The Commerce Commission emphasizes the importance of shopping around to help boost fuel competition

The Commerce Commission says, given fuel accounts for about half or almost $2,000 of annual household energy costs, even a small difference in the price per litre could result in meaningful savings at a time when many New Zealanders are facing cost-of-living pressures. 

“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, and delivering better value to New Zealanders,” says John Small, Commissioner at the Commerce Commission.

Its quarterly fuel monitoring report found that in some cases, independent retailers without discount programmes had the lowest retail price. Their prices were better than the big importer retail sites like BP, Mobil, Z energy and Caltex.

Fuel prices increased during the June quarter, which the report says was driven primarily by the international price of crude oil and foreign exchange movements. In June the world oil demand was forecast to surpass pre-pandemic levels by 2023.

The report looked at importer margins, that means the gross margin available to fuel retailers to cover domestic transportation, distribution and retailing costs in New Zealand, as well as profit margins. Average importer margins were 32% lower for diesel and 27% lower for Regular 91 compared with margins in the 2018 market study into the retail fuel sector.

Following on from Energy and Resources Minister Megan Woods' press release last week, there has been a requirement for wholesale suppliers to open the books on their contract terms and pricing methods for all existing contracts.

A terminal gate pricing regime was put in place, where wholesale suppliers that sell from terminals post a daily spot wholesale price (the terminal gate price). If requested, wholesale suppliers must supply the retailer with the requested amount at the terminal gate price. 

This improves access to the wholesale market and provides for transparent wholesale prices, which makes it easier for new participants to enter the market and for existing fuel sellers to expand into other regions.

The Commerce Commission's initial review of wholesale contracts has found around three quarters of contracts do not contain clauses which incorporate terminal gate prices as part of their pricing.

Small says while it’s too early to draw conclusions, there “appear to be large differences between New Zealand terminal gate prices and those in Australia and also between terminal gate prices here and wholesale contract prices."

Future monitoring could look more closely at why terminal gate prices in New Zealand were higher than expected.