Editorial: Paean at the pump - the chorus condemning petrol prices

Prime Minister Jacinda Ardern says high retail petrol prices outside of Auckland point to a wider issue of New Zealanders being fleeced. File photo / Peter Meecham

EDITORIAL:

It's a little rich for Prime Minister Jacinda Ardern and the Commerce Commission to be calling out industry for the cost of fuel and zeroing in on margins as the culprit.

"Our instinct was certainly that New Zealanders were being fleeced at the pump, now the Commerce Commission has confirmed that that is true," Ardern declared yesterday, on the back of a draft report confirming the fuel industry is not as competitive as it should be - and New Zealanders pay too much for petrol.

Petrol companies in New Zealand were in some instances making twice the revenue which their overseas counterparts were, Ardern said, and the fluctuations in price were significant.

It's important to remember any successful move to force fuel companies to cut their margins is only likely to move the price just a few cents a litre.

Perhaps anticipating a volley of criticism for the Government's part in the "fleecing" motorists, Ardern pointed out prices were often higher outside Auckland's sphere of regional fuel tax. "This points to a wider issue of New Zealanders being fleeced," she said.

The draft Commerce Commission report confirmed regional variations in fuel prices and prices nationwide might be higher than should be expected. ComCom chairwoman Anna Rawlings said: "Our current view is that the fuel market is not as competitive as it could be."

The ComCom drew this conclusion based on four factors: Many fuel companies are highly profitable; regional differences in retail fuel prices reflect variations in competition levels; discounting does not provide a substitute for competition on board prices; and premium petrol margins have grown faster than regular petrol.

While petrol retailers should expect scrutiny - and criticism, where warranted - theirs aren't the only oily hands on the nozzle.

When the price at the pump is at $2.10 or $2.20, depending on the day of the week and where you are in the country, the Government is taking more of a cut than anyone else. Just on half of that price is tax. Forty per cent is the cost of the raw oil which is bought offshore. Around 10-15 per cent is the margin for the oil companies which are supplying motorists with the fuel.

Evidence that New Zealand margins were high by global standards have already been tabled by MBIE and there has long been political whistling for the commission to put pressure on fuel companies to cut margins.

Global oil prices will fluctuate according to influences from production, supply and worldwide demand, as well as geopolitical factors such as trade sanctions and unrest in producing nations. The value of the NZ dollar also has a role in the 40 per cent of the total fuel cost.

It's important to remember any successful move to force fuel companies to cut their margins is only likely to move the price just a few cents a litre. This low-hanging fruit has much less influence on the price than factors such as tax, the value of the Kiwi dollar and crude oil prices.

To be raking in around half the cost, and wagging the finger at those taking 10-15 per cent could risk looking a little like a petrol pump, standing with a finger in an ear.