Jun 182008
 

Apropos of yesterday’s post on alternatively powered motor vehicles, I thought I’d make a point about something which rolled into my Inbox today, courtesy of one of my brokers.

I’ve been through with the spell-checker in MSWord and compressed a few of the paras, but the general content and obvious emotion of the writer remains unaltered:

Fuel: The Mass Debate (Or How to Knock About 50c a Litre Off the Price Of Fuel )

First and foremost this debate should be centred on Diesel NOT Unleaded. Why? You may ask. Just look at the increase in supermarket prices for your answer. While it may cost you $5 or $10 extra to fill your tank everything that is transported (which is everything) rises as Diesel rises. My average basket at the supermarket per week has increased on average $30 and that’s for one person. Australia’s whole economy is tied to Diesel and therefore it should be afforded the same priority and status as water i.e. an essential commodity.

I own a small transport company and I have had to significantly raise my prices twice

in the past year just to maintain profit margins. This cost you money too. I am compelled to write this letter because I am sick of all the namby-pamby pussyfooting around everyone seems to be doing about the current fuel debate. I have spent considerable time researching this area because it affects my income. Contained herein is the WHOLE truth about the debate, the WHOLE big picture, if you will. NO-ONE till now has had the testicular fortitude to stick their necks out and present the WHOLE argument about just how much we are being RIPPED OFF. If you want

the truth and the WHOLE truth read on.

DON’T – Listen to spin doctors from the oil companies. THEY HAVE A VESTED INTEREST TO KEEP FUEL PRICES HIGH.

DON’T – Listen to the government – state or federal. THEY HAVE A VESTED INTEREST TO KEEP FUEL PRICES HIGH.

DON’T – pay too much attention to news or current affairs programs. THEY HAVE THEIR OWN AGENDAS.

So here we go. How to make fuel cheaper!

FIRSTLY – DISBAND FUEL PARITY

Parity, for those that don’t know, is government sanctioned price fixing (simple as that). Parity allows fuel companies to sell their products for the highest current price they find in the Asia Pacific region. It completely disregards supply and demand economics and eliminates any need for competition amongst them.

Don’t believe me? Just look at the price of Diesel. If you remember growing up when Diesel was always 10-15c p/l cheaper than Petrol you might understand this more. How can a product that costs far less to produce (partially a by-product of producing Unleaded as well) and a product that Australia uses more of than any other fuel be MORE EXPENSIVE than Unleaded? Simple, ring Singapore, where they don’t use a lot of Diesel and import all their fuel, find out how much it’s selling for there and charge the same here – sound fair? NOT!

Any other industry which tried this one would be hauled of to the High Court quick smart and prosecuted for price fixing! Oh but hang on, our government ALLOWS them to do this.

NUMBER TWO – BARREL PRICE

That price the news loves to show us each night is the PREMIUM GRADE crude oil price. Australian oil companies DO NOT buy PREMIUM GRADE crude oil! In fact Australia produces around 70% of its own oil and imports about 30%. The cost of production per litre produced here is cheaper than that of imported fuel, but in no way is this factored into the pump price, because they don’t need to (SEE PARITY ABOVE) we pay a pump price based on PREMIUM GRADE crude oil price the same as if we imported all of it, say somewhere like Singapore! Starting to get the picture?

NUMBER THREE – LEVIES

Everyone knows that both State and Federal Governments take a large slice of the cost of a litre of fuel. This equates in total to about 46% of the price per litre. This money is used for infrastructure, road trauma etc. etc. so fair enough right? WRONG!

What is wrong is that it is a PERCENTAGE! Look at this. If a litre of fuel costs $1.00 then the Government gets 46c p/l, right? A week later fuel rises to $1.10 p/l; the Government gets 50.6c p/l, bingo! Something tells me that in one week, their costs, IN NO WAY have gone up 9%!

As I stated previously – THE GOVERNMENT HAS A VESTED INTREST TO KEEP FUEL PRICES HIGH. THEY MAKE LOTS MORE FREE MONEY! Why else do they allow fuel companies to maintain PARITY? If they changed the tax (sorry, levy) to a flat rate tied to the GDP then the fuel price would drop drastically and immediately!

NUMBER FOUR – GST – THE DOUBLE DIP

Now this one is outright “THIEVERY” and also applies to cigarettes and alcohol. GST = Goods and Services Tax, correct? 46% or 46c in every dollar in the price of a litre of fuel is TAX (sorry; again, LEVY). What part of LEVY is a good or a service? YOU CANNOT TAX, TAX RIGHT?

WRONG! You do the math. Say fuel costs $1.00 p/l – the GST component = 9c. But hang on a minute 46% or 46c of this is TAX!

i.e., 4.14c of the GST is ILLEGALLY CHARGED ON THE TAX COMPONENT! Not much you say? FOR EVERY LITRE SOLD IN AUSTRALIA EVERY DAY!

That equates to millions of free dollars for the Government! I’ll say it one more time – THE GOVERNMENT HAS A VESTED INTEREST TO KEEP FUEL PRICES HIGH. THEY MAKE LOTS MORE FREE MONEY!

The GST on fuel should be 5.4% not 10%. At $1.75 p/l this would drop the current price by around 8c p/l. Feeling a little annoyed? You should be! Even without disbanding parity and introducing real competition among fuel companies, you should be paying about 40c less per litre!

My name is Graeme Strempel, and I run a small transport business. I happily welcome anyone, Government and fuel companies included to prove me wrong. If you feel strongly about this issue then pass this missive on to everyone in your address book. Eventually someone might take notice.

