Don't get too pumped on Govt moves to lower fuel prices

Thursday, 5 December 2019

OPINION: More than two years ago, then Energy Minister Judith Collins raised an eyebrow in apparent frustration and sent a nasty letter.

She wrote to the nation's fuel retailers that she was 'disappointed' with their 'cynical' price rises and perceived manipulation of profit margins.

But just as motorists didn't need a 2017 Ministry of Business, Innovation and Employment report to tell them the big retailers appeared to be working together in setting prices, they no doubt sensed that Collins was slipping a sly wink from the other eye.

Behind the puffed-out chest and practised indignation was a government unlikely to force real change, in part because of an ideology that railed against regulating business but also because its own machinery was so well oiled by the collusion of many taxes and levies paid at the pump.

**READ MORE:

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* Much talk, little action in fuel price debate**

Prices continued to rise, as did the pain for consumers, as well as those levies, which now add more than 70c a litre - excluding regional taxes.

Two years on a new energy minister is arching an eyebrow. And motorists have every right to wonder if Collins' successor Megan Woods will once again flatter to deceive.

Woods at least has a harder-hitting report to lean on.

Unlike its 2017 equivalent, the Commerce Commission study released on Thursday makes it plain that we are paying too much at the petrol pump and profit margins are higher than what would be expected if there were genuine competition. That will be news to no one.

More importantly it sets out ways to possibly encourage that competition, from the producers and the punters.

The commission wants to see more transparency around pricing, both retail and wholesale.

Most stations already highlight their price for unleaded 91, but the commission wants the prices for premium fuel displayed as well.

Given that this makes up just 20 per cent of the market, and the 91 price is already displayed prominently, it's hard to see how that will make a big impact on changing entrenched consumer patterns.

Motorists are more likely to see a bigger bang for their buck in recommendations for more regulation and encouraging competition at the wholesale point.

Both would lend greater impetus to that raised eyebrow.

In Australia the industry must reveal its terminal gate prices, giving a clearer indication of the wholesale price and the mark-up at the retail bowser.

It changes daily and on Thursday the price ranged from $1.35 per litre of unleaded in Melbourne to $1.40 in Hobart.

We can't tell you what New Zealand's price is because we don't have one.

The commission says that base price could become the entry level for other competitors, who could gain access to fuel from any terminal or storage facility around the country.

That could inspire more Gulls and Waitomos to take on the big boys and force the price south.

But this is no early Christmas present for long-suffering motorists; you should hold off buying that gas-guzzling four-wheel drive you've always wanted.

It's not clear how that wholesale price would be set or who would set it.

Commission chair Anna Rawlings acknowledges there's a risk it might end up being manipulated in the same way the petrol prices have been.

It could be Cartel 2.0.

And there's no guarantee that a spot price market will be any cheaper than one based on more long-term contracts. The terminal gate price regime didn't save Australians from a record spike in petrol prices after recent attacks on oil facilities in Saudi Arabia.

Another recommendation is the regulation of wholesale supply contracts to allow greater contractual freedom for resellers.

But there's no reason to believe this Government's threat of legislation and industry intervention is any more real than that delivered by the previous outfit.

Consumer Affairs Minister Kris Faafoi says the Government has accepted the commission's findings and 'we're ready to act on them'.

But just as there's no guarantee we will save the 18c a litre Faafoi forecasts, there's no certainty about what legislation pumped through Parliament might look like, and whether it would even get over the line with a coalition government whose disparate environmental and industry parts don't always make for a united sum.

Maybe that's why Faafoi is hopeful the industry will respond to the threats and pressure.

Collins raised the eyebrow, this government has raised the ante.

Punters and voters will be hoping that they are, once again, not lost in the blind spot.

- Additional reporting by Amber-Leigh Woolf