Z, BP defend fuel price hike, citing exchange rates, replacement cost

WELLINGTON: Both Z and BP are defending this week’s 6c fuel price hike, saying it was based on global oil prices, exchange rates and how much it costs to buy new fuel to replace what is sold.

But neither company had lowered their prices yesterday despite global crude oil dropping more than 6% as concerns about supply from Saudi Arabia eased.

It was standard practice for fuel companies to hike prices quickly, but they needed to explain why this affected the price of fuel already in their tanks that was bought at a different price, AA fuel analyst Mark Stockdale said.

‘‘A lot of motorists don’t understand why it is that they do it so quickly, when in fact the fuel in the tanks in New Zealand has been there for a while and they purchased it at a different price.

‘‘It’s how the market works, but really, only the fuel companies can actually answer why it is they adjust their prices according to the current commodity price, and not the price they actually paid for the product,’’ he said.

BP said several factors influenced its fuel price — ‘‘including the refined barrel price, which has risen overnight’’.

Z said it, too, used ‘‘current cost’’ pricing to set prices at the pump.

‘‘Essentially, ‘current cost’ works on the basis that as fuel is sold, a roughly equal amount is bought at the same time.

‘‘It’s sort of like how a house’s value is reflective of [the] price it would fetch on the market if it was put up for sale today, not how much it cost to originally buy the house. It’s typical in the fuel industry.’’

Z did not reduce its prices yesterday because it was still facing cost pressures, the company said.

‘‘When we moved the price up we didn’t reflect all of the increase in the price of the barrel, as we had planned to move the price by 3c on that day anyway.

‘‘We took on the other 3c because we know it’s hard when prices go up, so we wanted to keep it affordable as we could.’’

Gull chief executive Dave Bodger said its competitors had jumped the gun by increasing prices on ‘‘day 1’’.

‘‘That’s over the top,’’ he said. Z disagreed with his assessment, saying the Australianowned company was ‘‘shielded’’ by cost fluctuations affecting New Zealand. — RNZ

❛ Really, only the fuel companies can actually answer why it is they

adjust their prices according to the current

commodity price