PRIME MINISTER:
Ladies and gentlemen, the Deputy Prime Minister and I have just completed a meeting with leaders of the major oil companies in Australia. The principal purpose of the meeting was to talk about the Government's target of 350 million litres of biofuels by the year 2010 following the release of the ethanol taskforce report last week. I am pleased to report that both the Government and the oil companies have agreed to work together to achieve that target. We believe together that it can be achieved and what will happen now is that the individual companies will prepare, and discuss separately with the Government, Action Plans covering their contribution to achieving that target. And when that process has been completed, there will be an overall industry framework plan released.
Both the oil companies and the Government agreed that crucial to achieving that target was a restoration of consumer confidence, particularly in ethanol. That consumer confidence was quite wrongly undermined several years ago as a result of a scare campaign politically based, run against the use of ethanol. And part of that process of restoring consumer confidence will involve a meeting to be convened by the Minister for Industry, Mr Macfarlane, of consumer groups, retailers and others involved in the industry to discuss the implementation of the Government's plans. We will, consistent with what is feasible and based on the information coming from the Action Plans, be releasing, where possible, volumetric targets as we move towards achieving 350 million litres by the year 2010.
The meeting was attended by the Chairman of the Australian Consumer and Competition Commission Mr Graeme Samuel. He attended all of the meeting. We, not surprisingly, had a discussion about petrol prices during the course of the meeting. We would all like to see lower prices. The reality is that we are stuck with much higher oil prices and petrol prices therefore than any of us would like. That is the international reality and it is an international reality that Australia cannot escape. The only source of comfort of course is that the price of petrol, although it is very high in Australia, it is much higher in every other country with which it's fair to make comparisons, other than the United States. For example, it's $1.23 yesterday here. In Great Britain its $2.13, Japan $1.69, Germany $2.07 and France $2.11. That's converted to Australian dollars, dinky-di dollars, and cents per litre. So that's a proper international comparison. Now that doesn't relieve the pain of any Australian motorist, I understand that. But I make those comparisons to emphasise the point that this is a worldwide phenomenon, and if there were some magical way that we could escape it, I can assure you that we would certainly do so.
But I think it was important we had the discussion. It reminds the oil majors of our continuing interest in this issue and the continuing interest of the ACCC. But I think it's also right of me to say that the price of petrol is high because the price of oil is high. That's the fundamental reality and nobody can escape that. And no good purpose is served by my pretending that there's some magical fiddle that can be implemented to bring it down faster than it will otherwise fall as a result of market forces. I know Mr Vaile will want to say a couple of things as well. But it was a useful meeting. But achieving that target of 350 million litres of biofuels is a work in progress. The important thing is that we believe it's achievable, so do the oil companies. And we've agreed to work together to achieve it and that's a very important outcome from today's meeting.
DEPUTY PRIME MINISTER:
Thank you Prime Minister. Ladies and gentlemen, just to concur with the comments of the Prime Minister, the discussion was quite fruitful in terms of the shared objectives that we have of achieving that target of the use of biofuels. It's become probably a little bit more relevant in today's context given the global price of oil and the impact that that is having on Australian consumers, that we look at alternatives. It's happening across the world and in fact some of the oil majors already in some parts of Australia have been running trials to help build confidence in the use of blends of biofuels in the transport fuel mix in Australia. We, in this discussion, indicated that we want to see a cooperative effort, if you like, moving forward with the oil majors and the Government in achieving the Government's target by 2010. And as the Prime Minister indicated, that's been agreed to by the oil majors as being quite achievable. We'll now enter into bilateral discussions with them in terms of the development of individual Action Plans in how that will be achieved over the next four or five years. Obviously a lot of that information that needs to be exchanged is commercially confidential, will be shared with Government and protected by Government. But we wanted to make very, very clear our absolute commitment to seeing that goal achieved by 2010.
The other thing that we did announce, the Prime Minister announced in response to the Taskforce Report that came back to Government was that we want to give a clear indication to consumers in Australia of our confidence in biofuel products, by encouraging the entire Commonwealth vehicle fleet to use biofuels, particularly an E10 blend, in the Commonwealth fleet where it is available. And we do that by way of instilling confidence in this product across Australia and we made that very clear to the oil majors today. And of course the discussions that will take place over the shorter term with the oil majors in developing the individual action plans in terms of what contributions the oil majors can make in working with Government to roll out the use of biofuels across Australia en route to achieving the target by 2010 to the extent possible will also include volumetric targets that we need, if you like, as milestones along the way.
