Howard widens petrol inquiry

The Howard Government has dramatically widened its planned inquiry into petrol taxes and will now investigate pricing and possible market collusion in the oil industry.

The inquiry is set to be announced in the run-up to the crucial July 14 Aston by-election and has been broadened beyond the original plan to examine how petrol is taxed.

Sources said the terms of reference now included petrol cost structures as well as pricing and marketing arrangements.

But the politically sensitive special zonal rebates that keep fuel prices down in rural and regional areas will be quarantined from the inquiry to reassure country voters that they will not lose the subsidies.

It is believed that National Party leader John Anderson fought to ensure the rural subsidies were exempt from the inquiry, which will include policies by state governments that affect petrol prices.

Petrol prices will be under the most intense scrutiny until the federal election later this year as the Australian Competition and Consumer Commission is also conducting an inquiry into the feasibility of placing limitations on petrol and diesel retail price fluctuations throughout Australia and has released a discussion paper.

As petrol prices in Sydney jumped 10 cents yesterday, industry sources predicted that Melbourne would follow suit. The rise was caused mainly by increases to international petrol prices after United States refinery fires cut supplies.

There is rising concern within the fuel industry and by consumers about domestic marketing arrangements and especially whether independent operators are being squeezed by the oil majors.

ACCC chairman Alan Fels yesterday said the independents were the key to keeping prices down in the domestic fuel market. There is also increased pressure from state governments to introduce new regulations designed to deter price increases and appease consumers.

The Western Australian Government has just introduced tough petrol regulations for service station operators and most other states are considering similar moves.

Opposition treasury spokesman Simon Crean has called for Labor's petrol price inquiry to examine whether Federal Government deregulation in 1998 of wholesale petrol price controls has affected prices.

Moves such as intervening in the market to introduce petrol price caps or price regulation were a "matter for political parties to debate and the government of the day to decide," Professor Fels said. "Whatever the government of the day decides, we will implement," he said.

"In 1998, the ACCC recommended, and the government accepted, that the maximum wholesale petrol price control would be discontinued. We do acknowledge, however, that in Australia historically, when the Commonwealth vacates this area, the states step in and when this happens it may be preferable for the Commonwealth to regulate for a uniform approach," he said.

Prime Minister John Howard announced an inquiry into the taxation of petrol in early March when he abolished fuel excise indexation and discounted the excise for the impact of the GST, but has yet to announce the terms of reference.

Opposition Leader Kim Beazley yesterday promoted the case for regulation of price rises.