Ross Greenwood speaks to ACCC Chairman Rod Sims as petrol prices reach new highs
Introduction: Where to find the cheapest petrol
Ross Greenwood: Welcome back to Money News right around the country. Well, of course, electricity right now is highly timely as a political issue. There’s no doubt that what’s occurred over the past or couple of weeks at least anyway has led to the events we saw in Canberra today as we detailed. One of the big issues is all about, “What is the right electricity policy and energy policy for Australia?”
The National Energy Guarantee was put in place to make certain that, number one, consumers had a ready supply. Number two, they knew what price they were going to pay. Three, that there was downward pressure on that price. Now, this also came about partly because of recommendations that had come from the Australian Competition and Consumer Commission. The ACCC today also put out a separate report on fuel prices.
We’ll come to that very shortly. In the meantime, let’s go to the Chairman of the ACCC, Rod Sims, who’s on the line. Many thanks for your time, Rod.
Interview with: Rod Sims, Chairman, ACCC
Rod Sims: Good day, Ross.
Ross Greenwood: Right. I want to take you to a couple of recommendations that you made which the government appeared to be taking up with some gust. One of which was default electricity pricing. Rather than having these standing offers which nobody knew what they’re based upon, having a default electricity price that you monitored, that meant that everybody will understand if there was a discount, what the discount was based off.
Rod Sims: That’s right, Ross. There’s two parts of it. One is there’s currently standing offers set by the retailers which are at differing but also at very high levels. If you take electricity prices, Ross, they’ve gone up by 56% after inflation in the last 10 years. The standing offers have gone up by more a 100%. People left on those offers are really paying way too much for electricity and something’s got to be done about that. Then separately, at the moment you just can’t compare discounts, because they’re off different bases. Giving a common base, will really help competition and help consumers.
Ross Greenwood: One of the things you and I have perhaps argued about in recent interviews we’ve done, is my question about whether it is right for a Generator to also be a retailer of electricity, whether in fact, their ability to have market power is too great. Again, you see argument in that, but when you came down to recommendations, you said you thought it was almost a step too far to actually order divestment in these big energy companies.
However, when the government came out with its policy, it said, “As a final straw, it could actually order the divestment of power assets.” Just in regards to where your recommendation came from, why did you make the recommendation you did?
Rod Sims: Well, Ross, we were totally focused on getting electricity prices down. We came up with 56 recommendations to do just that. We think we came up with a blueprint that was workable, that addressed all the issues we saw. Now, divestment, as I think indicated by the press conference that the Prime Minister, the Treasurer and the Minister for Energy held, is in their minds, if I heard them correctly, very much a last resort, a very big issue.
Our job under our monitoring role is to make sure that the market is working in the interest of consumers, make sure that when policy changes are made, the expected improvements in affordability are there. If that’s not happening, to make recommendations. They had, I think, listed a range of things that could be considered by them. I think they mentioned this is very much a last resort. I think there’s a lot of focus on that, Ross. It has been described as very much a last resort almost if everything else fails.
Ross Greenwood: It’s going to be interesting to watch exactly where that now goes, given where the politics lies. That’s not your area, of course, Rod, and I’ll move on. Let’s go to petrol prices. Petrol price in your latest report have hit a four-year high in Australia’s largest cities. You’re also saying there’s been a 7% jump in fuel prices over the past three months. Hitting in real terms about a $1.45 per liter.
Are you concerned? Do you believe that this is because of real reasons, in other words, increases in the wholesale price or the increase in oil prices? Or do you believe also there’s ongoing profiteering from the oil companies and the fuel stations themselves?
Rod Sims: Yes, Ross. It’s the right question. I think most of the reasons for the increase has to do with the OPEC cartel, the oil-producing nations. International cartel which, of course, given its essentially governments, it’s not something we can deal with. It just shows how badly cartels do affect consumers. Australian motorists are paying too much for petrol because of the actions of the OPEC cartel. That’s really extremely bad. That’s the main driver. We also had a weaker Aussie dollar which also pushed up the price, given that we essentially import the petrol. Those are the two dominant things.
Also, Ross, yes, there was a further increase in margins. Margins are now probably four cents greater than what we thought typically they should be. There may be some cost increase in there. There’s no doubt, there’s two or three cents I think where retailers are charging more than they should and that’s costing motorists real money. Two to three cents is $400 million to $600 million across the Australian economy. We’re talking about real money.
Ross Greenwood: If the retailers are capable of pushing up their margins, does that mean that there has been a lessening of competition which is clearly not good for consumers?
Rod Sims: I think, Ross, a couple of issues. There’s some markets where there just isn’t enough competition. Brisbane is a classic one, where there just aren’t enough players who are interested in volume rather than just maximizing the price. Brisbane motorists pay more than other cities do. Of course, you’ve got that problem perhaps even larger in some of the regional centers. I think it’s just due to the fact that prices have gone up, that has allowed motorists, petrol retailers too– the gyrations in the international price have allowed retailers to make a bit more extra money.
Our advice to motorists is very much, use either our website or some of the apps to work out when to buy because of the massive fluctuations in these petrol prices, 20 or 30 cents in a couple of days. Also, look around and work out where to buy.
Right now, Ross, in all the capital cities, the gap between the highest and lowest is about 20 cents a liter. If you look at the map of the city, there’s different prices all over the place. A little bit of extra effort can save you a lot of money at the petrol pump and more than make up for those excess margins.
Ross Greenwood: The Chairman of the ACCC, Rod Sims. As always, Rod, we appreciate your time.
Rod Sims: Thanks, Ross.
Interviewed –Rod Sims, Chairman, ACCC–titled –Do we have enough gas supplies to keep prices down?
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