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Independent Petrol Retailers Report Disappoints

The Motor Trade Association (Inc.) is disappointed with the recommendations of a report released today investigating the role of independent retailers in the downstream petroleum market.

This report, carried out by the New Zealand Institute of Economic Research (NZIER), was commissioned last year after the MTA raised concerns with the Minister of Commerce, Hon. Paul Swain over the difficulties being faced by independent retailers. Margins for independent fuel retailers were, and still are, steadily being eroded, with the result that they are being progressively squeezed out of the marketplace by the world oil majors. Both of these factors played a significant part in prompting the report.

Despite outlining a range of proposals which would have provided benefits to retailers and customers alike, the report concludes that the demise of independent retailers is the result of natural market driven rationalisation, is not reducing overall competition or causing market inefficiency, and thus regulatory intervention is not warranted.

Commenting MTA CEO Stephen Matthews said “we are far from convinced that if left as is, the market is capable of meeting the government’s policy objective of delivering services to all classes of consumer in an efficient, fair, reliable and sustainable manner. Independent fuel retailers play a key role in this, which has not been recognised in the report .”

He went on to add “ the Report openly acknowledges independent retailers are disadvantaged in terms of pricing arrangements, that they lack protection during ‘price discounting weekends’, and that the outcomes of this could be seen as unfair, and yet it fails to offer any support to these retailers. We view the open disregard for the plight of independents with considerable concern.”

Larger volume metropolitan sites have, over recent years, steadily come under the direct control of the oil companies. While independent retailers cover a wide range of outlets in terms of size and location, they are increasingly represented in smaller urban, provincial and rural sites

Mr. Matthews stated “ with the prospect of up to 10,000 full and part time jobs in jeopardy, the loss of a convenient fuel supply for many communities, (a large portion of which are rural), let alone the investment made by many hundreds of independent fuel retailers across the country, there is too much at stake to accept the report as is.” Adding “the MTA is convinced that without independent retailers there is nothing standing in the way of absolute control by the oil majors and the subsequent manipulation of the market to their advantage. It is highly unlikely that local motorists would be satisfied with such a situation; by then it will be too late to ask for competitive forces to hold sway and the Government would have no option but to regulate”.

Independent retailers have previously played a key role in earlier competitive breakthroughs in the retail market: the Challenge network was built using a combination of existing and new sites. Without the availability of independent retail sites, the opportunities for any new entrant and with it additional competition are that much more limited.

Mr. Matthews concluded saying “it is noticeable that since Challenge was purchased by Caltex, wholesale margins appear to have firmed while at the same there seems to have been something of a fall-off in the once regular 10 cent discount weekends. Likewise, many motorists will also be noticing the steady reduction in the actual service levels provided as many service stations – a check of your oil and wash of the windscreen are rapidly becoming a thing of the past”.

While Government has indicated it is prepared to receive comments on the report up until June 7th, the very disappointing recommendations contained in it means that MTA will be contacting all independent fuel retailers urgently to confirm the next steps in its campaign.

ENDS

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