In March of this year, the New Zealand Government released the Terms of Reference for the conduct of a Fuel Market Financial Performance Study.
The key objective of the study was to determine whether New Zealand petrol prices were reasonable.
The main industry players (Z Energy, BP, Mobil and Gull) all co-operated with the study, although the Minister indicated that Gull and Mobil were perhaps less forthcoming than Z Energy and BP.
Lamenting the inconsistency in data provided by market participants, the Report’s authors came to the somewhat guarded conclusion that retail prices “might not be reasonable”.
Gross retail margins had increased significantly over the last five years, especially in Wellington and the South Island, but non-retail margins had been relatively flat, the Report’s authors noted.
The Report also identified some unexplained differences in regional pricing.
The Report’s authors recommended that the Government carry out further market analysis and explore possible solutions with the industry, including:
- asking Z Energy to remove its main port price from its website (to avoid price co-ordination)
- creating a registry system for the ‘borrow and loan’ system operated around terminal facilities (to reduce visibility of market share)
- creating a liquid wholesale market (to reduce limitations imposed by terminal access)
Z Energy responded by immediately removing the main port price from its website.
The Minister asked the Ministry of Business, Innovation and Employment (MBIE) to assess the Report’s recommendations and report back by November 2017.
“The Minister’s response effectively kicks the issue off into the long grass” said Andy Glenie (a Director at Anderson Creagh Lai in Auckland).
“With our general election scheduled for 23 September 2017, the Minister has ensured that petrol pricing won’t be a political football in the run-up to that election by asking MBIE to reflect further”, Andy said.
The Minister also raised the prospect of the Commerce Commission being asked to carry out a market study into the petrol industry.
There is currently no legislative basis for such studies, but the Government has recently announced changes to the Commerce Act to facilitate them.
“It may be that, once the dust has settled after the election, the issue will come back to public attention”, continued Andy.
The full inquiry report and the associated Cabinet paper can be downloaded at: http://www.mbie.govt.nz/info-services/sectors-industries/energy/liquid-fuel-market/fuel-market-financial-performance-study-2017.
Andy Glenie is a Director at Anderson Creagh Lai in Auckland, specialising in competition and regulatory law. Andy can be contacted at email@example.com.