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Petrol Price Rises Begin To Bite As Political Issue

Petrol prices are becoming a worrying political issue for the federal government, following a series of increases in recent weeks.

As unleaded petrol steadily climbs to the politically potent and symbolic one dollar mark, the pressure on the Howard government will grow.

The main reason for petrol price increases is the Middle East cartel, the Organisation of Petroleum Exporting Countries, which has been limiting oil production during this year. This has increased the price of a barrel of oil from $42 to $54 (Australian dollars).

Prices have also increased because of shortages created by fires at two refineries in Kuwait and Indonesia.

The GST is also partly to blame. Previously a flat rate of excise tax was levied on petrol. From 7.1 cents a litre in 1983, this has risen to 38.1 cents a litre today. The Royal Automobile Club of Victoria (RACV) claims today that petroleum excises now make up one third of all federal indirect taxes.

Unlike excise tax, the GST increases with the retail price, so this has created even higher prices than those caused by world factors.

The Age reports today that $1.00 at the petrol pump contributes 45.1 cents to the refinery, 38.1 cents to the Federal government in excise, 9.1 cents in GST, 4.5 cents to the petrol station and 3.2 cents to the relevant oil company.

Given the importance of petrol to the economy, and especially to rural and regional areas which are being assiduously wooed by both sides of politics, this issue is set to have major political ramifications.

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Malcolm Farnsworth
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