The problem with petrol politics is that the numbers involved are simply enormous. A small cut in excise — that’ll will be a few billion thanks. A large cut in excise — pick a number and add nine zeros. The debate revolves around numbers so large that economists hide in the cupboard, muttering about the fiscal carnage that could be unleashed.
But there is one area of the fuel pricing melodrama that is at the opposite end of the spectrum — where the amounts involved are so small that we could call it microeconomics if the word hadn’t already been pinched.
We are talking, of course, about FuelWatch.
To get an idea of how the FuelWatch scheme might play out in practice nationally, we have our own natural experiment to look at in WA where FuelWatch has been running for eight years. Using data supplied by the Australia Automobile Association on average quarterly petrol prices in capital cities, we can plot the Perth price since 1980 against the combined average price of Melbourne, Sydney and Adelaide (Brisbane has been excluded because of the State government subsidy that drivers north of the Rio Tweed enjoy).
As we can see, the difference is minute between the two measures, with prices moving together through time, obviously being driven by far larger things than geography or programs like FuelWatch.
However, if we dig down a little deeper and plot the average cents per litre difference between Perth prices and the three state average over the same period, a slightly different picture emerges.
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Throughout the 1980’s and 1990’s, petrol was an average of 1.4 cents per litre more expensive in Perth than the three state average (or 2.45%), whereas over the period since the introduction of FuelWatch, Perth has enjoyed a petrol price that is, on average, 0.2 cents per litre cheaper (or 0.11%) than the three state average.
While the cause and effect of FuelWatch in WA can be debated, the glorious savings for Sandgropers simply cannot be ignored. A typical Commodore driving family in Perth would have saved an average of 14.4 cents every time they filled the tank over the last 8 years compared to a working family in the nation’s south east.
That’s nearly a saving of $7.50 per year if the car gets a weekly fill! We’re talking serious kitchen table Working Family economics here.
If the ALP government wants to start spruiking the benefits of this one, they’ll need to get in touch with the North Korean Newsagency, because I just don’t think that Australian PR firms could deliver the necessary hype.
However, nervous economists can rejoice and leave their cupboards, for we need not be worried about those 10 figure sums with FuelWatch. We only have to worry about whether our software goes to enough decimal places to measure the benefits.