Legislative Council, Tuesday 23 August 2022

Ms FORREST question to LEADER of the GOVERNMENT in the LEGISLATIVE COUNCIL, Mrs HISCUTT

With regard to shipping services for King Island – retail fuel prices are usually 40-45 cents higher on average on King Island than in regional Tasmania. During the last 6 months the average retail fuel price on King Island was 55 to 65 cents higher than regional Tasmania retail costs:

1. Please provide details of fuel (LSD, ULP and PULP) transport to King Island on Bass Island Line (BIL) for the last five (5) years;

2. Please provide a breakdown by percentage of cost for each component charged by Bass Island Line (BIL) that relate to:
a. Fuel Supply/Commodity;
b. Transport (road & sea);
c. Wholesale (storage & distribution); and
d. Retail.
 
3. Please provide a breakdown by dollar amount for each component charged by (BIL) that relate to:
a. Fuel Supply/Commodity;
b. Transport (road & sea);
c. Wholesale (storage & distribution); and
d. Retail.

4. Please provide a copy of the financial statements for BIL for the 2020/21 Financial Year and the 2021/22 Financial Year, including any segment reports;

5. Following Minister Ferguson’s recent visit to King Island to listen to the concerns brought forward by the then Mayor and the King Island Shipping Executive:
a. what solutions to the problems that were raised have been agreed to in principle; and
b. what solutions have been actioned?

ANSWER:

In relation to these questions that relate to TasPorts and BIL involvement in King Island freight matters, I have received advice as follows:

Question 1

TasPorts plays an important role in the fuel supply chain for both Flinders and King Island. In 2020-21, TasPorts delivered 5.65 million litres of fuel products to King and Flinders Island. Total fuel import on the islands increased marginally to 5.65 million litres, compared to 5.6 million during 2019-2020. This was due to an increase of approximately 50,000 litres in diesel uptake.
Fuel is sourced competitively by TasPorts, at terminal gate prices from Victoria and mainland Tasmania, for supply and distribution on both islands.

Import fuel mix was dominated by low sulphur automotive grade diesel which formed 79.5% of total volume on the Islands. It should be noted that TasPorts – in addition to supplying the community – also supplies diesel to Hydro Tasmania for power generation.

To ensure continuity of supply on the islands, TasPorts has existing storage infrastructure for fuel storage for approximately two-weeks’ supply to the islands, which has been purchased at a particular terminal gate price. Through the pricing formula, the appropriate pricing for end customers is determined for the stored fuel supply. The fuel pricing on King Island is calculated on a weekly basis. The calculation includes a re-averaging of fuel purchases for the past week, such that the pricing is reflective of what fuel is on hand for the period. That is, the fuel price is re-averaged based on new purchases and remaining stock on hand on Island. Fuel pricing varies depending on the terminal gate prices at the time the fuel is purchased by TasPorts. Further to this, it can also be impacted by several other factors, including changes in international benchmark prices, the value of the Australian dollar relative to the US dollar, as well as global supply chain impacts.

With regard to the reduction in excise that was approved by the Federal government, TasPorts has passed through the price reduction as soon as the new purchases were reflective of a price change. TasPorts does not set the price for fuel at service stations on the island, this is set by the retail operator.

Question 2

Fuel pricing varies depending on the terminal gate price at the time the fuel is purchased by TasPorts and I am advised that it is not possible to provide a breakdown by percentage of the elemental costs referred to involved in fuel supply to King Island. TasPorts manages fuel distribution and transport to customers. It sells fuel on King Island on a wholesale basis. Bass Island Line’s role is limited to the sea freight transport component. TasPorts does not set retail prices and notes the margin applied to fuel by the retailers would be a matter for the retailers.

Question 3

As per response to question two, TasPorts manages fuel distribution and transport to customers. It sells fuel on King Island on a wholesale basis. TasPorts does not set the retail prices and notes the margin applied to fuel by the retailers is a matter for the retailers.

Question 4:

In line with all public reporting obligations, the provision of BIL financial statements for 2021-22 Financial Year will be by way of the Annual Report to be released by 31 October 2022.

2020-21 Financial Year information is available in the 2020-21 Annual Report, which is publicly accessible via the TasPorts website.
Question 5
TasPorts/BIL had intended to participate in this meeting, however, the then Mayor specifically requested that no representative attend which unfortunately limited the exchange of information.

One area of particular focus was the current air freight arrangements for fresh and perishable items. That transport mode must contribute significantly to relatively very high retail prices of such essential grocery items for residents. (Notably, Flinders Island retailers use refrigerated sea freight for heavy, lower value perishables such as fresh milk and frozen food and pay less for such items.)

Subsequently, Bass Island Line is now offering the opportunity for local food outlets to source produce from mainland Tasmania by sea freight, considerably more cheaply than transport by air. Refrigerated containers have now been secured. BIL is now exploring the possibility of a trial, subject to market demand. To this end BIL is awaiting positive responses from retailers and has engaged with a number of grocers to gauge interest. However, responses from retailers and shipping agents on King Island have not supported this opportunity, preferring the air freight service to King Island from Victoria. While the commercial reasons for this are not well understood, it does translate into higher prices for residents than is necessary.

Also in response to a question posed at this meeting, BIL is also working with the Australian Maritime College to prepare an independent assessment of the John Duigan vessel for sea keeping on Bass Strait.