There have been instances of discounted fuel under $1.70 a litre, which the Automobile Association believes is at or below cost.
The AA has been calling for an inquiry and transparency on profit margins since writing to the former energy minister in early 2015, pointing out there had not been a retail inquiry since 2008.
Mrs Collins said the aim of the Fuel Market Financial Performance Study, to be done by the Ministry of Business, Innovation and Employment (MBIE) and delivered by June, was to determine if companies "were making super-normal profits or not".
"MBIE data shows that fuel [profit] margins have more than doubled over the last five years," Ms Collins said. The study would report on fuel company returns and include in-depth analysis of oil companies’ finances to make sure New Zealand had quality, reliable and reasonably priced fuel.
AA PetrolWatch spokesman Mark Stockdale predicted the day before Mrs Collins’ announcement that a 2c per litre drop in prices that day by the fuel companies was to "pre-empt" her then "looming" announcement.
He said this week’s 2c per litre drop was not due to a decline in commodity prices nor a rise in the exchange rate, because both were stable.
"But the reduction isn’t enough to offset what the AA says was an unwarranted 5c per litre rise in prices during January," Mr Stockdale said.
The investigation into profit margins was a good idea, to help answer motorists’ questions why the profit margins kept rising, and why prices varied so much across the country.
"However, we suspect motorists won’t like the answers or the facts that support them," Mr Stockdale cautioned.
When quizzed about that scenario, Mr Stockdale said once the facts were established about the combination of how regional price discounting worked, alongside the increasing use of loyalty scheme dockets, motorists could be "uncomfortable".
"They [fuel companies] have to raise the price of undiscounted fuel in order to be able to offer lower prices, of 20c or 30c per litre, at other places," he said.
Ms Collins said, "I’ve spoken to the oil companies this week and I am very confident that they will work with MBIE and provide the required information in a timely manner."
