Motorists need to stoke competition, report says
The Commerce Commission’s first report on the performance of the $10 billion fuel market shows motorists need to take action to stoke competition between petrol stations.
While many petrol stations offered prominently advertised discounts, the discounted price of petrol often did not reflect the lowest price, the commission found.
Commissioner Dr John Small said that in many cases motorists could get a much better deal ‘‘simply by crossing the road to another petrol station’’.
Motorists should shop around both to find the best deal and to encourage competition between retailers, he said.
‘‘The more Kiwi motorists are shopping for the lowest price in their local area, the more this will help drive healthy competition over time.
‘‘This is an important factor in helping keep downward pressure on the price at the pump,’’ Small said.
Fuel accounted for about half of annual household energy costs, about $2000 a year, so small differences in price could result in meaningful savings at a time of high cost-of-living pressure, he said.
The greatest difference in price was for 91 octane fuel and the report found retailers that offered discounts were often not the cheapest price in an area.
In some cases, independent retailers without discount programmes had the lowest retail price, he said.
Automobile Association principal policy adviser Terry Collins said large differences in petrol prices were often due to the volatility in the market.
‘‘The price you see at the pump depends on when the retailer bought the fuel, how much they paid for it, what their costs were, and what their mark-up is. All of this is causing huge variations in price,’’ Collins said.
The fuel industry was a cost plus industry, in which the price at the pump represented the cost of getting the fuel to the station plus the profit margin of the retailer. That made the price of fuel particularly vulnerable to wild price changes due to global volatility, he said. But the industry was also a volume industry, in which the companies wanted to sell product in large volumes to maximise profit, he said.
‘‘Because of the desire for volume, these companies respond very quickly to market activity. If motorists get serious about pursuing the cheapest fuel, then we will see these companies sharpen their pencils and we will see more competition in the market.’’
Motorist should make use of fuel price monitoring apps such as Gaspy, and have knowledge of their local fuel retailers to make sure they were taking advantage of the best prices, Collins said.
The commission’s report found that fuel prices increased during the June quarter, driven by the international price of crude oil and foreign exchange movements.
But the average importer margins were 32% lower for diesel and 27% lower for Regular 91, when compared with margins in 2018 when the commission carried out its market study into the sector.
Falling importer margins was usually an indicator that competition had intensified but further analysis was needed, Small said.
As competitive conditions and retail prices varied throughout the country, the commission intended to undertake further analysis of prices at the regional level, he said.