The Government has confirmed the Commerce Commission will have a year to do a market study on the retail fuel market.
Prime Minister Jacinda Ardern in early October announced the Government was fast-tracking the passing of the Commerce Amendment Bill, to enable the country’s competition watchdog to do market studies on selected industries.
Ardern said the retail fuel market would be the first batter up.
The Bill was passed at the end of October, and on Monday Ardern and Commerce and Consumer Affairs Minister Kris Faafoi made their selection of the retail fuel market official.
They said the Commission would provide further information about the process and would be required to publish a final report by December 5, 2019.
According to the terms of reference, matters to be considered in the study may include, but are not restricted to:
- the structure of the industry
- the extent of competition at the refinery, wholesale and retail levels, including the role of imports
- any factors that may hinder competition between industry participants
- the conditions for entry by potential competitors, including independent suppliers, and/or the conditions for expansion
- whether wholesale and retail price and service offerings of petrol and diesel are consistent with those expected in workably competitive markets
- features of retail petrol and diesel markets that are not in the long-term interests of consumers
“Simply, it’s in the public interest to ensure people and business aren’t paying too much for fuel," Faafoi said.
"There are existing indications of competition problems in the retail fuel market that are of concern to me, such as the more than doubling of petrol and diesel importer margins over the past decade.”
He said fuel retailing was hugely important to consumers and to our economy, given the extent to which we rely on fuel and the size of the market, with around six billion litres of petrol and diesel consumed for land transport use annually.
“The Commerce Commission will be undertaking a full and thorough analysis into competition in the retail fuel market. This will enable us to better understand the market conditions and determine whether consumers’ interests are being protected at present, and if not, what action needs to be taken.”
National’s Commerce and Consumer Affairs spokesperson Brett Hudson has responded to the announcement, saying: “Today the Government has confirmed it will take no action on fuel prices despite the fact it will take the Commerce Commission at least a year just to report back – and that’s after the inquiry was delayed by months in the first place.
“And even then there’s no guarantee this study will do anything to lower fuel prices.
“Meanwhile petrol prices remain high, albeit slightly off record levels, and New Zealanders are being forced to pay too much at the pump.
“And we know that by the time the Government has received the report and decided how to respond it will have become clearer who is doing the fleecing since it plans to impose two more 4 cents per litre hikes in both 2019 and 2020. That’s on top of this year’s 4 cent hike and the 11.5 cents per litre Auckland regional fuel tax...
“The Government should axe its fuel taxes and put a halt to any new ones to provide Kiwis with the immediate price relief they deserve.”
Angst over high fuel prices hit a high in October, as petrol prices went up by 40 cents a litre in six weeks. Since then, however, prices have dropped.
Milford Asset Management Portfolio Manager David Lewis maintains prices are likely to fall further in time for the summer holiday season.
“I think, if you look over the next few weeks, prices will continue to decline by another 10 cents or so. In general, I’d say that the big swings in price we’ve experienced in the last couple of months – I don’t expect that level of volatility to continue," he said.
“And we don’t expect that we’re going to get back to prices as high as what we saw in September when they reached $2.40 or $2.50 per litre…
“From an investor perspective, there is cause for concern and the reason is that this very sharp fall (more than 20% over a 6-week period) is an indicator of a softness in global demand – a softness in the global economy.”