Why can’t we enjoy cheaper fuel?
Motorists hoping for petrol price cuts might be disappointed despite measures to promote competition in the fuel sector, writes Melanie Carroll.
Abill to boost competition in the wholesale fuel industry became law in early August, but motorists are unlikely to see any impact on prices yet because regulations are still being finalised.
And the AA warns that motorists expecting to pay less for fuel than they are now will be disappointed.
The price of petrol slumped 12 per cent in the three months to the end of June – the biggest quarterly fall since late 2008 – as the effects of the coronavirus pandemic ripped through the economy.
The average price of 91 octane petrol was at a 21⁄ 2- year low of $1.83 a litre during the quarter.
According to PriceWatch on Friday, the price of 91 octane around the country was generally between $1.80 and $1.90, with West Coast prices between $2.049 and $2.099. Auckland region prices ranged between $1.737 (Gull) and $2.009 (Challenge).
Fuel prices were down substantially because Covid-19 had taken a huge chunk out of demand, said AA petrol spokesman Mark Stockdale.
“They’ve slowly been creeping up but there’s obviously still suppressed global demand, particularly international travel.
“Once we get on top of Covid-19, demand for fuel globally will increase and that’s probably going to have upward pressure on the commodity price, and that will flow through to the pump.”
Labour and National have both said they will not increase the fuel tax if elected, but that does not include the Emissions Trading Scheme levy on fuel, which is likely to continue to rise, Stockdale said.
“The price may not go up, but it may not actually go down,” he said.
The Commerce Commission fuel market study last year found that New Zealand did not have an active wholesale fuel market, and motorists were paying more at the pump than they should.
The Government decided that could be solved by changes at the wholesale level, which would see smaller players such as Waitomo and Gull gain access to cheaper fuel, forcing other retailers to adjust their prices.
A key part of the reforms is making the wholesale price of fuel more transparent as it is in Australia, with the introduction of a terminal gate price, a constantly updated price at which importers sell bulk fuel.
Under the Fuel Industry Act, terminal gate pricing, wholesale contractual terms, and dispute resolution processes need to be finalised by August 2021, a year after the bill became law.
Other regulations, including the display of premium petrol prices at service stations, need to be finalised by February 2022. The Ministry of Business, Innovation and Employment (MBIE) is still talking to the industry about the regulations that are part of the act.
“While the bill has passed, the important regulations haven’t been released, and therefore the industry can’t begin making these wholesale market changes when the regulations that effect those changes have not yet been released,” Stockdale said.
Some petrol stations were already displaying the price of premium petrol, but it was not clear whether that meant both 95 Octane and 98 Octane. “Quite a few service stations have already added that extra price, and that’s good. That should have an impact on the price of premium petrol because there’s transparency on that price, we’re seeing more transparency with more service stations displaying it.’’
The AA believes it will be difficult to measure the direct impact of the reform on prices.
‘‘How much extra are we paying now compared to under a
“The price may not go up, but it may not actually go down.”
Mark Stockdale AA petrol spokesman
more transparent wholesale regime? Is it 5c? Is it 10c? We don’t know, so it’s difficult to know what impact that’s going to have on price.
‘‘Prices already vary around the country now, that’s because of retail competition, there is a lot of healthy competition at the retail end.’’
Regardless of the reforms, the expansion of Gull and Waitomo was already lowering the cost of fuel for motorists in both the North and South islands. The arrival of independent importer Timaru Oil Services was also going to have an impact on prices, Stockdale said.
‘‘That’s probably one of the reasons why Gull has the confidence to move into the South Island and Waitomo are doing that.’’
Mobil country manager Andrew McNaught said the company had some concerns about the short time for implementing the reforms, ‘‘given the complex nature of the market, the similarly likely complex structure of the regulations, the coming general election, the strategic review of Refining NZ’s operations, and the ongoing Covid-19 response.
‘‘However, Mobil is confident that MBIE will take this into account as it progresses its development of the regulatory framework around the act.’’
McNaught said both the retail and wholesale fuel markets in New Zealand were ‘‘highly competitive’’.
The company was making progress on rolling out the display of premium pricing at its service stations.
Z Energy was deciding how to put the regulations into practice once they came into force, chief executive Mike Bennetts said.
It had nearly finished working on updated price boards at its service stations.
‘‘The only concern we have with timing is how long it is going to take to make changes to wholesale contracts,’’ Bennetts said.
‘‘Under the proposed timeline, changing wholesale contracts could take years and hold up the flow through of any benefits to customers at the pump, not to mention tying in distributors to contracts they might rather exit.’’
Gull general manager Dave Bodger said he would like more clarity, but expected the changes would happen smoothly.
Gull was working on five new stations, two in Christchurch, and one each in Wellington, Auckland and Sanson in the Manawatu¯, and planned to have three more open by the end of the year in Auckland.