AACS Response to the ACT Government

THE ACT GOVERNMENT’S PLANNED INTERVENTION IS OUT OF LINE

News that ACT Chief Minister Andrew Barr will use special powers to intervene against fuel retailers whose standard fuel retail price is above $1 per litre is misguided and unwarranted. It’s always concerning when Government intervenes without considering operators’ circumstances and the impacts their actions will have.

The facts are that land taxes and rate costs for ACT fuel retailers are often higher than other states. There’s a discrepancy in the way the taxes are applied. For Government to blanket-accuse retailers of profiteering at this time is not only insulting, it ignores real-world small business economics.

The @Canberra Times has reported on the absurd situation:

https://www.canberratimes.com.au/story/6738624/fuel-retailers-hit-back-at-governments-price-warning/

APRIL 28 2020 – 6:30PM

Fuel retailers hit back at government’s price warning

Peter Brewer

The Canberra Times

If retail petrol prices across Canberra don’t fall to under $1 a litre by the end of the week, the ACT government will use its powers under the Fair Trading Act to intervene.

Chief Minister Andrew Barr will use the legislation against fuel retailers in Canberra who he says are profiteering by taking advantage of the historically low international fuel prices.

The global coronavirus pandemic has led to an international over-supply of oil, with pump prices in most capital cities across Australia’s eastern seaboard now plunging to their lowest in more than 20 years.

However, Mr Barr’s edict has drawn a sharp response from ACT retailers, some of whom are paying more than double the fixed costs incurred by similar-sized service stations in regional areas such as Yass and almost four times that of the busy retail sites such as on the M4 motorway at Sydney’s Eastern Creek.

Land tax and rate costs on these service station sites obtained by The Canberra Times have verified these claims.

The NSW government is also deferring land tax for three months and offering a 25 per cent land tax rebate or waiver for landlords who pass on the equivalent relief to their tenants.

The ACT government’s leasehold system does not apply a land tax to commercial properties but calculates applicable rates by comparing one site with another approved for a comparable commercial lease purpose.

One ACT fuel retailer, who did not wish to be identified, said the playing field was not an even one because some discounters buy refined products direct from South-East Asia whereas others refine in Australia and therefore incur higher costs.

He said ACT rates and costs were a significant influence on pump prices but the government has dismissed this component out of hand.

“Additionally we have to pay wages to operate seven days a week, and rent, and the ACT environment fee and environmental management assessment fees. It’s a crazy business, I wish I wasn’t in it,” he said.

Retailers are also concerned that under the ACT’s new COVID-19 Emergency Response Act 2020 legislation, the Minister is given far-reaching powers to make declarations regarding enforcement and termination of commercial tenancies.

Mr Barr said on Tuesday that standard grade fuel should be retailed in Canberra “for $1 a litre or less no matter what the circumstances of the retail outlet”.

“Many [Canberra fuel retailers] are selling around 90 cents a litre but some are still around 40 cents a litre above the wholesale price,” Mr Barr said.

“Now that is a retail margin that is unacceptable and demands government intervention.”

He said that he was “having the work done now” which will allow legislative enforcement to occur on Friday.

“If I don’t see the prices fall to below a $1 per litre by the end of the week, then we will put that in place,” he added.

The Australian Competition and Consumer Commission has also warned that retailers should not use the current pandemic “to further increase profits” and said it would continue to monitor prices..

Terminal gate refined fuel prices offered to business customers vary according to the oil supplier.

On Tuesday, Viva Energy/Shell had a terminal gate price in Sydney for regular 91 RON unleaded of 81.84 cents. Exxon Mobil was set at 83.75 cents and Caltex was 89.09 cents. Transport to Canberra generally adds between 4-5 cents per litre.

Fuel excise is a flat 42.5 cents per litre component of the terminal gate price, and 10 per cent GST is added at the bowser.

Those retailers with set fuel supply contracts from suppliers have three options to vary their prices: accept the prices from the terminal gate and trim their costs accordingly to stay price-competitive, request a subsidy from the supplier – which won’t occur in the current environment – or sell at a loss.