Economy

ComCom wants to regulate fuel market

The Commerce Commission has concluded that fuel industry profits are persistently higher than necessary and wants Z, BP and Mobil to open up their terminals to competitors with a transparent spot price.

The Commission's retail fuel market study, released on Thursday morning, recommends the introduction of terminal gate pricing and increasing contractual freedom for fuel resellers.

The Government's initial reaction was that it accepted the findings and would act to make the market more transparent and competitive.

After a year of work, the Commerce Commission has released the final version of its retail fuel market study. In the report, the regulator has recommended the Government take moves to address a dysfunctional wholesale market largely governed by Z Energy, BP and Mobil.

These three companies, known in the industry as the majors, control 90 percent of the fuel imported into New Zealand and have free access to each other's importing infrastructure. At the same time, resellers like Waitomo are locked into arcane, secretive contracts that the Commission says decreases competition.

The Commission's draft report, released in August, found that the market was "not as competitive as it could be". Thursday's report echoed this assessment, saying consumers "are currently paying higher pump prices for petrol and diesel than could be expected in a competitive market".

Commerce Minister Kris Faafoi is due to hold a news conference at 11am.

“The report confirms our concerns that consumers are paying higher prices for petrol and diesel than could be expected in a competitive market. The changes we make will address that, and we expect those benefits will flow through to motorists,” Faafoi said in a statement.

Energy Minister Woods said the Commission’s study found a lack of competition in wholesale markets. "We’ll be introducing the best options to increase competition at a wholesale level, which will filter down to the retail market and prices on the forecourt.”

“A more competitive wholesale market means that low cost brands, like Waitomo and NPD, would be able to access cheaper fuel and pass these benefits onto consumers. Other retailers would be forced to adjust their prices or risk losing customers,” she said.

“The report also found that fuel dealers and distributors have limited ability to switch suppliers due to restrictive terms in their contracts. We’ll look to introduce a mandatory industry code to regulate the conduct of participants in the fuel industry.

“This is about breaking the big fuel companies’ stranglehold on supply and getting more competition into the market to benefit consumers,” Woods said.

The ministers said the Government would now take the Commerce Commission’s recommendations to Cabinet with a view to swiftly implementing changes, such as:  a more transparent wholesale pricing regime; greater contractual freedoms and fairer terms to facilitate wholesale competition; introducing an enforceable industry code of conduct; and improve transparency of premium grade fuel pricing.

“We will look to require that retailers display both regular and premium petrol prices on service station price boards, and I’ll be encouraging retailers to make those changes as soon as possible,” Faafoi said.

“We also see merit in adding premium fuel prices to the Ministry of Business, Innovation and Employment’s current monitoring of regular grade petrol and diesel margins so consumers have a better awareness of price trends.

“The report has found there is action required in several key areas and the steps we’re going to take to address these will make the retail fuel market fairer for all New Zealanders,” he said.

The Commerce Commission is currently holding a news conference and we will update this article through the day with reaction and detail.

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