport, the IC had recommended electronic road pricing as a means of allocating road space on particular roads at peak times.8 The IC considered a combined mass-distance charge, related to the mass of vehicles and the distance travelled, as a preferred method of charging for road wear and tear. Fuel taxes, as a means of charging for road damage, unduly penalised motorists and failed to recover marginal costs from heavy vehicles.

Government response

In the 1995-96 Budget, the diesel rebate was withdrawn from domestic use except for residential use by the mining industry and primary producers, consistent with the IC's recommendation. The IC's recommendations shaped the 1998 reform package for the petroleum industry, which also drew on the ACCC's 1996 report (see below).9

3. Pricing inquiries

Since 1939, when petroleum price controls were introduced at the outbreak of World War II, there has been some form of government regulation of the prices of petroleum products in Australia. From 1948, States and Territories took over responsibility for petrol price regulation. States and Territories have broad regulatory powers in this area and have implemented various price controls from time to time.

Except during war, the Commonwealth's role has been confined to surveillance or monitoring of prices. The Commonwealth established the Prices Justification Tribunal in 1973. The Tribunal was succeeded by the Petroleum Products Pricing Authority in 1981 and the Prices Surveillance Authority (PSA) in 1984. The role of the PSA was absorbed into the responsibilities of the Australian Competition and Consumer Commission (ACCC) in 1995.

3.1 Prices surveillance since 1983

Under the Prices Surveillance Act 1983, the PSA - from 1984 to 1995 - and the ACCC since 1995 have been responsible for formal prices surveillance of 'declared' industries and for formal and informal monitoring of petroleum prices.

Formal prices surveillance of oil companies ceased from 1 August 1998 as part of the Government's reform package for the petroleum industry10 and in response to the ACCC's 1996 report recommending conditional revocation of the prices surveillance declaration.11

One element of the Government's 1998 petrol reform package was the introduction of an independent price monitoring system, which was established as a joint cooperative venture between the Australian Automobile Association and the major oil companies, to monitor retail prices. Furthermore, since the latter part of 1999, the ACCC has also undertaken petrol price monitoring, including examination of pricing issues arising at particular times and in particular regions. For example, in 1999 the Government asked the ACCC to consider how international crude oil price movements had been translated into Australian retail prices.12

There have been numerous reports on the pricing of petroleum products since 1983 and details of these reports are set out in Attachment A. Some of these pricing reports have examined technical issues associated with the appropriate costing/pricing methodologies for regulatory purposes and others have taken a broader view on whether market conditions continue to warrant prices oversight or regulation. None has examined the interplay between fuel taxation and petroleum pricing in any detail. One inquiry considered - and dismissed - the potential for oil companies to make substantial windfall gains by building up stocks of petroleum products prior to increases in fuel excise, such as indexation, and then selling at an approved price based on the higher rate of excise.13

3.2 Rural and regional petroleum pricing

There have also been numerous examinations of regional problems with the availability and pricing of petroleum products. Some of these have been prompted by short-term market disruptions while others have addressed perennial concerns such as city/country price differentials. A list of these inquiries is also at Attachment A.

The PSA and ACCC have reported on the supply of petrol and/or LPG at particular times in the ACT, Tasmania, Western Australia, Victoria, and at specific locations such as Mildura and Geelong.

Outside its formal reporting framework, the PSA also conducted a series of regional pricing investigations in the early 1990s including in Darwin, the Victorian regional centres of Horsham, Hamilton, Mildura, Bendigo, Ballarat and Shepparton, and the Queensland cities of Toowoomba and Townsville. The ACCC conducted a case study of petrol pricing in two rural locations - Mildura and Warrnambool - in connection with its 1996 Inquiry into the Petroleum Products Declaration.

These various inquiries have identified a plethora of factors affecting city/country pricing differentials, including:

• the relatively small throughput in regional markets;

• distances from refineries;

• freight costs; and

• levels of competition in regional centres;

    - particularly the presence or absence of independent retail chains.

