AA Motoring Affairs General Manager, Mike Noon, says "it's a welcome relief and comes on the back of sustained falls in international crude and refined prices."

Government releases petrol price review

The Minister of Commerce, Lianne Dalziel, has released a review of petrol pricing in New Zealand. The review was prompted by public concern over the record price rises since the beginning of the year, and followed a call from the AA for an inquiry into New Zealand prices and the fuel market in May.

The report, by independent consultants Hale & Twomey, is an analysis of a comprehensive petrol pricing review by the Australian Competition and Consumer Commission, and the applicability of its conclusions to the New Zealand market.

Although the report only deals specifically with petrol prices, many of the conclusions of the report can be equally applied to diesel prices.

Mr Noon says "there are a number of important conclusions and recommendations on what can be done to improve price transparency for consumers."

"Although it is not a full inquiry, the report does conclude that there is nothing fundamentally wrong with the way fuel prices are set in New Zealand. The main reason for the rising prices is what most people already know - because of increasing international crude and refined product prices, and to a lesser extent, domestic taxes. The analysis of historical trends shows pump prices have increased no quicker than they fall, and that there is usually a delay of a week before international price movements are passed on locally."

"However, the report supports greater competition in the retail and wholesale markets and recommends that more information should be available to consumers. That includes expanding the Ministry of Economic Development's monitoring of importer margins. The AA also wants investigation of ways to make current pump prices more readily available to the public."

"The AA urges the Minister of Commerce and the Ministry of Economic Development to undertake more work in this area. We note from the report that the main way of determining current prices is from service station price boards. But that doesn't tell motorists if it's the lowest price in the area, and not all fuel prices are displayed on sign boards anyway."

"Motorists want to get better, immediate access to information on who has the best prices, and we think there is scope for publishing this data on a website, which may encourage more price competition between the oil companies."

"The AA also thinks that oil companies could be doing more to explain to their customers the reasons for increases or decreases in prices, though we have noticed a marked improvement in the amount of information some oil companies are providing to justify price changes in recent months."

The AA agrees with the report's conclusion that the Australian Fuelwatch scheme would probably not help motorists here. That scheme, which requires retailers to give advance public notification of price changes, was developed in response to the volatile Australian retail market, which often sees pump prices changing several times a day.

"New Zealand prices are much more stable, often only changing once a week, so there would be limited benefit to introducing such a scheme here, especially given the high costs of administering it," says Mr Noon.

"It is also a little reassuring to note our prices are comparable to Australia, once differential taxes and the exchange rate are taken into account. Often people point to Australia as having much lower prices, but this is due to their lower rate of taxation rather than cheaper imported fuel costs."

The report also highlights a number of other areas that warrant further consideration, including the impact of New Zealand's local fuel specifications on the ability for oil companies to source competitively-priced fuel, and a review of terminal capacity and contracts which may be hindering competition from independent importers.

"The report provides valuable insight into the operation of the New Zealand fuels market and some reassurance for motorists that it is operating competitively. This year's huge increases in prices have been driven by international rises in the cost of crude oil and refined product. However, increased transparency and monitoring is recommended to keep downward pressure on prices and encourage competition," Mr Noon concludes.

For more information contact

Mike Noon
General Manager - Motoring Affairs
New Zealand Automobile Association
T. +64 4 931 9984
F. +64 4 931 9964
M. +64 21 659 704
E. mnoon@aa.co.nz

The New Zealand Automobile Association is an incorporated society with over one million members. It represents the interests of road users who collectively pay over $2 billion in taxes each year through fuels excise, road user charges and GST.