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Consumer NZ supports calls for tougher monitoring

MEDIA RELEASE 6 May 2008

Consumer NZ supports calls for tougher monitoring of petrol prices. Chief Executive Sue Chetwin says “New Zealand urgently needs a Petrol Commissioner with similar powers to the commissioner just appointed by the Federal Government in Australia to make sure Kiwi motorists are not being ripped off”.

The commissioner should be based in the Commerce Commission and have the power to order companies to adjust their prices if they are too high or issue fines, monitor the price of petrol, diesel and LPG on a daily basis and check refining margins and crude oil prices.

“While Consumer NZ welcomed Commerce Minister Lianne Dalziel’s announcement that the government was considering closer monitoring of petrol prices”, Ms Chetwin said, “we want it go further and bring in price-enforcement powers if needed.”

Consumer NZ says an independent commissioner is a better answer than the government cutting GST or petrol tax. These can only be short-term measures and the government will want to catch up its tax shortfall somewhere else.

Current petrol-price monitoring is toothless. Oil companies led by BP – New Zealand’s largest – have given motorists a hard time since the New Year. They’ve raised prices at the pump as soon as crude oil prices have risen and then failed to pass on savings from falling prices and the high New Zealand exchange rate.

It’s been particularly noticeable this year. Although crude oil prices have declined several times since January, petrol prices dropped only twice in response and usually after some delay. But as soon as crude goes up, there’s almost always an immediate increase in petrol prices.

In April BP hiked the prices four times (from $1.779 to $1.889). The other four major oil companies usually followed almost immediately, which Consumer NZ says shows a lack of meaningful competition in the market. Only oil-industry minnow Gull showed any competitive spirit, holding off on price increases for up to a week.

“The oil-company line is that the price of petrol doesn’t always move in line with crude oil. It’s simply PR spin”, said Ms Chetwin. “Consumer NZ has observed the price of refined petrol closely following the price of crude oil since the start of the year. Through January and February, the price of petrol followed the trend of crude oil prices almost exactly. Where the variation is noticeable – overseas petrol prices fell faster than crude.”

The four major oil companies own 73 percent of our only oil refinery, which produces 60 percent of our refined-oil products. NZ Refining Company’s 2007 annual report said refining margins were “healthy”.

Margins are obviously healthy elsewhere along the supply chain: Earlier this year Exxon Mobil announced a record profits of US$40.61 billion, eclipsing its 2006 annual record profit for any oil company. They are on track to do even better in 2008, with a first quarter profit of US$10.9 billion. Shell’s profit was a handy US$7.78 billion while BP’s profit for the quarter surged 48 percent to $6.58 billion.

ENDS

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