Gas price action needed

Wellingtonians have long suspected they were paying too much for petrol. Now they have been backed up by Minister of Energy Judith Collins and, more tentatively, by an economists’ report.

Collins says it’s ‘‘pretty clear’’ that New Zealanders are paying too much. ‘‘It certainly looks like there’s a lack of competition.’’

The gross profit margin on fuel at the pump had doubled to about 30 cents a litre in Wellington and the South Island over the past four years, says a report by Grant Thornton, the NZ Institute of Economic Research and Cognitus Economic Insight. It also found that higher prices in the South Island and Wellington weren’t explained by higher costs in those areas.

The report wasn’t sure if petrol prices were reasonable or not, but ‘‘we have reason to believe that they might not be’’.

Clearly the issue can’t be left in this uncertain state, especially given that part of the uncertainty arises from the fact that the oil companies did not provide all the information required by the researchers.

What is clearly needed now is for the Commerce Commission to carry out a ‘‘market study’’ in the area. New powers proposed by the Government would allow the commission to launch such a study in any area of the economy.

It seems astonishing that the commission did not already have this power, which its counterparts in other comparable countries have long had. Now that New Zealand is to catch up with the rest of the world, there can be no excuse for any delay.

The commission will have the power to compel the companies to provide any information it requires. This is a matter of great public urgency.

As Minister Collins points out, every cent of petrol price across the board ‘‘is a $30m wealth transfer from people who buy petrol to those who sell it’’.

If consumers are being ripped off, the Government cannot stand by and do nothing.

There has been a gathering movement against the assumption that New Zealand’s markets run smoothly and reliably. There has been a similar reaction against the idea that interventions in the market are usually undesirable or counterproductive.

The report suggests a number of reasons why competition might be imperfect in the petrol market. One is Z Energy’s decision to abandon the previous strategy, practised when Shell owned the company, to be slow to follow any price increases by competitors and quick to lower prices if crude oil prices fell.

No other major oil company had since adopted that approach, the report noted. But it also points to a rise in independent retailers, with possible inefficiencies in how they set prices.

And it says vertical integration, where the same companies own refining, wholesaling and retailing operations, could also be keeping prices too high.

These questions need answering as quickly as possible. The Government has the power to order an inquiry that would provide them.

It should do so now.

Oil companies must be forced to reveal petrol price information.