DEREGULATION OF THE AUSTRALIAN OIL MARKET

Abstract

The marketing of domestic crude oil has been regulated by the Federal Government since production began in the early 1960's. In late 1984 the Government decided, after an extensive review, to partially deregulate immediately and to move to a substantially deregulated domestic oil market by 1988.

After only four months of the new arrangements the Government announced a further review claiming that changes in international and domestic market conditions had led to calls from the industry to accelerate the move to deregulation. The Government would also have been influenced by the public perception that rising petrol prices were a result of government policies.

Deregulation would directly affect the prices and consumption patterns for domestic crude oils. Indirect effects would include changes to domestic oil exploration activity, the competitiveness of product imports, regional product prices, the viability of some Australian refineries and coastal shipping activity.

The diverse positions taken during the mid 1985 review reflected differing assessments of the consequences of deregulation and differing impacts on interested parties. Large fuel users such as primary producers and motorists favoured deregulation in the hope of lower prices. Oil producers were split, with the small producers generally opposing deregulation and the two large producers favouring it under most conditions. Refiners too were split, with the majority favouring deregulation. Refinery and shipping unions were opposed for fear of job losses.

The Government decided to halt the move toward deregulation but to review the position again in 1987. In preparation for that review the industry should work hard at improving and communicating its understanding of the complex implications of this vital issue.