Local Motorists To Benefit From Proposed Changes

The Motor Trade Association (Inc.) is proposing changes that will enable independent petroleum retailers (New Zealand owned and operated businesses) to compete fairly with the four major international Oil Companies retailing in this country, (Caltex, BP, Shell, Mobil), and in turn benefit local motorists. The MTA wants to ensure the consumer has fair and convenient access to a local service station.

The MTA, New Zealand’s leading motor trade organisation, representing the interests of more than 700 independent retailer members, is grateful to the Minister of Commerce and Associate Minister of Energy, the Hon. Paul Swain for his recent commissioning of a study into the role of independent retailers in the downstream petroleum industry.

The steady erosion of margins for independent retailers, was a major factor prompting the study. As independents are progressively being squeezed out of the market place by the oil majors. Without these independent operators, the four oil majors will, in the absence of any effective competition, be free to manipulate and control the market.

Stephen Matthews, CEO of the Motor Trade Association states, “All areas of New Zealand have seen closures of large numbers of independent service stations over recent years, and this will only accelerate, particularly in the rural areas. Unless the government intervenes immediately to remedy current market practices, this will see motorists travelling further to fill up their tanks, and receiving reduced levels of service on the forecourt.”

Reduced margins since the days of deregulation, and the entry barriers for any newcomers to the industry, could also lead to significantly higher costs for the driving public. “The MTA believes that the Government needs to carefully consider the effects on consumers if the World Oil Majors are allowed to gain exclusive control of the downstream petroleum industry” Mr. Matthews notes.

He also stressed, “…it is time the public are made aware, that the big four Oil Companies in New Zealand control the wholesale price that independent retailers pay, as well as the retail price they must charge consumers to stay competitive with the oil company owned retail outlets.”

Regulation proposed by the MTA to ensure a more competitive market, includes allowing independents to access the infrastructure owned and operated by the big four. Also, allowing them to choose up to 50% of their fuel from another wholesaler would allow healthy competition.

The MTA considers that the World Oil Majors use discriminatory pricing regimes that favour their own sites over independent retailers. In an effort to create transparency in the market place, the MTA supports the publishing of wholesale prices to ‘level the playing field’ by giving all resellers the same wholesale pricing opportunities.

Regulations preventing the sale of petroleum below the cost of supply are also supported by the MTA. It is apparent that because of the pricing structure of the wholesale market, company owned sites around them are forcing many independents, to sell their fuel to the public at a lower cost than they purchased it for.

If adopted by Government, MTA proposes that these regulations are enforced with the establishment of a monitoring body made up of representatives from the industry, and the Commerce Commission.

Mr. Matthews remarked: “Amongst the benefits which would flow from regulating this area more closely to ensure fair competition, include retention of up to 10,000 full and part-time jobs created by independent retailers. Government should be concerned about the employment impact this would have, particularly on our rural communities.

“In addition, independent retailers are the only source of competition for the World Oil Majors in the retail market.” he commented. “As such they are a threat to the World Oil Majors and this in a nutshell is the reason for their anti-competitive actions. The World Oil Majors are attempting to force independent retailers out of the market. This action is working, and this is why we are suggesting this comprehensive package to ensure the ongoing viability of this vital component of the industry. We are calling on Government to act decisively and urgently to ensure competition remains in the marketplace.”

By providing competition, the independent service stations prevent the Oil Majors controlling the market. Without them, the New Zealand petroleum wholesale and retail industry will be controlled by multinational overseas owned companies.

ENDS

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