Grey Power expresses concern about Fuel Prices

This morning the dollar is up against the $US and the oil prices are down and the cost of living continues to rise. Yet once again, petrol prices have risen and, to add insult to injury, the public has been subjected to the usual spin from the oil companies. The oil companies blame increases in the spot price of crude, increases in the price or refined product (which we have to partially import from overseas since the New Zealand Refining Company (NZRC) cannot at present fully meet the market demand) and changes in the NZ/USD dollar exchange rate

The news media frequently refers to the ‘the crude oil price’. This is the ‘spot’ market price of a specific reference crude (eg that from the Brent field). However, this is not necessarily the price that the oil companies necessarily pay because the price of crude depends on its source. The price of crude oil from other fields differs significantly. In addition, the oil companies will have long term supply arrangements with crude oil suppliers.

Each oil company has different supply arrangements and has different stock levels both of crude oil, petrol and diesel (eg in NZ stock levels are usually in excess of 60 days). The practically simultaneous and identical price rise, together with the same local selling price, smacks suspiciously of an informal cartel operating within the oil industry. Where is the competition?

If a truly competitive environment existed one would expect, not only a significant lag (say 60 days) between a rise in the spot price and the rise in petrol at the pump but also price differences between the brands. The same argument applies when prices decline although it appears that the oil companies are much more reluctant and tardy in dropping their prices than increasing them.

Grey Power hopes that the sale of the Shell franchise to locally owned Z energy will result in a more open and competitive market, but at the moment it is Gull who are resisting the upward movement.

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