Petrol retailers are under the pump over regional fuel prices, and politicians are at odds over when the Commerce Commission should step in
Immediate action is lacking following revelations Kiwis are likely to be paying unfair fuel prices in a potentially uncompetitive market.
The findings of the government’s Fuel Markets Financial Performance Study into fuel companies’ margins yesterday raised questions about whether new rules for fuel wholesalers to sell the commodity to other retailers are needed.
The report outlined how New Zealanders now pay the most for fuel in the OECD while companies have effectively doubled their profit margins in the South Island and Wellington, according to the findings released yesterday.
Labour called for swifter government action and the big three fuel companies, BP, Z, and Mobil, went to ground after the report was released by Energy Minister Judith Collins shortly after 9am.
The study found fuel companies have virtually doubled their margins – that is cents profit per litre – in Wellington and the South Island since the 2012-2013 financial year.
However, the report suggested there was no tangible reason for those geographic changes – the price surges could not be explained by logistics, handling, storage or other costs.
The report also recommended further government investigations into the industry – which was described by the authors as having “features which may not be consistent with a competitive market”.
However, Collins said the issue will only be passed onto the Commerce Commission after the recommendations of the report are assessed – a process not due for completion until November.
Labour leader Andrew Little and energy spokeswoman Dr Megan Woods said that timeframe was not good enough.
“You’ve got a report now that raises some pretty serious questions,” said Little.
“I don’t think there is any doubt – how you explain the differential in pricing, for example, between Wellington and the South Island when that report says there is no discernible reason for it.
“It is time for the Commerce Commission to do its job as of now, there is no need for Judith Collins to wait until November to refer it to the Commerce Commission. If she wants to show leadership she should be doing it now.
Dr Woods agreed.
“I think the key thing for us is that what this report is showing is that motorists need answers now.
“They need to know why it is that they are paying different prices in different parts of the country and we need investigation into margins all along the supply chains in this industry and the Commerce Commission is well placed to do that. There is no need to delay.”
The findings showed South Islanders were the most affected by price hikes discussed in the report, with the cents per litre margin increasing from about 13c in the 2012-2013 financial year to 29c in the 2016-2017 financial year.
In Wellington margins went from 16c to 31c in the same timeframe; in the South Island including Wellington it was 14c to 29c, and in the North Island excluding Wellington it was 14c to 20c.
The NZ Automobile Association’s petrol price spokesman Mark Stockdale said the findings reflected what it has suspected for years.
“There has been a big jump in regional price differences since the last report was done nine years ago – and that has been a cause for concern.
“Motorists were right to be concerned about the rising margins and the price discrepancies across the country.”
Newsroom approached four fuel companies for comment. Z and BP responded with pre-written statements that did not address questions Newsroom had about the reasons behind price discrepancies. Mobil did not respond at all.
Z spokesman Jonathan Hill said the company was not making any further comments from a statement issued via the NZX.
The company was focussed on speaking with investors yesterday, and if customers had any queries about why they have been paying potentially unfair prices, “they can ask us themselves,” he said.
The statement, attributed to Z Chief Executive Mike Bennetts, defended the company and said its pricing was fair and in line with national and international fiscal standards.
BP’s statement was attributed to its head of oil in New Zealand, Debi Boffa.
“BP is committed to the New Zealand market. We believe we receive a fair return that reflects both the complexity and risk of our operations and the level of investment we continue to undertake.
Gull’s General Manager David Bodger said he was unsurprised by the report’s findings.
It has been suggested that prices are higher in Wellington and the South Island because there are no Gull stations there.
The “Gull Effect” – where petrol retailers drop their prices to match Gull’s – has been widely reported.
While there are 21 petrol retailers throughout New Zealand, only BP, Mobil and Z have the infrastructure to provide fuel nationwide.
“We have attempted several times to buy fuel in the South Island and said we will pay top dollar and we are looking to buy this amount…and had the same response pretty much copy-pasted from most, ‘No’,” said Bodger.
“It’s their legal right to say that, but what about the motorist down the road who is paying 20c or 30c more per litre?”
He said there was no Gull in Wellington or the South Island because the financial outlay of establishing infrastructure there was too high.
Consumer NZ head of testing Paul Smith said the report’s findings were bad news for consumers.
“The questions for consumers is, ‘Are you getting a fair deal on the fuel prices?’ And I think the reports gives a resounding, ‘Maybe not’. It’s not the best of outcomes.
“The government should start to have a wholesale fuel market where everybody can access it.”
Energy Minister Judith Collins called for the report in January to investigate if New Zealanders are paying reasonable prices for petrol and diese, at what level might prices be considered unreasonable, and the reasons behind regional price differences.
Nationally, petrol prices fell in the lead up to the report’s release – fuelling suspicions from AA and Gull that petrol companies were up to something.
Last week, Newsroom reported on allegations flying between large petrol companies and the AA and Gull.
The usual drivers of petrol prices – the cost of the commodity and New Zealand’s exchange rate – did not add up to the discounts of 16 cents per litre that were on offer.
This meant the companies were either eating into their margins or – because of previous overpricing – were able to sustain the discounts.