Supermarket Fuel Strategy Surprises MTA

August 2 2002

Supermarket Fuel Strategy Surprises MTA

News that BP plans to team up with Pak’N Save to sell fuel at supermarkets has been met with surprise by the Motor Trade Association (Inc.) (“the MTA”).

As most oil companies believe the New Zealand fuel retail market to be over pumped, MTA CEO Stephen Matthews questions the rationale behind opening yet more fuel outlets. “Is this yet another move by international oil companies to drive out locally owned independent service stations? We believe so.”

“BP claims that by selling more fuel at more outlets they can stay ahead of competitors and provide support for their independent network of service stations. This is difficult to swallow given that independent service stations in metro areas will be hardest hit – BP or otherwise.”

The MTA is currently involved in a Ministerial Inquiry investigating whether independent retailers are disadvantaged in terms of pricing arrangements, compared with oil company-owned sites.

“We are concerned that the government’s overall objective to ensure the delivery of energy services to all classes of consumer in an efficient, fair, reliable and sustainable manner will not be met with such an arrangement,” Mr Matthews said. “Consumers without Pak’N Save supermarkets in their communities will be penalised unless BP’s wholesale margins are passed on to all their independent service stations throughout the country.”

As part of the Inquiry the MTA is calling for greater transparency in the wholesale fuel market and legislation to prevent the sale of petroleum below the cost of supply. The arrangement between BP and Pak’N Save suggests inequities in the pricing structure of the wholesale market. Company owned sites are increasingly forcing independent retailers to sell their fuel to the public at a lower cost than they purchased it for.

The MTA is anxious that independent service stations will be forced to match the fuel discounts offered by BP at Pak’N Save outlets to the detriment of their own viability by having to sell fuel below cost in order to compete.

Locally-owned independent retailers are the only source of competition for the international oil companies. By providing competition, independent service stations prevent the oil companies controlling the market, without them the New Zealand wholesale and retail petroleum industry will be controlled by multi-national overseas owned companies.

“We now have two industries controlled by a concentrated group of companies. Consumers should recognise that cross-subsidising petrol from groceries will lead to higher prices of petroleum, groceries or both. The consumer will pay, and in the end be left with less choice,” Mr Matthews said.

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