Fuel Monitoring Report Shows Wellington Prices Highest, And Significant Variation Within Cities

The Commerce Commission’s second Quarterly Report on the performance of New Zealand’s $10 billion fuel markets puts the spotlight on the capital with prices in Wellington, Porirua and Lower Hutt highest across Regular 91, Premium and Diesel.

The Quarterly Fuel Monitoring Report for the three months ended 30 September 2022, shows that Christchurch and Tauranga had the lowest average fuel prices - with motorists in Christchurch getting the best bang for buck for petrol, and in Tauranga for diesel.

“What we are seeing is that there continue to be significant variations in prices between the main cities in New Zealand, and within the cities themselves. This is likely due to several factors, including levels of competition, the capital or operating costs of sites, and consumer behaviour,” says John Small, Commission Chair.

Auckland had the largest price variation between its most expensive and least expensive site. Prices varied by 22 cents per litre for Regular 91, 29 cents for Premium 95 and 98, and 31 cents for Diesel.

Dr Small says this demonstrates the benefit from shopping around – “there may be a 20-30 cent difference in what you pay at one station compared with another down the road, and that’s a discount worth having – it all adds up.”

The Commission’s calculation for average consumers in Auckland shows that they could save up to $264 for Regular 91 in a year, or up to $348 for Premium if they actively compare prices between their nearby stations.

The range of prices in cities mean consumers may benefit from using fuel price comparison sites, such as Gaspy, to find the lowest prices close to them, Dr Small says.

“If consumers more actively shop around, competition is likely to increase amongst suppliers to help drive down prices.”

“Spending on petrol and diesel accounts for around 4.6% of the average annual New Zealand household expenditure, and at a time where we are experiencing a cost-of-living crisis, even a small reduction in what you pay for fuel can help.”

Dr Small says the Commission is now gathering further information on the difference in pricing in the regions to better understand market dynamics.

Global and domestic fuel markets continued to be volatile within the quarter, with prices falling from their June 2022 peak.

Importer costs dropped faster than retail prices in July and drove a three-week spike in average importer margins, the difference between retail prices and the cost of bringing fuel into New Zealand. Margins increased - 61.9% higher for diesel and 63.6% higher for Regular 91.

Information on the wholesale market shows that it remains mostly based on contractual sales, with Terminal Gate Price (TGP) sales accounting for a very small portion of total wholesale trade over the September 2022 quarter.

“Nevertheless, we have observed changes in certain areas of the wholesale market with increasing volumes and in some cases, purchasers switching suppliers - these are encouraging signs in terms of market development,” Dr Small says.

The full report can be found here.

Background

Fuel Industry Act 2020
The Commission’s monitoring regime was introduced following the first competition study carried out under Part 3A of the Commerce Act 1986. In its Market Study into the retail fuel sector report, published in 2019, the Commission identified shortcomings in the competitiveness of fuel markets in New Zealand. In particular, the Commission identified the absence of an active wholesale market and poor consumer information at the pump.

In response, the Government established a regulatory regime aimed at promoting competition in fuel markets for the long-term benefit of consumers. The Fuel Industry Act 2020 and related regulations came into effect in stages. The requirement to publish TGPs took effect on 11 August 2021. Requirements relating to fixed wholesale contracts also came into effect on 11 August 2021 (for all contracts entered into on or after 1 August 2021) and 11 August 2022 (for all contracts, including those entered into prior to 11 August 2021).

Importer Margins
Importer margins are the difference between retail prices and the cost of importing fuel into New Zealand. Importer margins cover the domestic costs of operating terminal storage facilities, distribution costs such as trucking and pipeline costs, and retail costs, as well as aggregate importer, wholesale and retail profit margins.

Commerce Commission’s role
The Commission is responsible for enforcing the obligations of fuel industry participants under the Act. We monitor compliance with the requirements of the Act, investigate potential non-compliance, and take enforcement action where appropriate.

Where we have concerns about potential non-compliance, we may investigate. If we consider a breach has likely occurred, we will apply our Enforcement Criteria to select from a range of enforcement responses. One possible response is to seek pecuniary penalties against industry participants in the courts.

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