The Commerce Commission wants fuel companies to explain differences in retail fuel pricing both between cities and towns and in some cases within the same towns, which it says don't appear to be explained by differences in costs.
The competition watchdog says it has identified anomalies in retail fuel pricing over the first year of monitoring under the Fuel Industry Act.
One of the indicators of a competitive market is pricing reflecting the cost of supplying fuel at retail sites, Commerce Commission Chairman John Small says.
"We are seeing wide variations in prices both between and within cities, and these pricing differences do not appear to be explained by differences in the underlying costs. We’re writing to all the major fuel companies in New Zealand to ask them to please explain what we’ve seen in some of the pricing levels observed as part of our analysis feeding into Quarterly Fuel Monitoring Reports," says Small.
"In a competitive market, we’d expect to see prices at the pump reflect the cost of supplying fuel at the pump, whereas what we are seeing is retailers in some towns and cities charging a lot more for what is essentially the same product with similar cost components."
Motorists in Whangārei are paying more for fuel than the other cities studied by the Commerce Commission, and Small says this can't be simply explained through the data it has been supplied with.
“Marsden Point is our nearest port to major fuel sources like Singapore and South Korea, and being near the Marsden Point import terminal means higher prices can’t simply be explained by higher ocean or local transport costs. Land costs in Whangārei don’t shed any light on these prices either," says Small.
"In contrast, Hamilton is seeing some of the lowest prices in the country, another anomaly we’re wanting these major fuel companies to shine a light on."
"This significant variation in pricing is of concern to us so we are asking the major fuel companies to help us understand the data being reported to us," says Small.
The Commerce Commission's full statement is below.
ComCom issues “please explain” to fuel companies on pricing anomalies
The Commerce Commission is seeking an explanation from New Zealand's major fuel companies about anomalies that have been identified in retail fuel pricing over the first year of monitoring under the new Fuel Industry Act regulatory regime.
Commission Chair, John Small, says the latest Quarterly Fuel Monitoring Report for the period ended 31 March 2023 has further highlighted pricing variation between cities and towns – and within individual centres.
Some of the pricing levels and variations are “concerning, with no clear underlying factors”, Dr Small says. The Commission is engaging with fuel companies to seek further information on how they are setting fuel prices for their retail sites to determine whether the pricing can be justified based on costs or other factors.
The Commission has responsibilities for monitoring and regulating fuel markets under the Fuel Industry Act 2020. The purpose of the Act is to promote competition in fuel markets for the long-term benefit of consumers.
One of the indicators of a competitive market is pricing that reflects the cost of supplying fuel at retail sites. “We are seeing wide variations in prices both between and within cities, and these pricing differences do not appear to be explained by differences in the underlying costs.
“We’re writing to all the major fuel companies in New Zealand to ask them to please explain what we’ve seen in some of the pricing levels observed as part of our analysis feeding into Quarterly Fuel Monitoring Reports,” says Dr Small.
“In a competitive market, we’d expect to see prices at the pump reflect the cost of supplying fuel at the pump, whereas what we are seeing is retailers in some towns and cities charging a lot more for what is essentially the same product with similar cost components.”
The Commission’s latest report shows motorists in Whangārei are paying more for fuel than the other cities studied, and Dr Small says this cannot be easily explained by the data supplied to the Commission.
“Marsden Point is our nearest port to major fuel sources like Singapore and South Korea, and being near the Marsden Point import terminal means higher prices can’t simply be explained by higher ocean or local transport costs. Land costs in Whangārei don’t shed any light on these prices either.
“In contrast, Hamilton is seeing some of the lowest prices in the country – another anomaly we’re wanting these major fuel companies to shine a light on.
“This significant variation in pricing is of concern to us so we are asking the major fuel companies to help us understand the data being reported to us,” Dr Small says.
Background
Fuel Industry Act 2020
The Commission’s monitoring regime was introduced following the first market study carried out under Part 3A of the Commerce Act 1986. In its Market Study into the retail fuel sector report, published in 2019, the Commission identified shortcomings in the competitiveness of fuel markets in New Zealand. In particular, the Commission identified the absence of an active wholesale market and poor consumer information at the pump.
In response, the Government established a regulatory regime aimed at promoting competition in fuel markets for the long-term benefit of consumers. The Fuel Industry Act 2020 and related regulations came into effect in stages. The requirement to publish TGPs took effect on 11 August 2021. Requirements relating to fixed wholesale contracts also came into effect on 11 August 2021 (for all contracts entered into on or after 11 August 2021) and 11 August 2022 (for all contracts, including those entered into prior to 11 August 2021).
Commerce Commission’s role
The Commission is responsible for enforcing the obligations of fuel industry participants under the Act. We monitor compliance with the requirements of the Act, investigate potential non-compliance, and take enforcement action where appropriate.
Where we have concerns about potential non-compliance, we may investigate. If we consider a breach has likely occurred, we will apply our Enforcement Criteria to select from a range of enforcement responses. One possible response is to seek pecuniary penalties against industry participants in the courts.
8 Comments
It seems the issue isn't that they are pricing different places differently. it is more that they are all doing it at the same time, but that can be explained by monitoring each others pricing rather than premeditated collusion.
Someone needs to be able to fill up a tanker in Hamilton and set up a pump in Whangarei.
Seems strange that petrol stations claim they only make a few cents a litre , yet prices can vary by 20 -30 cents per litre.
Though the few Gull stations that are nomimally independant , that I have asked,say the prices are set by Gull head office , and they have no control over it.
Maybe their markup stays the same at a few cents per litre , but head office manipulates the buy and sell price , depending on competition in the area at the time.
As per, the Fair Trading Act states businesses can’t mislead shoppers about prices. Yet the law was written when it was common for businesses to disclose pricing up front – with personalised pricing that’s not the case.
What could be misleading is if the business wasn’t upfront about its use of personalised pricing.
The Privacy Act requires companies to disclose to consumers what data is being collected, and how it’s being used.
Yet, our privacy legislation doesn’t include algorithmic transparency. Meaning, companies don’t have to tell us the assumptions, or biases, they’re making on factors like ethnicity, gender, incorrect information, or your ability to pay.
Any political parties mentioned this in their campaign yet?
By now you would think they would have systems in place to see if what is happening is right or not. Why do they need to ask them. They should also be required to respond in a set format allowing the responses to be easily compared. NZ consumers are not treated well IMO.
Pretty easy to use information from the likes of gaspy to see that fuel prices across towns and cities across the country are more about cartel behaviour and willingness to pay, than cost price.
Gull puts on a 10c special every few weeks and suddenly the BP across the road, the pak n save down the road and the z all find ways to drop their prices by another 6-8cpl
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