The Commerce Commission has taken a swipe at the fuel companies over petrol and diesel prices. Photo / File.
The Commerce Commission has taken a swipe at the fuel companies over petrol and diesel prices. Photo / File.
Self regulate or else.
That's the message analysts have taken from the Commerce Commission's report into petrol pricing, which pointed the finger at the big three fuel companies - BP, Mobil and Z Energy - for high wholesale fuel prices that ultimately feed through the price Kiwis pay at thepump.
Fuel bought at service stations and truck stops accounts for about 98 per cent of the petrol and 73 per cent of the diesel consumed in New Zealand, at an annual cost of more than $10 billion.
"For many families and businesses fuel is a significant weekly expense and there has been public concern for some time that pump prices may be higher than they should be," Commission chairwoman Anna Rawlings said.
The commission says many fuel companies are earning returns on investment "that are higher than what we would consider a reasonable return to be".
"In our view, the problem is the lack of an active wholesale market in New Zealand," she said.
AA spokesman Mark Stockdale said the big brands import fuel into New Zealand and distribute it.
"That means there is obviously not much competition in the wholesale price and so there is a limit to how much the 21 or so fuel retailers can adjust their pricing," he said.
Stockdale noted that the commission itself had controversially allowed Z Energy to buy Caltex for $785 million in 2016, taking the number of players down to three.
The AA was not the only one to have raised concerns about that at the time, he said.
"We have certainly seen margins continue to rise and Z has been pushing up margins."
Stockdale said the commission's report sent a clear message to the main fuel brands that they make voluntary changes to the wholesale market.
"And if they don't look at doing that, then ultimately there will be the threat of regulation," he said.
"It sends a fairly strong message that something needs to change in the wholesale market.
"The Commerce Commission has shown that there is a problem in the wholesale market and that it needs to be fixed.
"If that does not change, the only way to make it change is to regulate," he said.
Investor caution around the report dragged on Z Energy's share price, the stock closing 19c or 2.9 per cent lower at $6.42.
Economist Shamubeel Eaqub noted the commission is usually very conservative in its language but in this case the language was "quite strong".
"So that suggests action will be taken," he said.
"The other thing for me that I think it opens up is the likelihood that they are going to be using market studies for other industries going forward.
"We know that competition is a big part of how we can improve productivity in New Zealand and something that the Commerce Commission in the past has not had the tools to do.
"To me there are some obvious areas where the next Government might want to look into, construction and banking really kind of jump out as industries that might be in line for some fresh thinking," he said.
"The kinds of things that they looked at in the fuel study – in terms of profit margins, in terms of regional dispersion in pricing … these are all things that affect many different markets in New Zealand."
Will fuel prices come down?
"I think with this kind of language if fuel prices don't come down you'd expect the Commerce Commission to go really hard against these companies," Eaqub said.
"Now that they have evidence there are some issues in parts of the market they will be watching those parts very closely.
"The fuel companies are not stupid, they are smart people. They know how to make money and they know they don't want to upset the regulator."
BP, Mobil and Z Energy said they were assessing the Commerce Commission's report and would comment on it in due course.
