Pumping fuel wholesalers for change

The traffic moves a touch slower through Maheno these days, encouraged perhaps by some numbers on a sign sitting prominently beside State Highway 1.

The sign declares the site to be a petrol station, and cars slow when drivers see the advertised prices are lower than on similar signs in the towns from which they came.

Gull called its first self-serve fuel station in the South Island ‘‘a landmark’’, and the almost routine slowing and out-of-town traffic suggests it is becoming one.

We continue to call them small operators but there is little doubt the likes of Gull and NPD have made significant inroads in the southern fuel market. Their impact was noted as Commerce Commission chairwoman Anna Rawlings yesterday released the regulator’s final report into
competition in the local fuel market, a year after Prime Minister Jacinda Ardern said she reckoned New Zealanders were being fleeced at the pump.

Southerners know the feeling. Otago and Southland regularly have the second and fourth most expensive average prices in the country.

Commerce and Consumer Affairs Minister Kris Faafoi says broadening fuel market competition will drive prices down. They have dropped by at least 18 cents a litre where the small players have gone big.

The report found regional price differences were not well explained by regional cost differences. Fuel companies continue to make persistently high profits buoyed by what the commission calls ‘‘excess returns’’ in the region of $400million a year.

So, while it is clear there has been increased, if limited, retail competition, it is also clear much more significant, price-plummeting competition cannot happen without tackling the wholesale fuel market.

At the moment, wholesale prices are variable and access to wholesale fuel is difficult. Infrastructure sharing and restrictive supply relationships give the major fuel companies an advantage. Importers struggle to compete for customers and distributors struggle to get competitive supply.

A more transparent wholesale pricing regime — perhaps mirroring that of Australia, where terminal gate prices are advertised and supply contracts are regulated — may stimulate competition. Consumers will also be able to compare retail and wholesale prices, to help them decide whether to continue visiting service stations that are making unreasonably high mark-ups.

Retailer Z is an advocate for this type of regime but it is far from broadly supported by some of the other players in an industry that has been making such significant profits.

The Government also wants to make it mandatory to advertise premium grade fuel prices. This will comfort motorists sick of nasty surprises at the pumps, just as the report will comfort the Government which, as with the school spending stimulus announced last week, will be keen to effect change well before the election next year.

Cartoon response

Your newspaper continues to make changes in light of the hurt and distress caused by our ill-judged decision to publish a cartoon that made light of the measles epidemic in Samoa.

Editor Barry Stewart and Allied Press chief executive Grant McKenzie have met members of the Samoan community in Dunedin, and we are discussing ways we can make amends and help the people of Samoa.

As noted in our apology yesterday, our cartoon selection process has been strengthened and we will not publish Garrick Tremain’s cartoons while an employment review takes place.

Race Relations Commissioner Meng Foon has suggested we undertake regular training in respect of cultural intelligence and unconscious bias. We are consulting the people who can give us the help we need.

Meanwhile, we continue the process of responding to the people who contacted us. We received more than 1000 letters and your patience in awaiting a reply is appreciated.

 

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