PM promises petrol action
A landmark report into the fuel industry by the country’s competition watchdog shows New Zealanders are being ‘‘fleeced at the pump’’, Prime Minister Jacinda Ardern says.
The draft report into the $10 billion fuel industry says petrol companies appear to have made ‘‘excess returns’’ for most of the past 10 years, with profits ‘‘persistently above the returns earned by comparable firms internationally’’.
Commerce Commission chairman Anna Rawlings said earlier that fleeced was ‘‘not a term that we use’’. But she said the commission’s current view was that the fuel market was not as competitive as it could be and the core problem was the lack of an ‘‘active wholesale’’ market for fuel.
Z Energy shares had fallen by more than 3 per cent in midafternoon trading to $6.39 after the report and Ardern’s comments.
Z chief executive Mike Bennetts said it did not believe its returns were unreasonable ‘‘given the level of investment we make and the risks Z incurs’’.
The commission has set out proposals for how the wholesale market could be improved, which it believes could bring cheaper prices at the pumps. These centre on making it easier for independent retailers to source fuel on better terms from oil terminal owners Z, BP, Mobil and minor-player Gull. Either law changes or a negotiated deal with oil companies appear possible.
Bennetts said Z agreed with the commission that terminal arrangements ‘‘required updating’’.
Ardern responded fiercely to the draft report’s findings. ‘‘Now the Commerce Commission is going to finish its report. It is likely then they will give us a steer on what happens next, but ... we cannot stand by while they are facing that pressure at the pump and being fleeced.’’
The Government instructed the competition watchdog to look into the fuel market in December after concerns that petrol prices had got less competitive and that large variations had emerged in prices around the country. The commission is due to finalise recommendations from its 424-page draft report on December 5, after which it could be up to the Government to decide whether to take action.
Concerns about competition in the fuel market increased after 2016, when the commission approved the acquisition of Caltex NZ’s business by Z Energy in a non-unanimous ruling that sent Z’s share price sharply higher.
Rawlings said Z Energy, Mobil and BP controlled 90 per cent of the country’s petrol and diesel supply giving them ‘‘a significant advantage over any other potential rival importers, as their costs to deliver fuel are lower’’.
‘‘Not only have other fuel importers been unable to access the wholesale market, but the majors themselves have limited incentive to compete with each other during the terms of their supply contracts. As a result, competitive pressure does not appear to be driving down wholesale prices in New Zealand,’’ Rawlings said.