Independent petrol retailers afraid to 'stick neck out' during fuel study, says MTA

Friday, 29 November 2019

Wellington motorists react to the finding of a draft market study into the country's petrol prices in August.

Independent petrol retailers have been too scared to share information with the Commerce Commission about the barriers they face doing business, the Motor Trade Association says.

Motorists will find out on Thursday whether petrol companies will be required to play by new rules, with the competition watchdog set to release the final results of its market study into the $10 billion retail fuel market.

Smaller chains such as Allied, NPD and Waitomo and independent owner-operators running stations branded by the likes of Gas, Challenge, Caltex and Mobil ultimately rely on buying fuel sourced from petrol majors BP, Z and Mobil.

MTA sector manager Ian Baggott told the commission that owner-operators were routinely faced with 'one-sided contractual terms' that ensured profits were captured further up the supply chain.

* Z Energy accused of raising prices before offering a discount

BP says putting prices for all fuel types on its roadside boards could ultimately cost consumers 'tens of millions' and prove dangerous.

* Jacinda Ardern says NZers are being ripped off over petrol**

But they hadn't spoken out during the review because they were vulnerable and reluctant to 'stick their neck out'.

They would be 'blowing the whistle about issues in the only supply chain that is available to them', he said.

The MTA represents about 3600 automotive businesses, including service stations, fuel sellers, and new and used car dealers.

It made a late plea for the commission to provide a way for businesses to share their concerns about current market arrangements in private.

Baggott told the commission one independent retailer was considering stepping forward with information but had made it clear to the MTA that it would not do so unless the commission could give 'an iron clad guarantee of protection'.

He told Stuff the commission had not been able to provide such an assurance, so the approach did not eventuate.

Prime Minister Jacinda Ardern said a draft market study published by the competition watchdog in August showed motorists were being fleeced, though the commission itself would not make that claim when asked.

'Unfortunately, the commission couldn't give a guarantee they could protect anonymity.'

The Official Information Act was the main obstacle, but the commission was by that time also pretty well progressed with its study, he said.

He hoped the regulator had still been able to get an insight into the issues that the MTA hoped to bring into the open.

'We will wait and see on Thursday.'

AA policy manager Mark Stockdale said independent chains and owner-operators appeared to be only weakly represented at a four-day conference held by the commission in October to discuss the market review.

'It was mainly 'the big three', plus Gull.'

A commission spokeswoman said it had considered evidence from a wide range of parties during its study, including information from owner-operators and the MTA.

Prime Minister Jacinda Ardern said in August that the competition watchdog's draft market study showed that motorists were being fleeced at the pump.

Christchurch motorists on petrol prices and the sacrifices they make to drive their cars.

But BP and Z Energy strongly disputed the commission's preliminary findings that they had made 'excess returns' for most of the past 10 years.

Z Energy said an 80 per cent drop in its interim profit for the six months to September, to $28 million, showed competition was 'unprecedented'.

BP reported a 26 per cent fall in its annual profit to $179m last year.

Stockdale agreed the commission was under pressure to make a mark in its first market study, made possible by new powers provided to it by Parliament last year.

Motorists wanted concrete information, he said.

'They want to know what the Government is going to do, when they are going to do it, and how much it is going to reduce fuel prices.'

AA policy manager Mark Stockdale says the Commerce Commission should be able to tell consumers how much it expects the price of fuel to drop as a result of its interventions.

Thursday's report may recommend petrol companies are required to display the price of all their fuels on their roadside boards, a reform the AA and Z Energy favour but which is opposed by BP.

But Stockdale said that alone would not be enough to allay consumers' concerns, given their suspicions about wide variations in the price of fuel across the country.

Gull was selling 91 octane petrol at $1.96 a litre at one of its services north of Taupo in mid-November, at the same time that BP was charging $2.51 for a litre of premium 98 fuel nearby.

Stockdale said that sort of difference was 'crazy' and could not be justified.

The AA's view remained that there was not enough competition in the wholesale market for fuel, he said.

The biggest unknown remains whether the commission will find a way to help independent chains and retailers access fuel on better terms from the petrol majors, and so expand into new regions faster, he agreed.

But no clear consensus appears to have emerged about exactly what measures the watchdog could recommend to achieve that.

The commission has floated the idea of opening up the 'borrow and loan' system under which BP, Mobil and Z share the use of each other's fuel terminals, to other fuel buyers.

But that idea appears to have struggled to gain traction.

Motorists have been pumped up by the Government for action on petrol prices but Thursday will show what the Commerce Commission can deliver.

Gull favours an alternative that would require the petrol majors to advertise a 'terminal gate price' at which they would wholesale fuel.

But there are some doubts that would have the desired impact, and concerns such a move could backfire by making it easier for petrol companies to coordinate wholesale pricing.

Waitomo managing director Jimmy Ormsby said many fuel buyers were locked into long-term agreements that didn't really provide the 'opportunity to constantly test the market'.

It had been clear in advocating for changes, he said. 'Our position is that would trickle down to more competition at the retail level.'

Documents released by the commission showed BP was continuing to fight what appeared to be a rearguard action against the proposal that petrol companies should disclose all their fuel pricing on their roadside boards, after October's conference.

Z Energy has proposed an industry code that would require prices to be displayed, with regulation as a backstop.

But BP told the commission in a final cross-submission that advertising all prices on roadside boards might 'cause confusion' because some premium fuels differed in their composition.

Cluttered and distracting roadside boards would cost 'tens of millions of dollars' that would be passed on to motorists and could become a 'safety issue' for drivers, it said.

'The price of premium fuel is displayed at the pump. Customers can, and do, look at this price and can drive away if they consider that a more competitive option is available elsewhere,' BP said in its submission.

Stockdale said he did not understand the level of opposition against displaying prices.

'It shouldn't be that big a deal.'