Stop fuelling around, Kevin!

AS petrol prices sky-rocket across the Coffs Coast, the Prime Minister fuelled debate yesterday with a left-field solution for country motorists.

Kevin Rudd says he wants cash-strapped councils to become part of his controversial FuelWatch scheme.

The scheme has been billed as a nationwide system to regulate fuel prices, but yesterday the Prime Minister said it would be optional in regional areas.

"We recognise that they don't have as many petrol outlets, therefore the opportunity for greater competition out there is less and that's why we're not imposing it on them," Mr Rudd told Fairfax radio.

"It is a matter entirely for local government authorities in the bush to opt into the system if they want to."

One local government authority the option would fall to is Bellingen Shire Council, but it's news to council's acting general manager Peter Wilson.

"While we don't yet have the information to clarify what the Prime Minister has said, in general terms council would not see it as their role to be determining whether a privately run commercial business is subject to the FuelWatch framework," Mr Wilson said.

Member for Cowper, Luke Hartsuyker, said service stations in regional areas will lose out under FuelWatch, a view backed in part by a Regulation Impact Statement (RIS) tabled in federal parliament this week, which notes a number of deficiencies in the FuelWatch scheme running in Western Australia.

"At places like Dorrigo, where there aren't a large number of outlets, independent service stations are at a competitive disadvantage," Mr Hartsuyker said.

"The RIS report notes that under FuelWatch in WA, operators with small networks are less able to employ a strategy of rolling price leaders and are therefore placed at a competitive disadvantage in the market."

While Mr Hartsuyker is adamant FuelWatch would have a negative impact, he did concede that regional areas having the option of adopting the scheme is at least one positive step.

"It gives them the choice of opting out of a fraudulent scheme that may harm motorists," he said.

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