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PM Jacinda Ardern on Kiwis getting a raw deal at the fuel pump

Author
Newstalk ZB / NZ Herald,
Publish Date
Tue, 20 Aug 2019, 9:15AM
Prices at the pump are set to rise as the petrol excise duty and road user charges are reinstated. Photo / NZME

PM Jacinda Ardern on Kiwis getting a raw deal at the fuel pump

Author
Newstalk ZB / NZ Herald,
Publish Date
Tue, 20 Aug 2019, 9:15AM

The petrol industry is not as competitive as it should be, the Commerce Commission says.

A draft report released today says there are regional variations in fuel prices and that prices nationwide "may be higher than we would expect to see", Commerce Commission Chairwoman Anna Rawlings said.

"Our current view is that the fuel market is not as competitive as it could be."

The reasons for this conclusion include:

• Many fuel companies are highly profitable
• Regional differences in retail fuel prices reflect variations in competition levels
• Discounting does not provide a substitute for competition on board prices
• Premium petrol margins have grown faster than regular petrol.

While fuel industry loyalty and discount schemes were "prolific" these appeared to be used by retailers as a substitute for genuine competition.

Rawlings said consumers should have more choice when it comes to petrol - while noting that margins on premium fuel had risen faster than regular petrol.

Rawlings stressed this was a draft report for discussion only, and any final recommendations will be up to the Government, when the report has been finalised.

"Our preliminary findings suggest that many fuel companies are earning returns on investment that are higher than what we would consider a reasonable return to be."

Ardern: Motorists being 'fleeced'

Prime Minister Jacinda Ardern has said motorists are being "fleeced" at the petrol pump - and said she expected the Commerce Commission report to today confirm problems with the fuel industry.

The Commerce Commission was given new powers last year to probe markets it thought were anti-competitive.

Z Energy, BP and Mobil control 90 per cent of the fuel market in New Zealand.

While it's easy to see the final cost of fuel per litre, Rawlings said it's much harder to know what the wholesale price of fuel is.

When it comes to 91 Octane – the ComCom said 97c out of final $2.20 per litre prices is tax.

Rawlings said the report found petrol company returns in New Zealand are much higher than in other countries in the world.

Rival importers have found it hard to get into the market and this has impacted competition, the Commence Commission found.

More needs to be done to attract new entrance into the market – this would help increase competition and help bring down the price of fuel.

Although Rawlings said competition could be better in the market, she would not go as far as saying consumers were "being fleeced".

Ardern told Mike Hosking this morning that she had yet to see the report, but she expected that it would find issues with the industry.

"I'm anticipating that they will. I just can't see how, with the regional variation I see which I just cannot see a justification for, that they won't come out having found something."

Ardern said one of the issues may be the inability of suppliers or retailers to move around.

"If they for instance chose to go to a different supplier or operate under another retailer, they would often access to their tanks. It meant people never moved. That changed the dynamic of the market.

"That's been a problem for some time."

She still thought drivers were being ripped off at the petrol pump.

"I want to see what [the Commerce Commission] say and then we'll have to make a decision around what action we take."

Today's report is just a draft and the full and final report will be published in early December.

Ardern said if the commission identified problems, it might not outline potential remedies until later on this year.

In October last year, Ardern told media that "consumers are being fleeced" by petrol companies.

At the time, petrol prices were close to $2.50 a litre in some parts of the country.

Ardern said petrol companies' margins have more than doubled between 2008 and 2017 – she said this was "not acceptable".

The Government fast-tracked the passing of the Commerce Amendment Bill, which gives the Commerce Commission powers to probe markets it thought were anti-competitive.

Ardern nominated fuel markets as the first industry to be investigated.

"They haven't opened up their books to us in the past; so we're going to have to force their hand," she said.

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