Government would be 'commercially naive' to regulate fuel prices, industry body says

The Road Transport Forum's chief executive says it would be "commercially naive" for the government to step in and regulate fuel prices, after leaked emails showed the methods used by BP to determine pricing in the lower North Island.

Ken Shirley of the Road Transport Forum says New Zealand's petrol market is highly competitive and commercially unattractive for oil companies. Source: Breakfast

Prime Minister Jacinda Ardern has said the government will consider all options once BP has fronted up at parliament to explain the emails, which appear to show managers being told to purposefully hike prices north of Wellington, in order to persuade cheaper rivals to follow suit and offset profit losses at other locations.

Ms Ardern has said that the Commerce Commission could even be given great powers as a result, including the ability to conduct market studies, and that "Kiwis will rightly be saying, 'this doesn't feel fair'".

The RTF represents industry bodies in the field of transport and logistics, and chief executive Ken Shirley, speaking this morning to TVNZ 1's Breakfast programme, said regulating the petrol market in New Zealand would be "commercially naive".

"I don't blame BP - that's just normal commercial practice - we've got variable prices around the country," Mr Shirley said.

When the PM was asked if she thought the pricing moves were “fair”, she said “certainly motorists won't look upon it as fair”. Source: 1 NEWS

"We shouldn't be surprised at all - it's a commercial decision and that's why I think governments can sometimes be commercially naive with their public policy ... they don't understand those sort of commercial realities.

"New Zealand's actually a very competitive market for fuel prices ... it's actually not a very attractive market for the big companies, quite frankly - distribution costs are high relative to others and that's why a number [of companies], like Shell, have exited, with Z taking over them, and Chevron with Caltex.

"I don't believe there is price gouging as such, it's just we get these regional variations and distortions."

Mr Shirley says he does not believe that regulating the price of petrol would solve anything.

"If regulation's the answer, you'd want to be very sure what the question was," Mr Shirley said.

"Very seldom does this sort of interventional regulation help - it usually aggravates the situation and makes things a lot worse."

BP has responded to the issue, saying "Petrol prices in New Zealand are highly competitive and we adjust our prices in response to local competition, particularly in instances where discounting has become unsustainable, which is what occurred in the lower North Island last year.

"We believe competition on price will remain a key characteristic of the New Zealand fuel market in the coming years," BP said in a statement.

"Because the New Zealand fuel market is already highly competitive we actively manage our prices on a daily basis to remain competitive, as well as provide the best possible customer service offering."