Call for State Government to hold LPG inquiry

31 Mar, 2009 01:31 PM
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For most of the past six weeks the price of LPG at the pump in Perth has been at least five cents a litre more than any other mainland capital.
For most of the past six weeks the price of LPG at the pump in Perth has been at least five cents a litre more than any other mainland capital.

A competition expert says the State Government should hold an inquiry into LPG prices, as Perth motorists continue to pay the most of any mainland capital.

For most of the past six weeks the price of LPG at the pump in Perth has been at least five cents a litre more than any other mainland capital, and the trend continues, according to figures from monitoring agency Motormouth.

Frank Zumbo, an associate professor at the University of NSW's school of business, wants an inquiry into autogas LPG, much the same as a similar state investigation into LPG used for residential purposes, which reported in 2007.

The 2007 report on the residential market pointed to "extensive market control" of LPG in the state by Wesfarmers subsidiary Kleenheat, with the only other competitor being BP.

While prices were set using an international benchmark, the cost of production were well below this, leading to substantial profits for Wesfarmers and Alinta, which transported the gas.

Petrol Commissioner Joe Dimasi told WAtoday.com.au that LPG was "too minor" a fuel in Perth to scrutinise and the lack of a market was the reason prices went up. He ruled out the need for increased powers to investigate further.

But Mr Zumbo said "if Joe Dimasi won't do it, then it's up to the WA Government to establish an inquiry to do so".

"It's clear that Perth LPG motorists are victims of dominant players in the market (Wesfarmers and BP) playing games to help drive up autogas prices," Mr Zumbo said.

Both Energy Minister Peter Collier and Prices Commissioner Anne Driscoll had the power to order an inquiry.

Mr Collier said he dealt with "stationary" energy, not "transport" energy.

When questioned about his powers under the Energy Coordination Act, he said these were only for the Coordinator of Energy to seek information, not to monitor or regulate.

"The Petroleum Pricing Act provides the Prices Commissioner in the Department of Commerce with explicit powers and responsibilities to monitor and regulate motor fuel (including autogas and bottled LPG)... The clear intent of Government in legislating to give... these explicit statutory powers is that this issue be addressed using those explicit powers," Mr Collier said.

Ms Driscoll said FuelWatch made Perth the most "transparent" market for LPG in Australia and competition meant there could be an 18 cent a litre difference between the highest and lowest prices on any single day.

During 2008, Perth prices were 1.2 cents a litre cheaper than Brisbane and 1.7 cents less than Adelaide on average. Both cities sold a similar amount of LPG to Perth.

"Given this price transparency and price competition in the Perth LPG market place, and the comparatively low volumes sold, there is little evidence to initiate a statutory inquiry into this market," Ms Driscoll said.

An oil industry source said the discrepancy between Adelaide and Perth in the past two months was likely to do with different competitive forces.

Vitalgas - a joint Caltex-Origin Energy supplier - had tried to lift prices in both cities, but had only succeeded in keeping them up in Perth.

"It looks like the competition in Adelaide was too strong and the prices didn't stay up," the source said.

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READER COMMENTS

Ron N
1/04/2009 9:05:12 AM

The LGP scenario in Perth is the most uncompetitive, and the biggest, originally W.A.-Govt-authorised, monopoly the world has ever seen. Wesfarmers Kleenheat Gas have been rorting W.A. LPG users, since the day they built the LPG refinery in Kwinana. Weak politicians gave in to WKG demands that they get a Govt-authorised monopoly when WKG proposed the building of the LPG plant in 1987. They got a 25 year monopoly, on the basis the plant wasn't economic to build without it. They amortised the cost of the plant within 5 or 6 years, and have been rorting us ever since. Every time an inquiry is initiated into the excessive LPG prices in Perth, it becomes a whitewash, and goes nowhere. In 1998, I was running an LPG truck from Adelaide to Perth. LPG in Perth was selling at 30c litre and 27c litre on "special". In Adelaide, LPG was 16c a litre and 13c a litre on "special". I was utterly stunned at the MAJOR discrepancy in prices between the cities. The story put up was that "Adelaide was a bigger, more competitive market". This is utter BS, as Adelaide had a smaller population than Perth. The whole LPG rort can be sheeted home to corporate greed, just as we can sheet home the GFC to the same cause. Wesfarmers have taken on billions and billions in debt and we are going to cover their arse with higher LPG prices. Just watch as Coles ramp up prices and reduce available lines, as well. They have already screwed suppliers with higher shelf charges, and offered nothing in return.

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