But importantly in the short term we want to work with all the interested parties, the stakeholders, if you like, to continue to build the confidence in the product that exists in every other major developed economy across the world. If you look at the major economies across the world that use biofuels there is a very, very high level of usage and confidence in biofuels. And of course it provides us with the opportunity to take advantage of one of our great competitive advantages in this country and that is being a very, very efficient agricultural producer. Given that biofuels come from one of the agricultural products that we do produce in this country. So we look forward to working with the oil majors in the coming weeks as we develop those strategies on the way to achieving the Government's goal in 2010.
PRIME MINISTER:
Thank you. Any questions?
JOURNALIST:
What do we need to do to be able to produce enough ethanol for that particular target, of 350 million litres?
DEPUTY PRIME MINISTER:
Oh I think that there's going to be a need for an expansion in productive capability. At the moment there's probably a capability already in existence of maybe somewhere between 100 and 120, 150 million litres of biofuels now. But there certainly are, and supported by Government, a number of proposals that over the course of the next few years could get to the point of producing the capacity we need. Just remembering that 350 million litres of biofuels by 2010 will be made up of, for example, ethanol that is currently being produced and biodiesel. And there's certainly a significant focus at the moment in a number of different areas in terms of the development of a biodiesel industry in Australia. So it needs to be a step at a time. We need to build the confidence as far as consumers are concerned and we believe that the Government can lead the way in that regard, but also we need to ensure that there is, you know, the next number of logical steps are taken in terms of building certainty on the supply side.
JOURNALIST:
Will you have safeguards to prevent the oil companies controlling the whole process?
DEPUTY PRIME MINISTER:
Well as was outlined to us, the actual retail end, if you like, as far as transport fuels are concerned is quite diverse and although the supply and blending side of the industry is to a large extent controlled by the oil companies, the wholesale and retail sector is becoming a little bit more diversified and obviously we want those large retailers involved in this discussion as well. Because I mean they're going to be a very, very important part of building confidence in the product.
JOURNALIST:
Once that target is reached, do you expect that will have a significant effect on the price of petrol?
DEPUTY PRIME MINISTER:
Well that's a matter for the market. I mean it's, obviously market pressures will have an impact on price. Economies of scale will obviously factor into that in terms of the production of biofuels and that in turn will factor into the actual retail price of fuels. Hopefully there would be a bit of a mitigating effect in terms of downward pressure, but that's a matter for the market.
PRIME MINISTER:
And we've never represented this as being some kind of comprehensive answer to dearer petrol. It can make some contribution over time, but it should not be seen as some magical answer. Like all of these things, we need to see it in proportion. It can have environmental benefits, it can have some price consequence. Just how much will depend upon the operation of the market.
JOURNALIST:
Do you have any time scale for those volumetric measures that you're talking about?
PRIME MINISTER:
Well we will get the Action Plans from the individual companies and we'll have discussions with them and depending on what is contained in those our aim would be to have some volumetric targets announced. I think I can probably say I'll take that question on notice and you might like to repeat it in a couple of months time and then I'll be in a position to give you a bit more specific information. But that's the aim because look, it was a very positive meeting. The oil companies are quite genuine, based on what they said today in working with the Government to achieve this target. I think that's a very important breakthrough, a very important development. It shows their good faith, it shows a willingness to work with the Government. But I don't want to overstate benefits. It's tremendously important on an issue like this where there is understandable public sensitivity about the high price of petrol that whenever we're talking about something that might have a mitigating effect at some time to some degree, its very important that we don't overstate it.
JOURNALIST:
Prime Minister, did Mr Samuel from the ACCC have any issues at all from a....
PRIME MINISTER:
I'm sorry, say that again. I can't hear you.
JOURNALIST:
Did Mr Samuel from the ACCC have any issues from a regularity point of view with the plan?
PRIME MINISTER:
No. No. And the very fact that he was there represented a general benediction as far as the operation of the Trade Practices Act was concerned.
JOURNALIST:
Did you question the oil companies on refining margins?
PRIME MINISTER:
Yes.
JOURNALIST:
What was their response?
PRIME MINISTER:
Well the refining margin of course has now narrowed. And the refining margin, I am satisfied, and so is Mr Samuel, the increase in the refining margin was a direct consequence of events flowing from Katrina. The refining capacity in the Gulf of Mexico was reduced and in some cases entirely knocked out, and the automatic reaction of the market was to draw refined product from elsewhere and that of course had an effect on the price of Singapore crude, which of course, the Singapore refined product, which is of course the price that affects Australia. Now as both the process of restoring some of the refining capacity and the speculative element about the future has reduced, then so the refining margin I think has now come back to, I think at one point it was about 16 or 18, I think it's now come back to about 6 or 7 and has really narrowed. So that Katrina spike, and you can see it on the graphs, has disappeared. Now this does happen in an international market. And I think it's very important it be understood. And there really isn't a local option. If you say well we'll have local controls on refiners' margins in Australia that could result in companies exporting petrol which would cause a shortage and then further lift the price. People might then say well let's put a clamp on exports. Well if you do that, you could reduce investment in refineries, you could even have refineries closing down. Look we cannot escape the world market and we cannot escape the consequences. What we can do is to make sure at the margins, such as we did with scrapping the excise next year, as we are doing with ethanol and the like, we can try and have at the margin, an impact. John.
