The Government has announced it will pass legislation to regulate the wholesale fuel market in a bid to promote competition among smaller retailers. Photo / File
The Government has announced it will pass legislation to regulate the wholesale fuel market in a bid to promote competition among smaller retailers. Photo / File
A law change will boost competition in the wholesale market, but the AA warns motorists may never know how much prices fall as a result.
Some of the changes will be visible to motorists, with petrol companies required to advertise the price of premium fuel, in a bid to narrow the growing price gap with regular 91 octane petrol.
But the most substantial changes related to the wholesale market, in which major fuel companies buy and sell to each other, or sell to smaller players such as Waitomo or Nelson's NPD.
Energy Minister Megan Woods said the Government will pass legislation before the election which would require fuel companies to publish daily spot prices at which they are prepared to sell to competitors.
Energy Minister Megan Woods says changes to the fuel market will boost competition which should narrow regional price differences, but would not say much much prices will fall. Photo / Mark Mitchell
Woods warned that if the changes did not result in healthy wholesale competition, the Government would look to regulate to create forced arbitration or even regulated wholesale prices.
AA spokesman Mark Stockdale said the changes would boost competition, but "there's never been any sort of certainty" on how much they would lower prices for motorists.
Adding transparency to the wholesale market may mean the fuel importers will "sharpen their pencils" and lower prices to smaller retailers, but it was not clear by how much.
While some areas suffered from a lack of price competition, in particular parts of the South Island, Stockdale said the spread of "no frills" retailers meant in some areas the opportunity for significant drops was limited.
"There are parts of the country that already have strong price competition, thanks to those no-frills brands, like Gull and Waitomo. Will these changes result in more competition in those areas? That's not clear."
Woods said today that the changes would boost competition and lead to lower pump prices. But she would not say how much it would save motorists.
"We're not going to put a cent figure per litre because there's so many factors that come with petrol prices."
She pointed to estimates by AA that competition could lower prices by 10c a litre, while in some areas new competition had led to much larger, immediate price drops.
"We have seen in some places, when a new entrant has entered the market, a more competitive player, we have seen a price differential of 30 cents a litre," Woods said, with incumbents tending to drop prices in response to competition.
"Success for us will look like that we are monitoring a system that we are satisfied is competitive and consumers are getting a fair deal," she said, adding that for some time average prices in the South Island were "significantly" higher than in the North Island.
"It's also one where we don't see big geographical spreads [in price]."
One of the companies name-checked by the Government said the fact that it was growing would be proof that improved competition was working.
Waitomo, which was founded in 1947, has grown to operate more than 40 sites across New Zealand, with plans to have more than 50 sites by the end of the year, including through expansion in the South Island, managing director Jimmy Ormsby said.
"If you see that Waitomo is successful in growing our business and we're competing hard against other market participants, I'd say that would be confirmation that more competitive prices to Waitomo are being reflected in the market."
Z Energy, New Zealand's largest fuel company, welcomed the announcement, saying there were benefits to competition and consumers from more transparent wholesale pricing and display of premium fuel prices.
But chief executive Mike Bennetts questioned why the Government was giving fuel companies until late next year to make the relatively simple task of advertising how much each station was charging for premium fuel.
"We find it surprising that it would take 18 months to bring about price transparency," Bennetts said, adding that it would roll out the changes at the Z and Caltex sites by mid-2020.