None of the regional reports has identified fuel excise as such as a significant influence on regional petroleum pricing. Various reports were, however, critical of State regulation that distorted the market. In particular, there was mention of non-uniform State business franchise fees that existed until 1997, which resulted in unexplained differences in petroleum prices around Australia and had the potential to distort consumption decisions across State borders. Other local regulations such as the Tasmanian system of rostering late and weekend opening of service stations, and ACT restrictions on the siting of service stations, were considered to have had an adverse effect on petroleum pricing in those jurisdictions.

3.3 State and Territory regional pricing inquiries

State and Territory Governments have also conducted, and are continuing to conduct, inquiries on petroleum pricing. A list of State/Territory inquiries is included at Attachment A. Fuel taxation has not featured as an issue in these inquiries, with the exception of the one inquiry described below.

West Australian Select Committee on Pricing of Petroleum Products

A recent West Australian Parliamentary inquiry into petroleum pricing was explicitly asked to examine, inter alia, "the impact of State and Federal Government policies, taxes and charges on the price of petroleum products in both metropolitan and non-metropolitan areas of the State".14 The WA Select Committee on Pricing of Petroleum Products reported in October 2000 that:

• issues arose from the ad valorem nature of the GST for rural and remote areas;

• there are anomalies in the Fuel Sales Grant Scheme that should be rectified;15

• the Commonwealth should forgo the CPI adjustment to fuel excise that was then due to take effect on 1 February 2001;

• Commonwealth and State Governments should return any windfall gains (from resource rent taxation following the rise in world oil prices) to motorists in the form of lower fuel prices, additional road projects and the development and promotion of alternative vehicular fuel; and

• remote communities dependent on diesel for power generation should be entitled to the Diesel Fuel Rebate during the transition period to reliance on other fuel sources (the State Government to assist with conversion costs).

4. Other Commonwealth inquiries

Leaving aside pricing inquiries, there have been many Commonwealth inquiries over the past quarter of a century that have addressed fuel taxation issues.

There is an extensive body of work on transport economics, including reports by the Bureau of Transport Economics, its predecessor, the Bureau of Transport and Communications Economics, the Productivity Commission and its predecessor, the Industry Commission. These reports have considered fuel taxation as a means of charging for transport infrastructure. There has been a consistent recognition that fuel usage is a poor proxy for transport externalities such as pavement damage and congestion, and that direct pricing mechanisms are a superior way of funding infrastructure.

The findings and recommendations from Commonwealth reports on fuel taxation, rebates and subsidies are summarised at Attachment B.

5. Lessons from previous reports

The past reports outlined in this paper examine principles of fuel taxation that have relevance to the Fuel Taxation Inquiry.

These include the principle that petroleum products used as intermediate inputs to production should not be taxed and the finding that fuel taxation is a poor proxy for user charges for infrastructure such as roads.

Other reports have illustrated the complexity of the administration of fuel taxation and subsidy regimes and the enforcement challenges that must be met. The Fuel Taxation Inquiry is required to have regard to the administrative issues associated with the existing system of fuel taxation, rebates, grants and subsidies, as well as administrative issues arising from proposed changes.

Attachment A

Pricing inquiries

National petroleum pricing inquiries by PSA/ACCC

Over the past two decades, the major petroleum pricing reports have been those prepared by the Prices Surveillance Authority (PSA) and the Australian Competition and Consumer Commission (ACCC) pursuant to their responsibilities under the Prices Surveillance Act 1983.

• PSA, Inquiry in Relation to the Supply of Petroleum Products, 25 July 1984.

• Trade Practices Commission, Study into Market Practices and Government Regulation in the Petroleum Industry, 1988.

• PSA, Inquiry into Petroleum Product Prices, 20 December 1989.

• PSA, National Inquiry into Petroleum Product Prices, 8 November 1990.

• PSA, Review of LPG Pricing, 30 June 1990.

• PSA, Report to Government on the Recommendations of the Caucus Special Committee of Inquiry (the Wright Committee) into Aspects of the Australian Petroleum Industry, 28 October 1991.

• ACCC, Inquiry into the Petroleum Products Declaration, 15 August 1996.

• ACCC, Increase in the Average Retail Petrol Prices in Australia Compared with the Rise in International Prices, 24 November 1999.

Regional petroleum pricing inquiries by PSA/ACCC

The following inquiries have been conducted following complaints about unfair pricing in particular regions at particular times. Some were formal reports to the Commonwealth while others have been initiated by the PSA/ACCC following requests from parties such as motoring advocacy bodies.

