Gas push ‘proof of competition’
Fuel company Waitomo says its expansion across the North Island shows the petrol market is operating competitively.
Amid an ongoing national debate about record high fuel costs, Waitomo announced this week that it would open on the Hutt Road in Wellington in early 2019.
Jimmy Ormsby, whose grandfather founded the company 70 years ago, believed that if the station was to open today it could sell petrol at least 20 cents a litre below his major competitors’ prices.
Historically a commercial fuel supplier in the Waikato and now running unstaffed self-service petrol stations, Waitomo began expanding into retail sites around five years ago.
It now sells fuel sourced from Mobil at around 50 sites across the North Island.
Ormsby said that he did not believe the Government needed to regulate to force the major oil companies to allow access to fuel terminals.
‘‘There is active competition in the markets that we operate in and consumers, I believe, are getting a competitive offer, where the likes of Waitomo are in the market.’’
Waitomo’s arrangement with Mobil allows it to access any one of the US fuel giant’s terminals across the country.
In Wellington, it was access to a suitable site, rather than fuel, that caused delay, with Waitomo spending more than a year looking at how to enter the capital.
‘‘Barriers to entry aren’t really there for us. The market’s okay.’’
Waitomo chief operating officer Simon Parham said the company wanted to engage with the Government on the issues in the sector.
‘‘We’ll probably engage with some of the ministers, the prime minister, and show them how we can be part of the solution and show them our plans as well.’’
Ormsby said it was arguable that the company was expanding as a result of higher margins, which had grown over a decade.
‘‘But I believe that the competitive forces in the market are there, I believe people are taking different offers to the market.’’
The Government has pointed to a more than doubling of petrol margins over the past decade, and a rapid rise in petrol prices in 2018 to conclude, in the words of Prime Minister Jacinda Ardern, that customers were being ‘‘fleeced’’.
Ormsby said 2008 was something of a ‘‘low ebb’’ for the industry, with Shell selling its New Zealand business, a move which led to the formation of Z Energy.
‘‘There wasn’t a lot of investment, you weren’t seeing gas stations go in, you were seeing gas stations go out,’’ Ormsby said.
Over a decade transformation of the market included the introduction of technology to run unstaffed sites, and gave Waitomo an opportunity to expand.
‘‘Appetite for companies like ours, that have now got the confidence to invest and grow, and the technology as well, has enabled us to take a lot of the cost out of it so that’s opened a lot of markets.’’
While the company’s sites in Hamilton were more than 20c a litre cheaper than in Wellington last week, Ormsby said he did not know quite what would happen when it opened.
Previously when it had entered new markets such as Gisborne or Napier, Gull was already in those markets, while Wellington remains dominated by the major fuel companies.
‘‘This is new ground for us.’’ AA spokesman Mark Stockdale said Waitomo’s move was a sign of competition in action, with a decade of rising markets leading to an expansion of low-cost brands, including Waitomo and NPD, which is expanding across the South Island.
‘‘One of the reasons that they’re doing that is probably because of higher margins. These brands are seeing the potential to enter a market that has higher margins, like Wellington,’’ Stockdale said.
‘‘That wasn’t happening in 2008 when the industry was contracting, and these guys certainly weren’t expanding because margins were low, certainly a lot lower than today.’’
‘‘Barriers to entry aren’t really there for us. The market’s okay.’’