The Commerce Commission says a delay in reducing petrol prices is costing motorists $15 million annually at the pump.
According to its latest fuel data analysis, the competition watchdog says the data shows retailers are quick to raise fuel prices as a response to cost increases. But when costs are reduced from global oil prices dropping or exchange rates improving, retailers are slower to lower their prices.
“Our findings suggest that petrol prices shoot up at the pump in response to increased costs, but there is a noticeable lag in retail prices being lowered in response to decreases in underlying costs,” Commissioner Bryan Chapple says.
“We can see clear evidence showing that fuel companies maintain temporarily higher margins after a decrease in their costs, lasting up to two weeks – at great expense to Kiwi motorists.”
Chapple describes it as “lopsided, or asymmetric, pricing known as ‘rockets and feathers’”.
From the data analysis, the Commission estimates motorists could be saving around $15 million a year if fuel companies lowered prices as quickly as they raised them when costs change.
Chapple says the findings were “timely” with the upcoming removal of the Auckland Regional Fuel Tax on June 30.
Starting July 1, fuel delivered to the Auckland region will be 11.5 cents per litre cheaper than it was previously.
Chapple says the Commission expects fuel companies will “promptly pass the benefit of this reduced tax through to consumers”.
“If fuel companies don’t reflect this drop promptly in retail prices, Aucklanders could be over-paying by nearly $1 million in the first week alone,” Chapple says.
The Commission plans to closely monitor the pricing tactics and cost adjustments of fuel companies around the cost changes.
This will include tracking prices in and around the Auckland region before and after the removal of the Auckland Regional Fuel Tax and reporting on its findings.
Please explain
In September last year, the Commission issued a “please explain” notice to fuel companies on pricing anomalies in September last year.
The Commerce Commission wanted fuel companies to explain price differences between cities and towns – and even within the same town, which didn’t seem to be due to cost differences.
The competition watchdog said it has identified anomalies in retail fuel pricing over the first year of monitoring under the Fuel Industry Act.
Commerce Commission Chairman John Small said in September the Commerce Commission was seeing “wide variations” in fuel prices between and within cities and the competition watchdog wanted an explanation.
9 Comments
Chapple says the Commission expects fuel companies will “promptly pass the benefit of this reduced tax through to consumers”.
Given what their findings are, why on earth would they expect that?
Regulation via a stern frown might work for children, it's baffling to see public organisations do it with corporations.
So there are over 4 million registered vehicles in NZ..so this is costing each vehicle owner less than $4 a year.
As most vehicle owners don't even bother to cross the road for cheaper fuel when they fill up, and still buy coffee, pies and groceries from the most expensive fuel station, I think ComCom is wasting their time..
Similar story in the retail electricity market. Biggest handbrake on the industry being more competitive is many many people simply dont care to spend less money.
Right now near me there are two big fuel stations within a 1 km of each other showing a 30c per litre difference in their board prices. $2:70 vs $2.40.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.