Petrol prices are capitalism not collusion
The Prime Minister is shocked at the recent price increase of petrol. She should be. The cost of petrol is incredible. According to an analysis by the AA, 45 per cent of the cost of petrol is taxes. This means, based on $2.40 a litre, only $1.32 is charged by the petrol firms. This excludes the Auckland levy.
This is a product that is pumped out of the Arabian desert, piped to a port, loaded onto a ship, transported to half-way around the world, unloaded, refined and distributed by tanker to your local petrol station. All for $1.32 a litre. Milk, by contrast, is extracted from a cow a few hundred miles down the road and costs, on average, $2 a litre in your local supermarket.
Prime Minister Jacinda Ardern is upset the price has risen by 39c a litre during the past year. Which is terrible, except when you consider the price of a barrel of oil went from $US50 last September to $US70 now, and the kiwi dollar has fallen 10 per cent since she took office.
Those two data points explain the price increase but the government is clearly vexed and is rushing through parliament a nasty piece of legislation, the Commerce Amendment Act.
The Commerce Act makes collusion between firms illegal and grants the Commerce Commission the power to investigate and punish private firms that act anti-competitively. This amendment allows the Commission to go on fishing expeditions by investigating whole industries at the whim of the Commission or its minister.
This isn’t some meandering inquiry. The Commission will have draconian powers to compel testimony and demand internal company documents be produced. There is no right to silence.
During the past few days, Ardern indicated that she would not be surprised to see the supermarket industry on the list of those subjected to such an inquiry. There is a pattern here.
Shane Jones revels in targeting specific firms like Air New Zealand, the banks and Fonterra. These attacks on private firms by people with political power is troubling. It is an insight into how this governments thinks.
They see conspiracy where there is commerce and collusion where there is capitalism. The impulse is to bully, regulate and legislate.
We have had governments like this in the past. The last one was led by Sir Robert Muldoon. Perhaps the Prime Minister can ask her deputy to explain how that worked out.
She might be shocked at the answer.
The price at the pumps is undoubtedly painful but it pays to understand where the cost increases come from.