Australia undertakes major overhaul of retail gasoline industry

Australia's government has unveiled a major overhaul of the country's gasoline retailing industry that it says will increase competition and cut fuel prices for motorists and business in general. Under the deregulation package, effective Aug. 1, the Australian Competition and Consumer Commission (ACCC) will no longer set daily maximum wholesale gasoline prices. Gasoline and automotive diesel will also be removed from government price surveillance.

Aug. 24, 1998

2 min read

Australia's government has unveiled a major overhaul of the country's gasoline retailing industry that it says will increase competition and cut fuel prices for motorists and business in general.

What's involved

Under the deregulation package, effective Aug. 1, the Australian Competition and Consumer Commission (ACCC) will no longer set daily maximum wholesale gasoline prices. Gasoline and automotive diesel will also be removed from government price surveillance. The reforms also include a commitment by the four major downstream oil companies in Australia-units of Royal Dutch/Shell, British Petroleum Co. plc, Mobil Corp., and Caltex Petroleum Corp.-to allow open access to their terminals for independent bulk fuel suppliers. Existing legislation controlling the location of service stations and who can operate fuel retail franchises will be repealed, allowing the majors to directly control more retail sites. In addition, the deregulation will permit refiners in Australia to enter into "horizontal arrangements," thus allowing sharing and swapping of production between refineries to achieve greater production efficiency and lower costs. Price monitoring will be carried out by the Australian Automobile Association and the ACCC in 100 small towns around Australia.

Price reforms

The government believes that the new measures will create price transparency. Competitive pressure will now be applied to win a better deal for motorists, and rural residents in particular. Under the new system, the government says, small service stations will have to merge their operations and cooperate. It is estimated that the number of service stations in Australia will fall from the current 9,000 to 7,000 or less within a few years. However, some analysts warn that the big companies could use the deregulation measures to gain direct control of more retail sites. The same companies could then have scope to increase price controls at the retail level. Not surprisingly, the major companies welcome the deregulation, saying that it removes outdated regulatory obstacles that previously had applied only to refiner/marketers and that it will add to competition across the industry to the benefit of consumers.