BP asked to visit the Beehive after internal email outlines 'alarming' pricing plan

Sunday, 29 April 2018

A BP internal email revealed 'tactics' for reducing the price gap between fuel stations.

Petrol giant BP has been summoned to Wellington after 'alarming' evidence of its pricing strategy was revealed.

Energy Minister Megan Woods on Sunday contacted the New Zealand office of the British fuel giant requesting a meeting in her office, after being shown a BP internal email.

The document shows a head office directive explaining a decision to increase prices in three lower North Island sites in an attempt to protect sales in a neighbouring fourth, a 'tactic' the company said had worked before.

The BP petrol station in Levin. A BP internal email outlines how the company planned to hike prices in Levin in a bid to protect sales in Ōtaki, in the hope that rival companies would follow.

'Rather than just reducing the price in Ōtaki we will be looking to increase the price at Paraparaumu and Kāpiti and also Levin,' pricing manager Suzanne Lucas wrote, adding that the 'tactics' already seemed to be working, with the Z Energy station in Paraparaumu matching other recent price increases.

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Lucas went on to remind staff at affected petrol stations of BP's 'standard response' to motorists who complained about the prices that 'where we can compete we will'.

Although the email relates to only one region, the area around Levin is the centre of widespread concerns of a major cross-subsidy in the New Zealand fuel market. The source of the internal email suggested the tactic was also used elsewhere in New Zealand.

Fuel was selling at a higher price at BP in Ōtaki than some other areas nearby.

National Party spokesman for energy and resources Jonathan Young said what happened in Ōtaki was 'disappointing'.

Rather than competing for the best outcome for consumers, BP was focused on how to get the best return from the consumer, Young said. 'We need to get a balance between both.'

That was why giving the Commerce Commission more power to study petrol market pricing was so important, he said.

The Commerce Amendment Bill introduced to Parliament on March 28 will give the Commerce Commission the power to study the structure and behaviour of markets, and compel organisations and businesses to provide information.

Under the new legislation, a market study can be initiated by the Commerce and Consumer Affairs Minister or self-initiated by the Commerce Commission.

The AA has long questioned whether petrol companies are charging much higher margins in Wellington, Christchurch and the rest of the South Island, to recover losses in areas from Levin and Masterton north.

Prices in Levin are frequently around 30c a litre lower than in Wellington and Christchurch, which appears largely due to the operation of Australian fuel discounter Gull.

On Friday, the 'national price' of regular petrol was raised by 3 cents a litre to $2.179. The price, used by the major petrol companies in Wellington and widely across the South Island, but in only small pockets elsewhere, is now at the highest level since 2014.

BP has refused to comment on the email beyond a terse statement, in which it called on Stuff to reveal how it came into possession of it.

'We do not give permission for it to be used by you in any form,' spokeswoman Leigh Taylor said. 'An unsustainable level of discounting was in effect … in the area you have referenced. As a result, BP took an independent decision to improve its competitive position in the wider area.'

Woods said it appeared motorists were paying 'over the odds' at the petrol pump and the issue was one of importance.

'There's strong public interest in making sure Kiwis are getting the best possible deal at the pump. It's alarming to see evidence that suggests that's not always happening.'

In late 2017 Woods asked officials to come up with short-term ways to boost competition in the petrol market.

So far, nothing has been announced, but Woods said BP's tactics backed the Government's decision to give greater powers to the Commerce Commission to 'get to the bottom of why some Kiwis appear to be paying over the odds for petrol'.

AA spokesman Mark Stockdale said it was difficult to get a straight answer out of the petrol companies.

'More needs to be done to get the facts and give confidence to the consumers that the market is operating fairly and confidence to the Government that the market is operating fairly and if it isn't then the Government might consider intervention.'

BP New Zealand made a pre-tax profit of $215 million in 2016. A year earlier it paid its parent company a $300m dividend.

Headquartered in one of the most exclusive neighbourhoods of London, BP is one of the largest companies in Europe, with a market capitalisation of around $200 billion.

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