JOURNALIST:
Prime Minister, just on yesterday's summit on terrorism.
PRIME MINISTER:
Yes.
JOURNALIST:
There's been reports this morning of 800 people out there who might be potential and Mr...
PRIME MINISTER:
Well I'm not going to get...
JOURNALIST:
Mr Ruddock...
PRIME MINISTER:
Yeah well I thought Mr Ruddock put it very well.
JOURNALIST:
How would you characterise the nature of the threat that is out there?
PRIME MINISTER:
There is a potential. There are some people in this country who hold the values of our society in contempt. There are some people in this country who have welcomed terrorist attacks in other parts of the world. There are some and we have to face that reality. There is a risk of a terrorist attack in Australia. It is not as great a risk as exists in other countries, but I have said repeatedly that there is. I cannot guarantee that there will not be an attack but what I can promise the Australian people is that we will do all in our power to reduce the possibility of it and that's what yesterday was about. And I welcome the fact that the Premiers totally supported the Government's proposals. I think what came out of the meeting yesterday will improve the safety of the Australian community, and that is my first responsibility, my most important responsibility.
JOURNALIST:
Prime Minister, just with the 2010 target, will the 350 mils...
PRIME MINISTER:
Megalitres.
JOURNALIST:
Oh sorry.
PRIME MINISTER:
Yeah I may have said. It's a bit confusing I know. 350 million litres, megalitres.
JOURNALIST:
Will it be mandatory, and also why is it taking so long?
PRIME MINISTER:
Will it be mandatory that we get there? Well I don't think it needs to. I mean, it's our target. What's mandatory is an implementation of our policy. And our policy announced in 2001 was that we would get to that target. And we will get to that target. We need the cooperation of the oil companies and they have indicated a willingness to cooperate. And I have to say that the evidence so far is that is not just a token commitment, that they do appear on an individual basis to be developing plans and I think they are quite genuine. So I believe we'll reach it.
JOURNALIST:
Mr Vaile, are you concerned that some of your MPs might be disappointed there's no mandate?
DEPUTY PRIME MINISTER:
Oh look there's going to be a range of views across Australia that are held with regard to what the Government should and shouldn't do. I think this is a very positive step forward and that's the way I've characterised the response to the taskforce report from the Government and certainly what we intended to do in terms of our discussions with the oil companies. And this is a positive step forward. We are moving ahead with this. As the Prime Minister has indicated, our target is our target and our policy is to achieve that. When it was set, it was one per cent of the transport fuel in Australia. By the time we get to 2010, it's likely to be less that one per cent of the transport fuel used in Australia. And the takeout of the discussions we've had has certainly been very, very positive in what is in prospect and what is being done already by some of the oil majors. We want to encourage that, work with them, develop the confidence and build the confidence with consumers so we can reach our target progressively through the next four or five years.
JOURNALIST:
Prime Minister, you've played down taking out the labelling for 5 per cent ethanol fuels...
PRIME MINISTER:
Yes.
JOURNALIST:
Now some lobby groups, motoring lobby groups, have said that cars pre-86 and other vehicles could negatively be affected by ethanol whatsoever. Was their any discussion of this that?
PRIME MINISTER:
No, we had a very brief discussion on that. But we have said that we're going to do further testing in relation to that. But in Europe E5 is allowed without any labelling, so we're not talking about something that's revolutionary, unheard of, unprecedented. But it's one of the things that we will give thought to. Once again, we had to have a measured, balanced response. But the key thing is to restore consumer confidence. Consumer confidence was quite wrongly undermined in the name of a political campaign waged by the Opposition because of some you know, conspiratorial association between me and a respected business figure in Australia. Now it was always ridiculous and it's done great harm to a product and its done great harm to the consumer. One more question.
JOURNALIST:
Prime Minister, should rural communities be jumping for joy at the prospect of a new industry as a result of your meeting today?
PRIME MINISTER:
Look I think once again extravagant claims like that being made by me or Mr Vaile would be ridiculous. I think the rural communities should see this as a sensible move forward, as encouraging, as providing the essential prerequisite for the expansion of the industry. And the essential prerequisite is to restore consumer confidence. No market will work, won't even get started, unless the consumer will buy the product. And until the consumers of Australia are assured of the true qualities of ethanol and other biofuels, they're not going to be interested in buying them. And I think we've made a big step forward on that.
Thank you.
[ends]