Govt promises law change this year to make wholesale fuel prices more transparent, supplier/distributor contracts fairer, and retail premium petrol prices clearer

Govt promises law change this year to make wholesale fuel prices more transparent, supplier/distributor contracts fairer, and retail premium petrol prices clearer

The Government is promising a speedy law change largely aimed at making the wholesale fuel market more transparent to strengthen competition.

It’s committing to introducing a terminal gate pricing (TGP) regime, similar to that in Australia.

A TGP is a spot price at which wholesale suppliers will sell fuel to wholesale customers at storage terminals. This price will act as a benchmark for wholesale customers negotiating supply agreements.

A Fuel Market Bill is being drafted. It will be given priority and is expected to be passed mid-year.

The introduction of a TGP is one of the key recommendations made by the Commerce Commission following a year-long fuel market study it was instructed to do by the Government.

The Commission's final report, released to the public on Thursday, also includes a recommendation for new rules to be introduced to ensure contracts between wholesale fuel suppliers and their customers are fair and support competition.

The Government has agreed to include this in its Bill.

The Commission suggested some of these rule changes could be around enabling distributors to take a prescribed minimum portion (IE 20%) from other suppliers, for example.

It said distributors should also not be made to commit to wholesale contracts with terms longer than say five years, without a right to terminate the contract on notice.

The Government has also agreed to a recommendation to introduce an enforceable industry code of conduct.

The changes committed to are mainly at the wholesale end of the fuel supply chain, a lack of competition here feeds through to high prices at the pump.

The Commission said: “When the fuel industry was deregulated in 1988, the majors [suppliers] immediately entered the retail market, buying prominent retail sites of their own and securing long-term supply contracts with independent retailers. This effectively prevented the development of a competitive wholesale market.

“As a result, New Zealand’s fuel industry is now essentially a vertically integrated oligopoly.

“The three majors (Z Energy, BP and Mobil) benefit from the cost efficiencies of their infrastructure sharing arrangements. They supply more than 90% of their retail fuel sold through a network of retail sites…

“New Zealand’s only other fuel importer, Gull, is not party to any of the infrastructure sharing arrangements...

"Gull has had a positive impact in reducing prices for consumers in some areas where it operates.

"However, it is also incentivised to maximise its own profits and can do so by setting its prices beneath the majors’ average retail prices, without the threat of additional competition driving prices down further."

On the retail side of things, the Government is requiring retailers to display premium petrol prices on price boards to better enable consumers to compare prices. It has asked retailers to do this ahead of the law change.

Finally, the law change will require fuel companies to collect and disclose more data to the Government, so it can better understand the sector and intervene should it need to.

The Government is also engaging with the industry on issues around infrastructure sharing arrangements and considering requiring fuel caps of fuel flap stickers to tell consumers the minimum octane level required for their vehicle so they don’t end up buying more expensive fuel than they need to.

The sector has until March 30 to report back on the Commerce Commission’s recommendations.

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16 Comments

What the consumer should have is full transparency over the actual tax take on each litre. Right now, GST is the only declared tax on a receipt.

11
up

Correct, lets show exactly what the govt double taxes account for. Last 16% fuel increase is directly attributable to Labours tax increases since being in power, we even paid for an investigation into that to show it was, well the govt caused the increase.

An exact breakdown of the double tax we pay would be nice but the fluff and buff is just about blaming someone else for it.

So how do you suppose the government should pay for roads? A money tree?

Jeez what kept em.....about time..!

Can we do the same with Rental Houses...pretty please. OH sorry...I forgot.....Taxinda said a big NO.

"The Government is promising a speedy law change largely aimed at making the wholesale fuel market more transparent to strengthen competition."

With the "Most transparent" Govt in charge of this. I don't think I will count my chickens until they have hatched.

No solution to the taxes which are half the price.

As per normal this story is as much about what it doesn't tell you as what does. Which is par for the course for both the government delivering it & the media reporting it.

Whanganui's 91 petrol prices have been in the range $2.18.9 to $2.19.9c for the past few weeks. Yet the brent crude etc have been dropping for some weeks now.

Someone is banking a profit. Wednesday specials are not good enough to satisfy many.

Lol, Gotta love politicians...
Read...
'We tax ~47% of your fuel charge and all of it goes into the general coffers but hey, let's shine a light on the wholesalers because their total cost is less than the tax we collect from you...'

Diesel is misrepresented as their are road user charges which is just another form of tax

It actually goes to the National Land Transport Fund and is spent on building and maintaining roads. Only the GST goes to the general coffers.

Good lets see the same thing happen with the supermarkets...

Does this not seem counter intuitive to anyone? Shouldn’t increased regulatory burden and compliance cost result in increased product cost?
If you have to sell to other retail competitors why not skip the troublesome import and refining by buying from your competition? You may well end up with only 1 wholesale importer whom everyone buys off which would likely push prices up due to lack of competition at the import level.

Where is the Phil Goff tax Ak petrol in all this? We hear that petrol in the South Island is more expensive than in Ak. Well I can tell you that in Invercargill it is cheaper than in Ak.

Oil has dropped on World Markets....How long before Petrol here slumps to the level it should be.....(Never is my guess).

Tax may be a big part of the cost.....every thing that drives us to ruin......does too. They know how to spend.......these here tax suckers...

Must import a few million poor suckers to make up the short----fall.

“As a result, New Zealand’s fuel industry is now essentially a vertically integrated oligopoly"

so when is the government going to apply this to the electricity market as well ???

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