The Federal Government's national FuelWatch scheme seems doomed after losing the support of two key independent senators, whose favourable nod was needed to get it passed in the upper house.
Family First senator Steve Fielding has joined independent Nick Xenophon in saying he would not support the scheme as it stands.
The government needs the support of the five Green senators and the two independents to get the legislation passed.
The Green senators are still undecided, and will wait until the Senate inquiry into FuelWatch is finished.
Senator Xenophon said FuelWatch in Western Australia had wiped out independent fuel retailers. He also quoted reports from four government departments that said the scheme could lead to increased fuel prices.
"I can't support the government's scheme, it just doesn't make sense," he told ABC Radio.
Senator Fielding agreed.
“Family First has serious concerns and we are still wanting to understand how it won't push average petrol prices up, and we also want to know how FuelWatch won't squeeze out independents," he said.
"And until we are satisfied with those two questions, Family First can't support FuelWatch either.”
Economists have this week warned the falling Australian dollar, which is receding from 25-year highs due to weakening commodity prices, will counteract the effect of falling crude oil prices.
A weaker currency makes imported oil more expensive in Australian dollar terms even as its price falls in US dollar terms. The Australian dollar has fallen to about US$0.89 this week from a high of about US$0.98 in June.
The scheme has split Australia's motoring lobby groups, with NRMA president Alan Evans a strong supporter. Mr Evans came out against the two independent senators on the ABC radio program, saying “nimble” independent operators would have a pricing advantage over “bureaucratic” oil company-owned service stations.
But Victoria's RACV opposes FuelWatch because it fears the scheme could distort or eliminate the weekly fuel discounting cycle, which includes cheaper prices on Tuesdays.
The Victorian Automotive Chamber of Commerce also opposes the scheme. VACC executive director David Purchase has called for it to be scrapped.