Senator JOYCE—One of the submissions said that a diesel engine uses about 66 per cent of the fuel requirements of what a comparable petrol engine would use. Would that be a fair statement?

Mr Gow—The energy contained in a litre of diesel is much greater than a litre of petrol and that is why it is used extensively in heavy engines, otherwise you would have to carry more fuel on your vehicle.

Senator JOYCE—I just wanted to clarify that. It is understandable that there is a lot less refining in diesel.

Mr Gow—That was historically the case. Since the imposition, which we accept, of national fuel standards for diesel from 1 September 2003 that set levels of pollutants in diesel—particularly sulphur, which would deliver lower emissions—and then the tightening of those standards from 1 January this year down to only 50 parts per million, the refining cost has gone up considerably.

Senator JOYCE—I am fleshing out some information that has come to me and, since you are here, I want to ask you about why we have a diesel fuel levy when it uses less fuel all up and it is also less to refine. They argue the point that it is also less damaging to the environment. Seeing you are the ones driving trucks around, what are your views on that issue?

Mr Gow—The view that it is less refined is historical and no longer the case in Australia either for product that is refined here, which has to meet that national standards, or for product that is imported. I do not understand their point about if it has more energy per unit than petrol, why there should be a diesel rebate. I am sorry.

Senator JOYCE—They are trying to remove the diesel fuel levy. Is it right that we pay diesel at a world parity price? Is that correct? Is that what happens at the moment?

Mr Gow—I think they probably include a view about the resource rent tax. Oil produced in Australia is at world parity price—that is correct.

Senator JOYCE—I just wanted to clarify that. I can write back to them and tell them that I asked the question.

Mr Gow—I hope I answered it.

Senator JOYCE—I now have only 299 emails to answer. I am following up on Senator Allison’s queries. We have been approached by a number of people who are in the biodiesel industry and produce biodiesel which is 49 per cent tallow based and 51 per cent diesel based. They say that one of the ramifications of this is that, whilst an industry is just starting to get up and running, it will have a major effect on them. You have just said on the record that it does not matter whether it is 100 biodiesel; it will still work. Are you seeing the progression of new, independent fuel bodies around the countryside, apart from the major four oil companies, producing this biodiesel?

Mr Gow—We understand that that is happening, but, as I say, those producers are usually not marketing that product directly. It is blended with diesel, and we know the usual outlets that our people use to buy their other fuel supplies.

Senator JOYCE—Do you think it would be healthy if there were a greater diversity in the market with regard to places where your association members could source their fuel requirements?

Mr Gow—If that diversity were able to address the cost of fuel, I am sure our members would be interested in that. But I have mentioned that, even with the current production and tax arrangements on biofuels, they are not significantly cheaper than petrodiesel.

Senator JOYCE—Do you think it would be worth going in the other direction? Do you think that if there were greater centralisation of where fuel was sourced that that would inhibit any competition in the market? Do you think a greater centralisation of the retailing outlets of fuel would be an unwarranted outcome?

Mr Gow—Certainly generally, considering that I represent such a competitive industry internally—as I mentioned, some 40,000 trucking businesses from owner drivers through to larger fleets. We have a fundamental article of faith that market competition will deliver a better outcome. So moving towards a more centralised production or marketing arrangement for the fuels you are mentioning would not appear to deliver the outcome we are looking for.

Senator JOYCE—The reason it relates to this bill is that I believe the section that defines biodiesel as five per cent will probably inhibit some of these people coming into the market. Are you aware of the current investment grant arrangements and the ability for people to still claim an excise—that there is a 38c investment grant out there at the moment for people who are producing biodiesel?

Mr Gow—Yes, we are well aware of the program administered by the department of industry to meet the government’s target of 350 million litres of biodiesel by 2010.

Senator JOYCE—Do you think there would be any reticence about using new producers of biodiesel in the market?

Mr Gow—No, because the biodiesel producers would have to meet the standards that have been in place nationally under the Fuel Quality Standards Act passed by the Commonwealth parliament some years ago. As I say, provided biodiesel meets those standards we have advice from engine manufacturers that that will not affect the warranties of engines that are in vehicles using biodiesel.
 

Senator JOYCE—Does your association have any views on how long it would take a new biodiesel industry—basic farmers’ cooperatives that are especially evident in places such as Western Australia—to get up and running? How many years would it take for that new sector of the industry to become well established?

Mr Gow—We could not express a view on that. As you say, it is a new industry in Australia, although of course biodiesel has been produced overseas for many years, particularly in Europe. But, as so often with new industries in this country, there are particular and peculiar circumstances they have to address. If, by developing that product, they can get it on the market and compete with petrodiesel—and, considering the price of petrodiesel, that competition would now be more likely than ever—and deliver a product to the national standard that is price competitive, our industry will use it.

Senator JOYCE—Do you think we should encourage the development of that product?

Mr Gow—We believe that there are measures in place to encourage the development of the product already. Government needs to take cognisance of the fact that, should the product develop more, the current cost recovery from heavy vehicles in Australia, which is based on the registration paid to state governments and to the net diesel excise paid to the Commonwealth, is based only on petrodiesel. So, if and when the fuels that you are speaking of gain a larger share of the market, there will not be any cost recovery for those vehicles for their road wear. As an association, we are very conscious of our need and wish to pay our way for using the nation’s roads and to be fully recovered for that use.