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Transcripts from the Prime Ministers of Australia

Transcript 1935

SPEECH BY THE RT HON. J.G. GORTON, M.P. ON OIL PRICING POLICY - MINISTERIAL STATEMENT

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Gorton, John

Period of Service: 10/01/1968 to 10/03/1971

More information about Gorton, John on The National Archive website.

Release Date: 10/10/1968

Release Type: Statement in Parliament

Transcript ID: 1935

COMMONWEALTH OF AUSTRALIA
SPEECH BY
The Rt Hon. J. G. GORTON, M. P.
ON
OIL PRICING POLICY
Ministerial Statement
[ From the ' Parliamentary Debates,' 10 October 1968]
Mr GORTON ( Higgins-Prime Minister)
-by leave-In September 1965 the
Government announced certain policy
decisions regarding the use of Australian
. indrigeenous acrudfe ofil. i Trhomse decisaions tweireon
of the policy that the
OGovernment was determined that local
refineries use all the crude oil produced in
Australia, and an announcement that the
price to be paid by refineries for Australian
crude would be SA3.14 a barrel at the
* ustoms port at the refining centre nearest
to the producing field. Any amounts of
money that I shall mention during this
speech will be in Australian dollars and
cents. Included in this price was 67c
a barrel as an incentive payment.* This
arrangement was to finish on 17th September
1970, and no decisions were announced
as to what would happen after that date.
At that time the Moonie field was the
only one in operation. The production of
the Moonie and Barrow fields was and is
W comparatively small and the extra cost
resulting from the crude oil they sell at
S3.14 a barrel, together with freight costs
paid by them around the Australian coast
or through the pipeline is already included
O, inv eryp eetrxotle nspirvicee so ili n fiAeludsst rawliear. e dSiusbcsoevqeureedn tlyin,
Bass Strait by Esso-BHP. Oil from these
fields should begin to flow in March 1969
23801/ 68 and by September 1970 it is expected that
the fields will be producing at over 250,000
barrels of crude oil a day. During that
period the fields may well produce in the
vicinity of sixty million barrels of crude oil.
The prospect of such large quantities of oil
which refineries had to buy at a price so
much higher than the price of imported oil
obviously created a new problem and led
to forecasts of considerable rises in prices
of petrol and other petroleum products to
the Australian consumer. Because of the
effects that this would have throughout the
economy generally the Government has
most carefully studied the various problems
raised and I have for some time been
engaged in a series of negotiations with
Australian oil producers and refiners.
I now wish to inform the House that the
Government reaffirms its policy that for a
period of 10 years beginning on 18th September
1970, refineries in Australia are to
be required to process Australian crude oil
in order to provide the full requirements
of the Australian market for petroleum products.
This is, of course, subject to the need
for sufficient imports to meet the requirements
in Australia for bitumen, lubricants
and fuel oil in excess of quantities that can
be realised from the Australian crude, which
is deficient in these quantities but which is
so rich in the lighter distillates-petroleum,
kerosene, dieselene and so on.

Secondly, the Government announces as
policy that for a period of 5 years after
17th September 1970, when the present
policy arrangements terminate, the price
that refineries will be required to pay Australian
producers will be import parity.
Import parity is defined as the posted prices
of overseas oil as of today, less the discounts
allowed off those posted prices as of today,
plus overseas freights at the most efficient
and economic rates prevailing today plus
wharfage where applicable. To this price
will be added a sum for quality differential
worked out by the modified Nelson method,
this quality differential being added because
of the richness of Australian crude in the
lighter distillates. From the import parity
price so arrived at there will be deducted a
sum representing the average freight cost of
delivering Australian oil to the refineries
from the port of delivery by the most
economical means possible. This will mean
that as from September 1970 for a period of
years the price payable for Australian
crude oil should generally be neither higher
nor lower than the price now payable today
for overseas oil, except for the effect of
Australian coastal freights, if any. This in
turn should mean that as from that date the
price of petrol products produced from
Australian crude oil should not be higher
than the price payable today for products
produced today.
I now come to the period between March
1969 and September 1970, during which the
present arrangement operates, during which
the presently applying high prices for Australian
crudes were agreed to be paid, and
during which, as a result of that, significant
increases in the cost of petroleum products
have been suggested. I have already said
that the cost of oil from Moonie and
Barrow at those high prices has been
absorbed in existing petrol prices, and no
alteration is to be made to the prices payable
for oil from those fields until after
September 1970, when the import parity
prices which I have described will apply. In
the case of the oilfields discovered by Esso-
BHP we have agreed by negotiation that
there will be a reduction in the prices Australian
refineries are required to pay up to
September 1970. Our agreement is that
Esso-BHP1 will altogether forgo the 67c a
barrel known as the incentive allowance.
In addition, Esso-BHP will allow refineries a further discount of 5c a barrel. Tresult
is that between March 1969 and September
1970 the price to be paid for oil from this
field will be reduced from $ 3.14 a barrel to
$ 2.42 a barrel at the customs port at the
refining centre nearest to the producing
field. After September 1970 the price payable
for this oil to Esso-BHP will be import
parity as already explained, and this, of
course, will reduce the price still further.
To sum up, the new arrangements made
will mean that the large newly discovered
quantities of Australian oil to be used between
March 1969 and September 1970 will
cost 72c a barrel or a little over 2c a gallon
les than was previously anticipated. After
September 1970 the price payable for Australian
crudes will be, as I have said, no
more than the price of imported overseas
crudes today except for any extra costs
involved in coastal transportation, and will
be still less than the price payable between
March 1969 and September 1970. This
will not, between March 1969 and September
1970, in itself prevent any increase
in the price of petrol for other products but
it will undoubtedly very materially reduce
the size of any rise that might take place
or that would have taken place had this
agreement not been reached.
I have so far spoken only of the pricing
policy for Australian crudes and of the
Government's requirement that the Australian
market should be supplied from such
crudes. But we need to discover more oil
in Australia and the Government is therefore
currently studying the separate question
of the need for incentives for oil exploration
in the period after 17th September
1970. Various proposals are under examination
and we will in due course announce the
form of incentive, if any, which we will
adopt. In the meantime the arrangements 1
have just announced will provide a firm
basis upon which the refining industry can
plan ahead for the use of Australian crudes
and will materially reduce any possible
future rise in the price of petroleum
products. I present the following paper:
Oil Pricing Policy-Ministerial Statcment-
10 October 1968
and move:
That the House take note of the paper.
BY AUTHORrTY: A. J. ARTHUR, COMMONWEALTH GOVERNMENT PRINTER, CANBERRA, A. C. T. 0

Transcript 1935