Energy minister says BP email is a sign that petrol market is 'broken'

Thursday, 3 May 2018

Energy Minister Megan Woods says she believes the petrol market is 'broken' after a meeting with BP executives to discuss its pricing tactics.

Woods instructed BP to come to Wellington for a meeting in the Beehive after being shown an internal email in which a BP pricing manager outlined a plan to hike prices at a number of lower North Island sites in an attempt to protect falling sales at a fourth.

'Rather than just reducing the price in Ōtaki we will be looking to increase the price at Paraparaumu & Kāpiti and also Levin,' a BP pricing manager wrote in the email, revealed by Stuff on Monday. It added that the strategy had been working, with Z Energy matching a recent price increase.

Woods said she believed the actions were cynical and unlikely to be isolated to BP.

**READ MORE:

* Internal email lifts veil on BP's petrol prices

* BP not alone in price 'cross-subsidisation'

* BP asked to visit the Beehive

* You're being squeezed on petrol

* Read the BP pricing email in full**

'I remained convinced that what we're seeing here is an example of a market that isn't working for consumers. I think we've seen an example of some pretty cynical behaviour. I don't think this is isolated,' Wood said.

'People are quite possibly paying over the odds for petrol when they go to the pump,' Woods said, pointing to an official report which claimed 'hundreds of millions of dollars of wealth' could be being transferred from motorists to petrol companies.

'I actually think this is an example of a broken market, a competitive market is one where players can come in freely, and there can be competition and consumer benefit from that.

'What we're seeing is an example from a fuel company, and I don't have any reason to believe this is isolated, where price setting is going on to actually take the prices up to the highest level rather than give people the best deal that they can expect in a competitive market.'

Woods has written to BP saying directed officials to conduct a preliminary cost-benefit analysis of possible regulator interventions, which may be recommended by a possible, future Commerce Commission market study.

Earlier Debi Boffa, the BP New Zealand managing director, nervously delivered a short prepared statement before walking away under questioning for her meeting with Woods. The company has refused to be interviewed on the email, informing Stuff that it did not have the company's permission to tell the story and asking to know how it came into possession of the email.

She said she would 'be looking to reassure [Woods] that BP does operate in a highly competitive and dynamic market here in New Zealand. Actually things that are described in that email reflect that'.

Boffa, who has had virtually no public profile since she took the job in 2017, claimed BP was only seeking a 'sustainable' return, which it was failing to get across the region, especially in Levin.

'It was never our intention and we never went over that level at the expense of the New Zealand consumer.'

After the meeting BP issued a statement in Boffa's name, as it continued to refuse to answer questions.

'We fully appreciate that the tone of the email may have appeared blunt to an external audience who don't have the full context,' Boffa said. 'It was absolutely not our intent to cause any misunderstanding, nor is it the way we operate.'

Boffa refused to comment on fuel margins elsewhere, including Wellington and the South Island which are typically higher than the entire area discussed in the internal email.

While previously BP's management were visible figures who engaged with the media, after relocating to Auckland after 2013 the company has given few media interviews, typically responding to requests with short email statements.

The company made a pre-tax profits of $215 million in 2016 and paid its parent company a dividend of $300m in 2015.

BP's global press office has not responded to or acknowledged requests for comment on whether it endorsed the New Zealand company's actions.