That’s what a caller to BBC said last night our time — I heard it on ABC News Radio — in response to the latest round of fuel price protests in Europe. Then on Lateline last night economics correspondent Stephen Long had this to say:
LEIGH SALES, PRESENTER: FuelWatch or ‘FoolWatch’? It’s dominated politics this week, but does the petrol price scheme make economic sense and does it really matter?
With his take, I’m joined by Economics Correspondent Stephen Long.
Stephen, what do you reckon?
STEPHEN LONG, ECONOMICS CORRESPONDENT: Leigh. I reckon it’s amazing that so much time and effort has been devoted to such a second order issue, really. “Much ado about nothing” you could call it or if you wanted to change Shakespearean analogies, “a tale told by idiots full of sound and fury signifying nothing” or not much at all because really this won’t make much difference to prices one way or another. We’ve seen a 400 per cent increase in the price of crude oil since the war in Iraq. The economist John Quiggin has calculated that if a carbon tax is introduced, it’ll add 25 cents a litre to the price of petrol and we’re talking at best, what, one or two cents off the price of the bowser? Small beer. That said, Leigh, there is an economic logic to FuelWatch and logic and common sense as well. And so, it’s not a bad thing. I just don’t see why it’s such a big political deal other than the populist politics.
LEIGH SALES: We say it’s not a bad thing and God knows I don’t like to contradict a man who can analyse economics and quote Shakespeare at will, but four government departments seem to disagree with your assessment of FuelWatch not being a bad thing. How do you explain that?
STEPHEN LONG: Well, I could say to be glib that the finance department never wants to spend public money and there will be big public administration costs with this, and Treasury never wants to intervene in markets. What I would say is, they have legitimate concerns and the ACCC raised similar concerns before it investigated it further. Now, what’s the logic of it? Well, the logic of FuelWatch is that at the moment, basically, the sellers of petrol have all the information. They subscribe to their service informed sources which gives them real time information about what their competitors are charging. So, all the pricing power and information is with the buyers. That’s a basic issue in economics. It’s called information asymmetry that undermines competition. So, FuelWatch is designed to give the information to – sorry, the information’s with the sellers. FuelWatch is designed to give information to the buyers. And, it will work basically as a tender system. So, you have to bid your prices the day before and the logic is that in a market where clearly consumers are very price sensitive, if you bid too high, you’re gonna be out of the market. So, the logic is there: it makes economic sense. The modelling as I’ve seen it from the ACCC in this second round modelling makes it look reasonably convincing, but, as I said, it’s small beer in the scheme of things one way or another.
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