Oil Companies Must Drop Prices

Oil Companies Must Drop Prices As Quickly As They Rose

23 March 2000 PR21/2000

OIL COMPANIES MUST DROP PRICES AS QUICKLY AS THEY ROSE

Federated Farmers transport spokesperson Tom Lambie has called upon the New Zealand oil companies to reduce the fuel prices, in line with any drop in the world oil price, as quickly as fuel prices increased when oil prices rose.

"Oil companies' credibility within the farming community will be strained to the limit if they do not drop their prices as quickly as they were raised. Fuel prices and transport costs are a critical component of farmers' expenses and it is vital that the fuel market is highly competitive" said Mr Lambie

A formal inquiry is not necessary but Federated Farmers agrees there is a need for greater transparency. The federation believes that the Government - through the commerce commission - has an ongoing responsibility to monitor the market situation and to ensure no anti-competitive behaviour exists.

"The federation recognises that oil prices over the last 18 months have been on a roller coaster ride," said Mr Lambie.

Between March 1998 and March 1999, prices fell by $7 per barrel, to a low of $11 per barrel. Since then, OPEC limited the supply of oil, resulting in the world price escalating to $27 per barrel in early March 2000, a 145% increase in raw material prices.

The flow on effect in New Zealand resulted in the domestic petrol prices falling by 10c, to 86c/litre between March 1998 and March 1999. It then increased rapidly by 14c/litre to today's prices. This flow on effect of raw material costs has translated into a 23% increase on petrol prices when Government taxes and GST are subtracted.

"Oil companies have to act in a very responsive manner towards price reductions in order not to incur the farming community's wrath. The alternative is to face the prospects of the federation backing Deputy Prime Minister's call for a full inquiry," he concluded.

ENDS For further information: Tom Lambie 026-113-161 Catherine Petrey 04-473-7269

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