Aucklanders and other North Islanders are having their cheap petrol prices subsidised by motorists in Wellington and the South Island and the price gap is growing bigger.

That is what motorists association the AA believes and it has been backed up by Gull boss Dave Bodger.

Known as the "Gull effect" towns and suburbs who have seen the entry of low-cost operators like Gull, Allied and Waitomo have seen rival stations drop their prices to compete.

But AA senior policy analyst Mark Stockdale says the flipside of the coin is motorists in cities like Wellington and the South Island which don't have low-cost operators are paying 20c a litre more and in some cases it's as much as 40c a litre.


"We don't know how much of that is cross-subsidy."

But he said the reality was if there wasn't that cross-subsidy the prices would be a lot lower.

Stockdale said it was not illegal for companies to cross-subsidise their business.

"Fuel companies are not the only ones to do it."

"But in the AA's view that price difference is getting bigger and bigger."

He warned New Zealand could end up with a rural urban petrol price divide and that increasing pressure on petrol companies could lead to more unmanned stations and the closure of shops and facilities as companies were forced to cut costs to compete.

The government earlier this month announced an inquiry into petrol prices margins.

But Stockdale questioned what they could do.


"Would the government look at regulation? I don't think that is an option for the government."

The association surveyed members asking if they would like to see uniform pricing across the country which is what was seen before Gull entered the market around 20 years ago.

It found 54 per cent would support that option while 43 per cent supported the status quo - not surprisingly those who wanted uniform pricing were based in Wellington and the South Island.

"So whatever the government does - they are damned if the do and damned if they don't"

While more competition could potentially solve the problem for those who lived in the areas where Gull expanded to Stockdale said it wouldn't solve the issue for towns and suburbs for those where it wasn't and in fact petrol price could rise even more for those towns who miss out.

"The price gap in other areas will be even higher."


"The reality is those brands will never have full nationwide networks because some of those areas where those big brands operate will not be terribly profitable."

Another option was to cut staff and shops but Stockdale questioned whether motorists really wanted that.

Gull chief executive Dave Bodger has admitted the company could be indirectly pushing up petrol prices.

But said he didn't really know and he didn't see the opposition's books.

"The government is trying to decide what is fair and that is going to be tough."

Bodger said it was able to keep prices down through importing fuel through Mt Maunganui and trucking it around the North Island as well as having smaller sites and unmanned stations.


It had looked at building a terminal in the South Island but do to it low population based the numbers just "didn't stack up".

He said the company had asked all the oil majors if it could buy petrol at the terminal gate price off them in the South Island but the answer had been no.

The cost of transporting fuel to Wellington and paying the extra rental costs had also put it off entering the capital city, Bodger said.

He said the government did not have a great track record when it came to regulating markets and he supported a free market approach.

But he would like to see a terminal gate approach which would give more transparency on the wholesale price of fuel and allow it to buy fuel off other oil majors and expand into the South Island.

He says that change would also allow other petrol companies to buy petrol from its Mt Maunganui operations.


Gull is about to open its 77th station in Silverdale's Millwater housing area. It has three sites under construction and another four with planning permission.

The Millwater station will not have any attendants. He said unmanned petrol stations were part of the future.

"It is not the be all and end all."

But he said it gave options if places could not make money out of selling coffee, sushi or cigarettes.

"That is the way things are going with automation."