Petrol speeding towards $1 barrier

By TIM COLEBATCH ECONOMICS EDITOR CANBERRA Saturday 17 June 2000

Petrol prices in remote areas of Victoria are climbing towards $1 a litre, as soaring world oil prices eat into motorists' budgets and threaten to punch another hole in Peter Costello's federal budget.

The RACV manager of government relations, David Cumming, said yesterday prices of unleaded fuel had already reached 96.9 cents a litre in Mildura, and even higher in outlying settlements. He said prices of super would already be over $1 in parts of the state.

In Melbourne yesterday prices ranged from 82.9 cents to 89.9 cents a litre and Mr Cumming said only the rebound in the Australian dollar over the past fortnight and intense competition in the Melbourne market had prevented prices rising over 90 cents.

The Federal Government has pledged that petrol prices will not be increased as a result of the GST. But with the tax only two weeks away there is mounting concern in the oil industry that the government still has yet to spell out how it will implement this promise, while the time for oil companies to gear up for it is running out.

With motorists paying up to 99 cents a litre in Perth and $1.23 across the Nullarbor, the government is facing heavy additional costs if oil prices remain at this level.

While its original forecasts assumed a reduction in excise of 6.6 cents a litre would be enough to cancel out the GST at the petrol pump, Greg Hunting of the Australian Automobile Association warned yesterday it might now have to cut by as much as 2 cents a litre more than that if motorists are to be no worse off.

When oil prices rise from 77 cents a litre to 88 cents, the net GST take rises from 7 cents to 8 cents. State governments would get the benefit since they received the GST revenue, but the Federal Government would have to meet the compensation bill.

Mr Hunting warned that an extra two-cents-a-litre payout would cost the government about $600 million in lost revenue, relatively little of which would be regained by the tax on domestic oil production.

http://www.theage.com.au/news/20000617/A12402-2000Jun16.html

-- Martin Thompson (mthom1927@aol.com), June 17, 2000