• PSA, Inquiry in relation to the supply of petrol in the ACT, 4 December 1987.

• PSA, Inquiry into Tasmanian Petrol Prices, 8 November 1990.

• PSA, Regional Study of Petrol, Distillate and LPG Prices in Mildura, 9 December 1991.

• PSA, LPG Pricing in Western Australia, 15 May 1992.

• PSA, LPG Pricing in Tasmania, 7 July 1994.

• PSA, Inquiry into the LPG Declaration in Western Australia, 30 December 1994.

• ACCC, Autogas Pricing in Geelong, 16 December 1997.

• ACCC, Victorian LPG Autogas Prices, 9 October 1998.

• ACCC, Review of LPG Autogas Prices and LPG Cylinder Prices in Western Australia, 7 September 1999.

State and Territory inquiries

State and Territory governments have also conducted their own inquiries into matters related to petroleum pricing and marketing. The Fuel Taxation Inquiry is aware of the following State and Territory inquiries.

New South Wales

• Commission of Inquiry into Petrol Prices in Rural New South Wales, 1995.

• NSW Department of Fair Trading inquiry into Petrol Price Signs, 1999.

• Australian Centre for Co-operative Research and Development, Development of Co-operative-Type Structures for Lowering Petrol Prices in Rural New South Wales, December 1999.

• Western Research Institute, Enhancing Competition in the Petroleum Industry - The Role of Co-Operatives, December 1999.


• Victorian Coalition Backbench Committee, Discussion Paper on the Disparity between Country and Metropolitan Fuel Prices, 1993.

• Consumer & Business Affairs Victoria, Information on Fuel Price Trends in Victoria: Victorian Fuel Price Monitoring Initiative, October 2000.

• At the time of writing, the Economic Development Committee of the Victorian Legislative Council was finalising a report into the impact of the GST in Victoria, including on LPG and petrol prices.

• At the time of writing, the Victorian Government had just called tenders for fuel price monitoring services to establish data sets to be used to monitor and report on the impact of the Petroleum Products (Terminal Gate Pricing) Act 2000 on petrol and diesel pricing in Victoria.


• Fuel Taskforce 2000. Information on the Taskforce is available at: http://www.osr.qld.gov.au/fuel/fueltaskforce.htm

Western Australia

• Legislative Assembly of Western Australia, Select Committee on Pricing of Petroleum Products, Getting a Fair Deal for Western Australian Motorists, 12 October 2000.

South Australia

• National Competition Policy review of the Petroleum Products Regulation Act 1995, 2001.

• At the time of writing, the Select Committee on Petrol, Diesel and LPG Pricing appointed by the Parliament of South Australia on 27 March 2001 was yet to report. The Committee has a broad brief to consider and report on all aspects of petrol diesel and LPG auto gas pricing in South Australia.


• Tasmanian Legislative Council Select Committee on Petrol Pricing, 1995.

Australian Capital Territory

• ACT Government Working Group on Petrol Prices, 1992.

• ACT Legislative Assembly Select Committee Inquiry into Petrol Prices in the ACT, 1997

• ACT Independent Competition and Regulatory Commission, Summary Report: Inquiry into Motor Vehicle Prices, September 2001.

Attachment B

Commonwealth inquiries other than pricing

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Royal Commission on Petroleum. Report No. 4. The Marketing and Pricing of Petroleum Products in Australia.


Fuel taxation should be used to substantially increase the cost of transportation fuels to all consumers except the public transport sector. (This recommendation was one of a set of strategies to promote energy conservation).

No immediate outcome.

Royal Commission on Petroleum. Report No. 6. The Use of Liquefied Petroleum Gas in Australia,


Excise on LPG for automotive purposes (2 cpl from November 1974) should be cut to 1 cpl to promote the development of LPG as a motor fuel, particularly in the Melbourne and Sydney areas. The relativity of petrol excise and the reduced LPG excise rates should be largely maintained to 1990.

No immediate outcome. LPG was excise-free from 1981.

