Leaked email lifts lid on BP's petrol pricing strategy

A leaked email has exposed the pricing strategy underpinning the petrol industry.

In the email obtained by Stuff, BP pricing manager Suzanne Lucas outlined a plan to counter dwindling sales in Ōtaki, where the price of fuel was 20 cents more expensive than in nearby town Levin.

Instead of reducing the price in Ōtaki to make the station more competitive, Lucas proposed an increase of the fuel price across the entire region, with the expectation that competitors would match the new price.

"We have already increased all three sites mentioned by 5cpl [cents per litre] and have found that the Z [Energy station] in Paraparaumu has already matched our pricing," Lucas wrote.

"Over the next couple of weeks we will continue to try a number of tactics in the hope of reducing the pricing gap between Ōtaki and its surrounding regions."

Energy Minister Megan Woods and former energy minister Judith Collins both expressed to Stuff concern about the email, with the latter calling for a report to be conducted by the Ministry of Business, Innovation and Employment.

The Ministry of Business, Innovation and Employment last year released a report on fuel prices, saying it had "reason to believe" the market was not fully competitive and that fuel prices were unreasonable.

It said that since 2008, New Zealand pre-tax premium petrol prices had soared from the "bottom third of OECD countries" to become the "most expensive". The swing amounted to a "wealth transfer from consumers to producers, increasing the effective living costs of motorists".

Due to these concerns raised in this report, the Government said it was looking into giving the Commerce Commission more power to investigate petrol companies and the high prices they charge.

As part of the proposed law changes, the Commerce Commission may be able to investigate collusion among petrol companies after the report showed a massive swing in fuel prices in the past decade, transferring hundreds of millions of dollars a year from motorists to petrol companies.

That would require an amendment to the Commerce Act so the commission could force companies to comply.

The latest revelation of BP's pricing strategy in Lower North Island again raises the question of whether New Zealanders are really getting a fair deal at the pump.

Is this price fixing?

AA spokesperson Mark Stockdale this morning told Newstalk ZB's Mike Hosking that this "sounds a little bit" like market manipulation.

"This is a de-regulated market, so there are no controls over setting the price of fuel," Stockdale said.

"There's nothing saying that the fuel companies must set a certain price."

Stockdale said that the only way to solve this problem would be to re-introduce uniform pricing, but warned that this isn't without its challenges.

"That poses a lot of problems, because of there are parts of New Zealand – particularly in the North Island – that are paying pretty reasonable prices thanks to the presence of low-cost brands that are typically unmanned.

Stockdale said that if we go back to uniform pricing it could mean that parts of the North Island might end up paying more than they currently are, while Wellington and South Island might end up paying less.

"Half the country will be happy and the other half will be unimpressed," Stockdale said.

Stockdale also warned that setting a uniform price could impact the level of competition coming from low-cost providers in the market.

"We've got 21 different fuel retailers in New Zealand and many of them are low-cost brands because they operate unmanned service stations. It's just pay at the pump, there's no shop, no staff, so their costs are lower. And they're passing those lower costs onto motorists in the form of lower pricing."