The cost-of-living move aimed at making a big difference for motorists

Petrol stations would be forced to freeze their fuel prices for 24 hours under a new Victorian government policy aimed at tackling cost-of-living pressures, but the move has prompted warnings that the scheme could be gamed by big retailers and lead to higher average prices.

Under the plan announced by Premier Jacinta Allan on Monday, fuel companies would be made to publicly report their prices the day before they come into effect – and lock them in for 24 hours.

The government has announced a policy to force more than 1500 fuel retailers to lock in their prices for 24 hours at a time.Credit: Justin McManus

The policy is similar to FuelWatch, which has been running since 2010 in Western Australia, where retailers publish their prices for the next day by 2pm. The prices cannot be increased for 24 hours from 6am the following day. Victoria’s scheme would differ from WA’s by allowing prices to be lowered.

The Victorian plan also includes the introduction of real-time price-change reporting to government, ending the state’s status as the only one that does not have this. It would also add a government-run petrol price comparison feature to the Service Victoria app.

Legislation will need to be passed to bring in the scheme and the government said the “appropriate enforcement structure and penalties for fuel retailers” were still being worked out.

Allan said the policy, which Labor wants implemented within a year, would reduce surprises at the bowser. Melbourne motorists could save up to $333 a year by filling up at the lowest point of fuel price cycles and securing the best deal, she said, citing Australian Competition and Consumer Commission data.

“You know how much fuel prices fluctuate – under our plan, you can find out tomorrow’s fuel price at every single servo on your route to work and make your decisions accordingly,” she said.

But Melbourne University economics professor David Byrne, whose research into the WA scheme has been published in the American Economic Review, said while the policy could make prices more predictable, it would not necessarily lead to overall lower costs.

The main effect in WA has been that it now has a clear weekly fuel price cycle compared with Melbourne, which has a six to eight-week cycle, as evidenced in ACCC price-tracking data.

Byrne said the WA scheme had reduced pricing volatility but led to an overall higher price average as petrol suppliers over time settled on an agreed cap price.

“They’re going to be able to co-ordinate potentially, on a price for tomorrow and undercut from there,” he said. “So if [petrol retailers] can all co-ordinate on the high prices tomorrow, setting higher and higher and higher floor prices, that drags the overall price level up.”

The Australasian Convenience and Petroleum Marketers Association, the lobby group for service stations, also flagged potential unintended effects, as did the RACV.

“When government weighs in with intervention into an openly competitive market, you really need to make sure you’re understanding the market, and you’re understanding what the likely impact of your intervention is,” ACPMA chief executive Mark McKenzie said. “Businesses are businesses; they will respond to market conditions and regulation.”

But McKenzie said he understood that the average price of fuel was slightly cheaper now in Perth than in Melbourne.

“The variance in Perth tends to be between the highest and the lowest price in any given day, 10 or 12¢. Whereas if you look at Melbourne, the variance between highest and lowest is often 40 to 45¢.”

The mandatory reporting and app would improve price transparency, which would be good for the many smaller, family-owned retailers “that try to compete with the big guys”, he said.

“It puts everyone’s price in the same place. In that way, it makes it a level playing field. However, it is a complex market.”

Victoria would need to grapple with how the policy interacted with offers such as a 7-Eleven deal that allows drivers to lock in fuel prices already, he said.

An RACV spokesperson said the organisation supported “any measure that brings down the cost of fuel and provides Victorian motorists with savings at the fuel pump”. But they said it was still digesting the detail, noting “government intervention in price setting and mandatory reporting does not always result in a benefit for customers”.

Allan announced the policy ahead of the byelection for the seat of Werribee triggered by the resignation of local MP and long-term treasurer Tim Pallas in December. The byelection is being viewed as a litmus test for her government.

In 2007, former Labor prime minister Kevin Rudd tried to roll out FuelWatch nationally, but it was ultimately shelved.

Byrne said that now, nearly 20 years later, the use of data and apps was a “wildly different” proposition. He said the success of the scheme would also rely on how user-friendly the government’s petrol price app was.

“Something that mums and dads, you and I, can use day-to-day and build good shopping habits for petrol, then [apps are] effective – as long as we have good execution on the back end,” he said.

“Governments aren’t always the greatest at creating consumer-friendly products, but NSW’s FuelCheck is a very good example of where government can succeed.”

There are other fuel-price tracking websites and apps available in Victoria. PetrolSpy, for example, uses crowdsourced petrol prices.

The state government said its planned new price tracker would include every fuel provider and “never promote one outlet over the other”.

State Opposition Leader Brad Battin demanded to know how the scheme would be implemented, who would pay for it, what economic analysis had been undertaken and what advice was provided about the impact of it.

“The proposed ‘Fair Fuel Plan’ is anti-competitive and desperate politics brought to you by a
government that can’t deliver a major project or upgrade myki machines,” he said. “Yet they expect us to believe they’ll have this up and running in a few months.”

The state government has been asked whether the policy came from expert or departmental advice.

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