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Senate Standing Committee on National Resources, Replacement of Petrol by Alternative Sources of Energy


• LPG to attract the rural freight subsidy;

• Excise on 89 & 92 octane petrol to be varied to establish a clear 2 or 3 cpl price advantage over super (97 RON);

• Government to establish demonstration project involving operation of vehicles using blended fuels;

• National Energy R&D Development Council to increase support for vegetable oil/hydrogen fuels; and

• Feasibility of small scale vegetable oil extraction plants suitable for on-farm use to be examined.

There was a price differential between standard and super petrol through the 1980s.

Joint Committee of Public Accounts, Excise and Deferred Customs Duties, Report No. 224 of 1985.


• Abuses of the Petroleum Products Freight Subsidy Scheme were not under control and deterrents were inadequate. There was a need for immediate upgrade in enforcement with a comprehensive review after one year.

• There was a need to review the effectiveness of the Diesel Fuel Rebate Scheme to ensure that rebated fuel is actually used in specified applications.

The Auditor-General has since reviewed the effectiveness of the Diesel Fuel Rebate Scheme (see below).

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Industries Assistance Commission, Certain Petroleum Products - Taxation Measures, Report No. 397, 5 November 1986


• Fuel excise should be reduced; such changes should be considered in the context of broader changes to the commodity taxation system.

• Fuel taxes provide poor signals for road use and supply.

• Fuel excise should be determined in ad valorem rather than specific rate terms and should be indexed to a fuel price index, not the CPI.

• The Petroleum Products Freight Subsidy Scheme should be dismantled.

• Regulation of LPG prices should be dismantled and LPG imports dutiable at minimum rates.

The Government decided that the changes recommended by the IAC could only be considered in the context of broader changes to the taxation system.

Auditor-General, Report of an Efficiency Scrutiny - Diesel Fuel Rebate Scheme, March 1987


Issues were raised relating to the eligibility criteria and aspects of the lodgement and processing of claims.

(See 1991 review below)

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Auditor-General, Australian Customs Service - Diesel Fuel Rebate Scheme, Audit Report No. 27 of 1990-91.


• Policy objectives of DFRS were unclear so it was difficult to appraise its effectiveness.

• Eligibility criteria were complex and ill-defined, effectively broadening the scope of the scheme and adding to administration costs.

• Overclaiming was estimated at $19.8 million pa. ANAO made recommendations to improve the rebate control function.

(See 1996 review below)

Industry Commission, Petroleum Products, Report No. 40, 5 July 1994.


Fuel taxes on intermediate inputs should be reviewed with a view to exempting businesses from diesel excise more effectively than has been achieved under the Diesel Fuel Rebate Scheme. The Diesel Fuel Rebate Scheme should be modified to include rail, marine and mining and exclude residential use except in remote areas.

In the 1995 Budget, the rebate was withdrawn from domestic use except for residential use by the mining industry and primary producers.

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Australian National Audit Office, Diesel Fuel Rebate Scheme: Australian Customs Service, Report No. 20 of 1995-96.


The Auditor-General made 28 recommendations, most directed at the Australian Customs Service (Customs) and designed to improve administration of the Diesel Fuel Rebate Scheme and to strengthen investigation/auditing activities. It was also recommended that the Department with policy responsibility for the scheme seek clarification of the purpose and objectives of the scheme, and report on whether the scheme was achieving the desired economic and social effects on claimants eligible for rebate.

Customs accepted most recommendations.

Department of Industry, Science and Resources, Downstream Petroleum Products Action Agenda.


Industry and Government to continue to work together to address petroleum excise evasion. Government to consult with industry on a range of environmental policies, including fuel quality and emission standards, measures to increase the market share of ultra low sulphur diesel, accelerated introduction of higher octane fuel, and other greenhouse measures.

This work is continuing.

Table: Recommendations on fuel taxation from Commonwealth reports



Major conclusions and recommendations


Senate Rural and Regional Affairs and Transport Legislation Committee, Report on the Provisions of the Petroleum Retail Legislation Repeal Bill 1998


The Senate should amend the Bill to delay repeal of the Sites Act for two years after Royal Assent. In the interim, the Senate Rural and Regional Affairs and Transport Legislation Committee should conduct a review of the repeal decision.


