Explanatory Memorandum
(Circulated by authority of the Minister for Primary Industries and Energy the Hon John Kerin, MP)OUTLINE
From 1 January 1988, the marketing of indigenous crude oil will be deregulated and Import Parity Prices will no longer be used as the basis for allocated sales of domestic crude oil or the calculation of crude oil excise. This Bill provides the Minister for Primary Industries and Energy with the powers to determine the prices to be used as the basis for crude oil excise and in particular to determine the volume weighted average of realised (VOLWARE) price for sales of Bass Strait crude oil. The final VOLWARE price for each month will be the final price basis for crude oil excise for that month.
2. The Bill enables the Minister for Primary Industries and Energy or his delegates to:
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- determine a reference price for crude oil for each month to be used as the basis for the initial calculation of crude oil excise.
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- calculate the interim and final VOLWARE prices for each month to be used as the basis for interim and final calculation of crude oil excise.
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- notify the producers and the Australian Customs service of these prices in writing.
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- specify the factors to be used in the calculation of the VOLWARE and reference prices.
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- determine a transaction price where any part of a transaction is considered not to be at 'arm's length'.
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- require oil producers to provide prescribed information for the calculation of VOLWARE prices at a specified time.
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- verify the information to be provided.
3. The Bill also contains provisions for penalties for failure to comply with the verification procedures.
4. The powers in the Bill are integral to the collection of crude oil excise under powers in the Excise Tariff Act 1921 and the Excise Act 1901 .
Financial Impact Statement
5. The financial impact of deregulating Australia's crude oil market will depend on crude oil price movements in the free market. In a deregulated market average Bass Strait crude oil prices are expected to fall by $Al - $A4 from what they would have been under Import Parity Pricing.
6. On the basis of a price fall of $2.50 per barrel, (the middle of the range), the drop in Government revenue in 1987/88 and 1988/89 is expected to be about $100 million and $168 million respectively.
7. There will be no offsetting product excise adjustment to recoup revenue foregone by the Government as a result of a drop in crude oil prices upon deregulation.
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