Jacinda Ardern has vowed to lower petrol prices across the country.
The vow comes after a new government-commissioned report found the price of fuel has risen at an unusually high rate for the past decade. According to the report, the chief reason for this is the petrol industry’s lack of meaningful competition.
Around 90% of petrol entering New Zealand is controlled by Z Energy (formerly Shell), Mobil, and BP, thanks in part to a shared infrastructure agreement which sees all three companies pool resources to reduce the costs of importing. According to the report, this shared agreement makes it virtually impossible for competitors to emerge in New Zealand’s petrol market, as they cannot compete with the scale and efficiencies of this infrastructure.
Because new competitors can’t enter the market, the three companies dominating the market now – Z Energy, Mobil, and BP – are not encouraged to lower prices. In fact, they have continued to raise them at a rate which is higher than the rest of the world.
More importantly, the three petrol companies do not really appear to be competing to lower prices. Instead, they have continued to raise them – probably because the
Because the three petrol companies dominate the market, and because they have a roughly equal share of the market, Z Energy, Mobil and BP are all disincentivised from lowering prices.
The report says more companies like Gull need to open if we are to see prices lowered. Gull opened their first few automated stations last year. Their prices often run much lower than their competitors’ prices – Gull Birkenhead is regularly the cheapest petrol station in Auckland. According to Gull CEO
Z Energy, Mobil and BP all dispute the results of the report, with spokespersons for the three companies saying competition in the industry is rife. But data collected for the report undermines these claims. Between them, the three companies made “excessive returns” of $400 million dollars or more last year. As mentioned in the report, it is not usual for a highly competitive market to see every single competitor making enormous amounts of profit.
Ardern says the report is proof New Zealanders are being “fleeced” by petrol companies.
At current prices, a motorist filling up a 60 litre car three times a month can expect to spend just under $2000.