Now, before going further, I’d like to clarify my use of Graeme’s name and linked email address. I contacted Graeme today to explicitly seek his permission, or otherwise, to publish his ‘missive’ and his email address here. He gladly obliged me, for which I thank him. Graeme makes a valid point about this thing called ‘parity’. If you watched the ABC news this evening, you’d have seen this graphic during Alan Kohler’s finance segment:

fuelish

That, apparently, is parity in fuel pricing across the globe. Make any sense to you, reader? Makes bugger all to me. Parity is supposed to equate to "equality, as in amount, status, or character" or in fiscal terms "equivalence in value in the currency of another country." Let’s see, 1 Dutch Guilder converts to A$0.75. Why are the Dutch paying 40% more for their fuel than we are? Why are we paying 33% more than the US? Why…..and this is a corker…..are Iranians paying the equivalent of A$0.14 per litre???????? Oh, how I remember those days. That’s parity??

It’s clear to me, and probably 99.999% of other motoring Australians that the petrol excise levy is a punitive tax charged to feed governmental coffers. The soft soap about preserving a dwindling resource wouldn’t raise a lather under a waterfall. You use an internal combustion engine, you pay, and we all use the internal combustion engine in one form or another. Your lawnmower, brushcutter, motorcycle, car, outboard and the list goes on. 38.143 cents is levied on every litre. Currently, GST is then added, at 10% of the already taxed purchase. Graeme Strempel is correct when he links this ‘tax-on-a-tax’ to alcohol and tobacco.

This
, and related issues, were addressed by the Senate in its 2006 Senate Economics Committee inquiry into petrol prices in Australia. The report makes interesting and revealing reading. Essentially, it was just another Howard government exercise in being seen to be doing something, but not actually reaching a resolution of any kind requiring conclusive action. Senator Andrew Murray’s comments upon handing down of the Chairperson’s report are more than revealing. Damning is far too polite a description. Then opposition Senators – now government – make big points about the committee chair’s dismissal of the WA Fuel Watch system and some clarifying information is contained within their comments to the report which tend to explain why the current government is so vowed and declared to pursue the scheme on a national basis. Barnaby Joyce’s comments are predictably skewed toward rural Australia, yet even he damns the Chair’s treatment of the committee process and final report.

Interestingly it’s Graeme Samuel’s evidence before the inquiry on the subject of price monitoring schemes which raises most interest in me. Remember, this is the man, head of the Australian Competition and Consumer Commission, whose opinion on the WA Fuel Watch scheme which the current government relied upon to support its instigation nationally.

…if you take steps to endeavour to regulate that or to diminish the price cycle, invariably what will occur is that the price will be set, on average, at a higher level, and those who take advantage of being informed and purchase at the lower points of the cycle will suffer loss. This price cycle is a very interesting thing. It is a highly emotive issue, and it causes extraordinary emotive reactions which, on the many observations we can make, seem to be somewhat irrational. The price cycle is evidence of a volatile market in pricing which, of itself, is evidence of competition. If you had less competition, you would actually see a steady price that would run throughout the week, throughout the month, and you would not see it drop to below cost levels…

‘highly emotive issue’…..’causes extraordinary emotive reactions’…..‘seem to be somewhat irrational’. There you have it people. The man in charge of protecting consumer interests in a competitive business world thinks our emotive reactions to excessively high fuel charges are irrational. My disdain for the man and his obvious partisanship in favour of business interests sinks ever deeper.

So, Labor didn’t like George Brandis’ cavalier handling of what we in voter land believed then to be an important and contentious issue, yet now they’re in government, don’t seem to want to do anything serious about addressing this important and contentious issue themselves. Hypocritical? You betcha bippy! It goes without saying that a conservative government in it’s latter days, completely out of touch with the real world which previously elected them, would make a farce of treating a serious issue with anything approaching the import it deserves. So what’s keeping Labor down now? Politics, dear reader. I’ve written on this previously, but it’s pertinent to reiterate.

2008 is year one of a three year term. Nothing happens in year one which the people need to have fresh in their memory in order to return the government at the end of year three. 2009 is when the nasty stuff happens. The things we really don’t like, so hang in there for Budget 2009. 2010 is when we can all look forward to the glad-handing, pork-barrelling, genuine/faux public interest and……..something from the Rudd government on taxation which they’ve already promised they’ll have ready by that time. Who wants to bet the GST on petrol will be shuffled in between the pump and the cashier so that we can’t whinge about a tax on a tax? I’d bet on it. A reduction on the excise, I hear you ask? Maybe. Depends on how the Rudd government performs in the public eye between now & then as to how badly they think they need to win us over. Don’t hold your breath. If you’re still alive to hold your breath and haven’t suicided out of sheer despair at losing your business and being unable to feed your family because of high fuel prices which forced up grocery prices……etcetera, etcetera.

While fuel pricing is a painful, costly and macro-economic nightmare for not just the consumer, but business, industry and the country’s economic growth overall, I don’t believe this government or any other into the future can or will dispense with the fuel excise as it stands without conjuring up a substitute for the loss of revenue axing it would create. Maybe company tax could be increased from $0.30 in the dollar to $0.32? Given the boom times our resources industries are having, we could probably lop at least $0.19 off the excise. We might also see an exodus of multi-national conglomerates and their resource-gotten gain out of reach of the taxman. It’s always far easier and much less painful overall to belt the bejezzus out of the consumer.

That said, I’m a consumer and so are you, reader. I’m sick to death of being belted. I like to drive. I also need to eat and wipe my arse. Currently, I’m struggling to afford to do any of the aforementioned. If people like Graeme Strempel go to the wall because of government unwillingness to do something constructive about levelling the playing field between those supposedly well off resource industry workers, and the other 7 million working family types, then I strongly suggest you book your seat, dear reader, in the rapidly approaching handcart heading for Hades.