Changes to make fuel market more competitive recommended by Commerce Commission

New Zealanders are paying too much at the pump and the fuel industry lacks competition, the Commerce Commission's final fuel market study has found. 

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

The report was released by the Commerce Commission today, with the year-long study finding an absence of fuel importers offering little price competition for customers filling up at the pump.

It also 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 report recommended introducing a terminal gate pricing regime, meaning lower barriers for entry for importers and distributors which would provide greater price transparency and potentially create a wholesale market.

It also recommended that fuel retailers should be required to display premium fuel prices on price boards.

Other recommendations include: Regulating wholesale supply contracts for greater contractual freedoms for resellers; Introducing a sticker that can show the minimum fuel grade that can used in vehicles and introducing an enforceable industry code of conduct to implement the above recommendations.

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”.

“For consumers, this means they are paying higher pump prices that could be expected.

“If competition was improved, then prices could well be lower,” Ms Rawlings said.

Despite indications that returns are now stable, profitability is expected to remain high.

“We are not convinced that the industry’s experience of excess returns has come to an end under current policy settings,” she said.

Ninety per cent of the country’s fuel comes from an infrastructure network used by Z Energy, BP and Mobil. Gull is the outlier, with a terminal in Mount Maunganui, Tauranga.

The study found this infrastructure network and supply relationship gives the large fuel companies an advantage over any other importers.

Energy Minister Megan Woods said the Government is ready to act on the Commission's findings. 

"We’ll be introducing the best options to increase competition at a wholesale level, which will filter down to the retail market and prices on the forecourt."

"A more competitive wholesale market means that low cost brands, like Waitomo and NPD, would be able to access cheaper fuel and pass these benefits onto consumers," she said. 

BP's Debi Boffa said they "look forward to assessing the Commission’s recommendations in full, and continuing to work with Government and officials to progress next steps in the interests of consumers and the market".

"We’ve appreciated the extent to which the Commission has engaged with us to understand BP’s broad offer, and the complexities of the retail fuel market and our global supply chain."