UPDATE: Govt confirms petrol price inquiry as pump prices fall
(adds PM comments and reorders first six paragraphs accordingly)
By Pattrick Smellie
Dec. 3 (BusinessDesk) - The government wants to be "ready to go" with a policy response to its inaugural 'market study' into the retail fuel market as soon as the report emerges in a year's time, says Prime Minister Jacinda Ardern.
The study will be the first to be conducted by the competition watchdog, the Commerce Commission, since Parliament gave it new powers to conduct studies into markets where the government is concerned they are insufficiently competitive.
It is due to report by Dec. 5, 2019, with an interim report likely within nine months.
Ardern indicated the government was likely to start considering policy responses that could be implemented swiftly if there were findings that the petrol market was uncompetitive.
"I don't want to spend another 12 months (after the final report) to take action," Ardern said at her post-Cabinet press conference. "If they make a case, I want to be sure that we're ready to go."
Unlike previous such inquiries, the commission will have the ability to require market participants to provide any information it deems relevant.
A Ministry of Business, Innovation and Employment-commissioned inquiry conducted under the previous National Party-led government concluded that it was not possible to be sure whether there were anti-competitive practices. That study was hampered by variable levels of compliance.
While industry price-leader and the largest fuel retailer, Z Energy, devoted substantial resources on high-quality disclosure, responses from BP New Zealand, Mobil and cut-price operator Gull was variable and incomplete.
Today's announcement comes after Ardern's claim on Oct. 8 that New Zealand motorists were being "fleeced" at the petrol pump, at a time when global oil prices were more than US$80 a barrel and the kiwi dollar was below 65 US cents, producing petrol prices that broke records and came close to $2.50 a litre.
Today, Gull is offering 91 octane petrol at just under $2 a litre and Milford Asset Management portfolio manager David Lewis issued commentary suggesting the price per litre could drop another 10 cents a litre, in time for the summer holidays.
His commentary noted there had been 12 price cuts since the 40 cents a litre increase that provoked "driver rage" in October.
However, the market was "not working well for consumers at the moment," Lewis said.
"This government is committed to easing financial pressure on families,” Ardern said. “New Zealanders deserve peace of mind that the price they’re paying at the pump is fair. At the moment we can’t definitively say whether that is in fact the case across New Zealand so this is a market that most certainly warrants a full investigation.”
Consumer affairs minister Kris Faafoi said there were "existing indications of competition problems in the retail fuel market that are of concern to me, such as the more than doubling of petrol and diesel importer margins over the past decade".
Terms of reference for the study will be issued on Wednesday.