Senate Economics Legislation Committee, Consideration of Diesel and Alternative Fuels Grants Scheme (Administration and Compliance) Bill 1999


The Senate should pass this Bill (to prevent fraudulent claims under the grants scheme while minimising the compliance burden on the transport industry).


Senate Economics Legislation Committee, Consideration of Petroleum Excise Amendment (Measures to Address Evasion) Bill 2000


The Senate should pass this Bill (to replace specific product descriptions in the excise tariff with generic descriptions to discourage fuel substitution).


Senate Economics References Committee, Inquiry into the provisions of the Fair Prices and Better Access for All (Petroleum) Bill 1999 and the practice of multi-site franchising by oil companies. Interim Report.


The Bill should be amended, re-introduced and passed. (The Bill sought to promote competition at the wholesale level in the petroleum industry).

The Government is yet to respond.

1 The ACCC released a discussion paper for its inquiry, entitled Reducing Fuel Price Variability, in June 2001. This paper is available on the Internet at: http://www.accc.gov.au/new/fs-new.htm (Scroll down to June 2001).

2 Industries Assistance Commission, Certain Petroleum Products - Taxation Measures, Report No. 397, 5 November 1986.

3 Industry Commission, Petroleum Products, Report No. 40, 5 July 1994. This report is available on the Internet at: http://www.pc.gov.au/ic/inquiry/40petrol/finalreport/index.html

4 Information on the Government response is taken from the 1988-89 Annual Report of the Industries Assistance Commission, pp 167-68. Information provided courtesy of the Productivity Commission Library.

5 Terms of reference, printed in IC, 1994, p. xvii.

6 The Diesel Fuel Rebate Scheme originally covered all residential use, including urban households with ready access to the electricity grid. The IC found that claims from the residential category dominated processing costs of the 'Other' grouping. It noted that the Government had not formally explained the rationale underlying the rebate of excise for residential use of diesel although it appeared to be aimed at remote households that used diesel to generate electricity for light, heat and cooking.

7 The IC had identified a range of options for exempting businesses from fuel excise, including: coloured excise-free fuel for intermediate use; annual self-assessment of excise to be deducted from tax liabilities, exemption certificates for businesses, and another option of addressing the issue within the context of a broad-based Value Added Tax.

8 IC, Urban Transport, Report No. 37, 1994. This report is available on the Internet at: http://www.pc.gov.au/ic/inquiry/37urbant/index.html

9 Details of the 1998 reform package are at: http://www.isr.gov.au/industry/petroleum/new-era/new-era.html

10 The Government's announcement is available on the Internet at: http://www.treasurer.gov.au/default.asp?main=pressreleases/press.asp. Choose Press Release No 68 of 1998, dated 20 July 1998.

11 ACCC, Inquiry into the Petroleum Products Declaration, 15 August 1996. This report is available from the ACCC.

12 The ACCC's report on this matter can be accessed on the Internet at: http://www.accc.gov.au/fs-pubs.htm (Choose Industry/Petroleum).

13 PSA, Inquiry in relation to the supply of petroleum products, 25 July 1984, p. 43. The PSA found that any such windfall gains would be limited by storage capacity after the fuel was taken out of bond and by the potential for consumers and end-users also to bring forward purchases in anticipation of increases in excise. The Australian Taxation Office now has the power to impose quotas in anticipation of changes in excise rates.

14 Legislative Assembly of Western Australia, Select Committee on Pricing of Petroleum Products, Getting a Fair Deal for Western Australian Motorists, 12 October 2000. This report is available on the Internet at: http://www.wafuelpricing.com/report.pdf

15 The anomalies identified were associated with the zoning system for the grant. For example, the Committee found that Kwinana - a metropolitan suburb and the site of the BP refinery - qualified for a rebate under the scheme, and also noted that fuel outlets within 100 km of Perth consistently featured fuels at prices outstripping most metropolitan outlets. The Committee also noted that Esperance, on the south coast of the State, qualified for the remote zone grant of 2 cents per litre (cpl) notwithstanding that some inland towns supplied out of Esperance, such as Kalgoorlie, only qualified for the regional zone grant of 1 cpl; unleaded petrol prices in Esperance were found to be typically 3-4 cpl lower than in Kalgoorlie/Boulder. See Getting a Fair Deal for Western Australian Motorists, pp. 36-37.

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