Queensland-owned servos ‘pure folly’, say economists and industry bodies

Queensland Premier Steven Miles’s plan to open 12 state-owned petrol stations is a risky investment of taxpayer money, economists and industry bodies have warned.

Queensland Premier Steven Miles. Picture: Dan Peled / NewsWire

Premier Steven Miles’s plan to open 12 state-owned petrol stations is a risky investment of taxpayer money that would push independent operators out of the market, economists and industry bodies say.

In a last-ditch political recovery strategy ahead of October’s state election, the Queensland Premier has promised to introduce a 5c cap on daily petrol price increases and build, or acquire, a dozen publicly owned fuel stations at a cost of $36m.

No modelling has been done on how state-owned stations would impact the market or reduce petrol prices, despite Mr Miles insistence it would.

“Publicly owned fuel stations will charge a fair price for fuel, increase competition and ensure Queenslanders have more choice when it comes to filling up,” he said.

He faced immediate backlash from economists, industry bodies and the Liberal National Party opposition after the announcement on Tuesday, with warnings from the National Retail Association that it would crush competition.

“We are concerned small, independent-run stations will be chased out of the market by a ­taxpayer-funded competitor who undercuts them,” NRA interim chief executive Lindsay Carroll said. “We’re yet to see a compelling case for this level of intervention into the fuel market. There needs to be a lot more detailed provided, including how much it will cost taxpayers.”

 Infrastructure Partnerships Australia chief Adrian Dwyer said the policy was “economically bereft and fiscally flawed”.

“It’s a bit sad to see debate get to the point where an idea like this escapes the brainstorm session into the real world,” he said. “As a rule of thumb, if there’s no one else in the world even suggesting this solution, it’s unlikely to be the right solution for Queensland.”

Under the plan, which economist Joe Branigan described as “pure folly and a massive step backwards”, the dozen stations would be funded through borrowings and opened where competition was most needed.

“There’s no free lunch here,” said Mr Branigan, director of Tulip­wood Economics. “Queensland will ultimately pay for ‘at cost’ petrol via a higher budget deficit, fewer services or higher taxes down the road.”

A re-elected Labor government would also intervene in the market to ban petrol stations from raising the price of fuel more than once a day and cap increases to 5c a litre a day.

Queensland Deputy Opposition Leader Jarrod Bleijie. Picture: Richard Walker

The Australian Convenience and Petroleum Marketers Association warned that capping daily fuel prices may reduce volatility at the start of the cycle when prices move high, but would also mean prices would not fall as far either.

The result is that there would be less variation in the market, with prices normalising around a higher average price and the total destruction of the bottom of the cycle when fuel discounts are greatest, ACAPMA chief Mark McKenzie said.

“History proves that government interference in complex competitive markets inevitably leads to higher costs for consumers – and the retail fuel market is no different,” he said.

LNP deputy leader Jarrod Bleijie said the plan for government-owned petrol station was “economic vandalism … seriously what’s next? The butcher, the baker, the candlestick maker?”