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Inside NZ’s mysterious fuel price plunge

Petrol industry players are launching hefty allegations at each other as fuel prices take an unexpected dive. Morgan Tait reports

Something strange is happening with New Zealand’s petrol prices.

Consumers are currently paying up to 16c less per litre for fuel than they did last month - the cheapest prices have been in a year, in a decade where the cost of fuel has continued to rise.

And just days before the findings of a government study into the issue is due, industry players are launching hefty allegations at each other.

The AA and Gull say the big petrol companies are only offering low prices because of the imminent release of Fuel Market Financial Performance Study findings - which they have not seen.

The petrol companies, who have also not seen the report, say prices are low because of international price drops and a weaker US dollar.

AA’s petrol price spokesman Mark Stockdale says those two factors are not enough alone to justify the sharp drops.

“The AA monitors commodity prices and exchange rates because these are the things that petrol companies say lead to changes in the retail prices.

“It is good that prices are down, but our monitoring shows it is not because of what the commodity prices and exchange rates show.

“It is very unusual for us to see fuel companies cut prices by more than the reduction in those costs.”

Energy Minister Judith Collins said the study into rising petrol prices, conducted by the Ministry of Business, Innovation and Employment, would be completed by the end of June.

The study investigated whether petrol companies were charging more for fuel in regions where there was less competition.

Stockdale’s claims were supported by Gull’s chief operating officer Ulrik Olsen. He said his company was proof of the price disparities.

The “Gull effect” - where the big petrol companies lower their prices to match Gull’s - was well documented, he said.

In January, a new Gull station opening in New Plymouth saw competitors drop their prices by 30c per litre.

“How can they suddenly afford to do this? Why didn’t all the other competitors sell fuel cheaper before that when all of a sudden they can?”

Olsen said he believes consumers in Wellington and the South Island, where there are no Gull stations, were subsidising the cost of cheaper petrol elsewhere.

“It was these phenomena that sparked the inquiry from Judith Collins. We are as perplexed as the AA because all of a sudden the price cuts are not reflected in the exchange rates of the commodity prices.”

Z Energy spokesman Jonathan Hill said Stockdale’s claims were “absolute nonsense” and he had even called him to tell him so.

“I can’t for the life of me work out what Mark is on about. We are pricing exactly the same way as we always have.

“Our margins have been pretty much constant, and there is absolutely no way that we are selling products at a loss.”

Mobil New Zealand country manager Andrew McNaught said he did not comment on other companies’ prices.

“Mobil’s fuel prices are influenced by a number of factors, including product cost, exchange rates, transportation, retailing costs and local market competition.”

McNaught said he had not seen the report and was not aware of any of its recommendations. However he did say:

“Setting retail prices is thus a balancing act between the immediate effects and influences of the market, versus the longer-term outlook for our business and the industry.”

A BP spokeswoman said: “The most recent BP decreases are not related in any way to the upcoming government report, and in fact have been due to a combination of excess supply on the international market and changes in the exchange rate, among other things.

“We have participated fully in the Fuel Market Financial Performance Study and will carefully consider the outputs of that review when they are made available.”

If the accusations of Stockdale and Ulrich are correct, there could be huge implications for New Zealand consumers.

“If this is the case, then I want to know why petrol companies’ margins have been as high as they were and what the fuel companies have to say about these higher margins. We simply just need their reasons,” said Stockdale.

Hill agreed the report could leave some people in this - arguably premature - debate looking sheepish.

“I don’t want to comment ahead of the release of the report. We have welcomed the report, the whole industry has welcomed the report.

"It will all come out soon, I suppose.”

A spokeswoman for Collins said she could not name the date of the study’s findings, but that it would be “very soon”.