The Main Law
FuelWatch is empowered to monitor and report on WA wholesale and retail fuel prices under the Petroleum Products Pricing Act 1983 . The Act gives the Government authority to enforce price transparency. The Act originally applied to a range of products, but it was amended in 1983 to apply solely to fuel products.
The Act enables the Government to make Regulations and authorises the ‘Commissioner’ to publish Orders. These Regulations and Orders then direct the way the Act is enforced.
In 2000/2001 the Act was substantially amended following the Select Committee on Pricing of Petroleum Products report, 'Getting a Fair Deal for Western Australian Motorists’. The report was produced in response to WA motorists' frustration at intra-day price fluctuations and the significant difference between city and country fuel prices.
The Act supports the following key tools which help FuelWatch to achieve it goal of price transparency.
Terminal Gate Price
The Terminal Gate Price (TGP) provides transparency of petrol and diesel wholesale prices in WA. Suppliers selling fuel (to retailers and distributors) from a terminal are able to set their own price as long as it complies with a specific formula called the Terminal Gate Price (TGP). The TGP formula is based on an Import Parity Pricing model, which effectively ensures the price of fuel in Australia is competitive with the price that could be earned if the wholesale supplier exported the fuel.
The TGP calculation considers:
- The Platts Singapore Products Assessment Price – the international market fuel price.
- A quality premium - the cost of ensuring the fuel meets our high environmental standards.
- Transport costs - to a terminal from Singapore.
- Insurance – of the fuel while it is being transported.
- Wharfage - charges payable to the Port Authority.
- Commonwealth Government Excise.
- Goods and Services Tax.
- Terminal Operating Margin - an amount that represents a reasonable return on investment to the supplier for the cost of the establishment and operation of the terminal.
The TGP system increases the transparency in the wholesale fuel market - providing eligible retailers and distributors with comparative prices (between oil companies) allowing them to make informed decisions about their wholesale fuel purchases. The TGP is fixed for a minimum of 24 hours and sets a maximum at which suppliers can make sales to eligible buyers. Generally, prices at terminals change Tuesday – Saturday.
The 24-Hour Rule
- Notify the Commissioner of their fuel prices for the following day by 2pm.
- Keep notified prices unchanged for 24-hours from 6am.
- Display fuel prices on price boards in regional areas.
The Compliance and Information Power
The Commissioner can compel people to answer questions, take samples, provide documents, seize documents as well as request other information relating to fuel pricing. These powers assist the Commissioner to monitor developments in the wholesale and retail sectors of the industry that may affect fuel pricing and price transparency.
The 50-50 Rule
The 50/50 rule gives retailers greater flexibility in their purchasing power by giving retailers the right to purchase up to 50 per cent of their fuel supplies from a supplier other than their primary contract supplier. In exchange, retailers have certain obligations to properly label the fuel and store it separately.
Under the Petroleum Products Pricing Regulations 2000, non-metropolitan retailers within the FuelWatch boundaries are required to display their fuel prices on clearly legible roadside price boards. The rule was introduced to further encourage price transparency and competition in the regional areas. The increased competition has also helped to reduce the fuel price differential between metropolitan area and many regional towns.
Prices for at least three fuel types must be displayed, one of which must be unleaded petrol and or LPG autogas (if sold at that location). If the retailer sells fewer than three fuel types, they must display the prices for all the fuels sold.