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Government to introduce new law to pull petrol prices down, create fuel industry code of conduct

The Government is bringing in new rules to promote competition in the fuel industry, with the hope it will lower the price at the pump.

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Officials say the proposed law change could result in savings of 10 cents per litre. Source: 1 NEWS

Today, Energy Minister Megan Woods released the Government's response to the Commerce Commission report that found New Zealanders are paying too much for petrol. 

The year-long study found the difference in regional prices reflected the level of local competition, discount schemes avoided direct competition and premium petrol prices have increased faster than regular prices.

The Government is accepting six of the Commission's 11 recommendations. 

A proposed law change is to be drafted, with consultation with the petrol industry, and is intended to pass by the middle of this year. 

"We’re introducing changes that will promote greater competition in the fuel market at the wholesale level and lead to lower prices on the forecourt for motorists,” Ms Woods said.

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A Commerce Commission report found Kiwis are being fleeced at the pump. Source: 1 NEWS

"We know that the cost of fuel is significant for households and businesses.

"The report confirmed our concerns that motorists are paying higher prices for petrol and diesel than could be expected in a competitive market."

The changes would be focused on the wholesale level - and "would see smaller players such as Waitomo and Gull gain access to cheaper fuel".

"This will mean other retailers will need to adjust their prices or risk losing customers."

The new rules include a requirement for premium fuel to be displayed, for contracts between wholesale suppliers and customers to be "fair and support competition" and for wholesale pricing regimes to be "more transparent". 

National's Paul Goldsmith said the Government's response was "tinkering around the edges". 

"After all of the chest beating from the Prime Minister on reducing costs, all we’ve got is some modest changes that won’t alter the reality that the Fleecer-in-Chief has always been Jacinda Ardern and the Labour, NZ First, Greens Government with its big fuel tax increases," Mr Goldsmith said. 

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Saudi Arabia is working to restore production at its largest oil facility following a drone strike. Source: 1 NEWS

The Commission's draft report was released in August 2019, finding a range of issues within the industry that were pushing up prices for consumers.

It showed New Zealand's pre-tax petrol and diesel prices were among the highest in the OECD, fuel companies were highly profitable and that discounting was a "poor substitute" for price competition. 

Prime Minister Jacinda Ardern said that "we cannot stand by while they are facing that pressure at the pump and while they are being fleeced".

She said the revenue companies were making was almost double that of international comparisons.

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A quick explainer on what makes up the cost of petrol. Source: 1 NEWS

The full report was released in December 2019.

Commission chair Anna Rawlings said the study showed "many fuel companies have been making persistently higher profits over the past decade than we would expect in a workably competitive market".

"If competition was improved, then prices could well be lower."

Accepted recommendations from the Commerce Commission:

- Introduce a terminal gate pricing regime (lower barriers for entry for importers and distributors, provide greater price transparency and potentially create a wholesale market).

- Change wholesale supply agreements.

- Adopt an enforceable industry code of conduct.

- Improve transparency of premium fuel prices.

- Monitor the display of discount pricing on price boards.

- Improve information and record keeping.