Petrol prices: Motorists pay too much at pump says Commerce Commission

Prime Minister Jacinda Ardern says Kiwis have been "fleeced" on petrol prices for a decade and her Government is "ready to act".

The Government had already started work on options to drive down fuel prices, she confirmed today.

"Our instinct was certainly that New Zealanders were being fleeced at the pump, now the Commerce Commission has confirmed that that is true," Ardern said.

"I can tell New Zealanders we cannot stand by as they are facing that pressure at the pump and while they are being fleeced."

Asked if she could give Kiwis a guarantee that petrol prices would drop, Ardern said she would give motorists an assurance the Government would not "stand by as they continue to be fleeced".

"It's not right. It's been happening over the last decade. Unlike the last government, we're going to do something about it."

Ardern said that over the past decade, in particular, petrol companies' returns had climbed - and were higher than what firms would have been collecting overseas.

The Prime Minister's criticism follows a draft Commerce Commission report released today confirming the fuel industry is not as competitive as it should be - and that Kiwis pay too much for petrol.

Ardern said the commission would complete its report and give the Government a steer on the next best move.

Energy Minister Megan Woods had already started work to see how the Government could act once the Commerce Commission's final report is released.

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.

Prices were often higher outside Auckland, where there was a regional fuel tax.

"This points to a wider issue of New Zealanders being fleeced," she said.

Asked if the Government would cut fuel taxes, given it was so concerned about New Zealanders being fleeced, Ardern replied: "Because when you look at what has happened to the fuel price over the last decade that does not explain what is happening in our market."

Ardern said taxes were outstripped by far by rises in margins.

"If we want to make a big difference to New Zealanders at the pump we have to deal with what's happening in the market."

Commerce Commission: Fuel market is not competitive

Today's report confirmed there were regional variations in fuel prices and that prices nationwide "may be higher than we would expect to see", Commerce Commission chairwoman Anna Rawlings said.

"Our current view is that the fuel market is not as competitive as it could be."

The reasons for this conclusion include:

• 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
• Premium petrol margins have grown faster than regular petrol.

While fuel industry loyalty and discount schemes were "prolific" these appeared to be used by retailers as a substitute for genuine competition.

Rawlings said consumers should have more choice when it comes to petrol - while noting that margins on premium fuel had risen faster than regular petrol.

Rawlings stressed this was a draft report for discussion only, and any final recommendations will be up to the Government, when the report has been finalised.

"Our preliminary findings suggest that many fuel companies are earning returns on investment that are higher than what we would consider a reasonable return to be."

Commerce Commission chairwoman Anna Rawlings at the release of today's report. Photo / Mark Mitchell

The report found that fuel retailers have higher profits than in other countries - with Z Energy, BP and Mobil controlling 90 per cent of the fuel market in New Zealand.

Rival importers have found it hard to get into the New Zealand market and this has impacted competition, the Commence Commission found.

More needed to be done to attract new entrants into the market – which would help increase competition and help bring down the price of fuel.

Although Rawlings said competition could be better in the market, she would not go as far as saying consumers were being "fleeced".

If competition was working well, consumers would be paying less over time, Rawlings said.

She was open to the Government building more infrastructure that could support fuel being imported into New Zealand.

The Commerce Commission's view was that petrol was still going to be around for a long time and it "does not seem like a sensible strategy" to solely focus on electric vehicles.

If competition was working well for consumers, Rawlings said she would expect consumers to be paying less than what they're paying at the moment.

The commission was happy with the level of compliance from petrol companies and that they gave them "everything they asked for".

Although tax made up almost half of the price at the pump in some cases, the Commerce Commission did not look at tax as a factor in its report.

This was because the commission was only assessing competition and tax was not a factor in that.

Ardern: Motorists being 'fleeced'

Prime Minister Jacinda Ardern has previously said motorists are being "fleeced" at the petrol pump - and said she expected the Commerce Commission report today would confirm problems with the fuel industry.

The Commerce Commission was given new powers last year to probe markets it thought were anti-competitive.

Ardern told Newstalk ZB this morning that she had yet to see the report, but she expected that it would find issues with the industry.

"I'm anticipating that they will. I just can't see how, with the regional variation I see which I just cannot see a justification for, that they won't come out having found something."

Prime Minister Jacinda Ardern says she still thinks consumers are being fleeced at the petrol pump. Photo / Mark Mitchell

Ardern said one of the issues may be the inability of suppliers or retailers to move around.

"If they for instance chose to go to a different supplier or operate under another retailer, they would often access to their tanks. It meant people never moved. That changed the dynamic of the market.

"That's been a problem for some time."

She still thought drivers were being ripped off at the petrol pump.

"I want to see what [the Commerce Commission] say and then we'll have to make a decision around what action we take."

Today's report is just a draft and the full and final report will be published in early December.

Ardern said if the commission identified problems, it might not outline potential remedies until later on this year.

In October last year, Ardern told media that "consumers are being fleeced" by petrol companies.

At the time, petrol prices were close to $2.50 a litre in some parts of the country.

Ardern said petrol companies' margins have more than doubled between 2008 and 2017 – she said this was "not acceptable".

The Government fast-tracked the passing of the Commerce Amendment Bill, which gives the Commerce Commission powers to probe markets it thought were anti-competitive.

Ardern nominated fuel markets as the first industry to be investigated.

"They haven't opened up their books to us in the past; so we're going to have to force their hand."