Energy Minister accuses petrol companies of 'cynical' price rise around school holidays

Thursday, 7 September 2017

Energy and Resources Minister Judith Collins has written to New Zealand's fuel companies accusing them of 'cynical' behaviour and warned the industry could face greater scrutiny if Parliament approves plans to give the Commerce Commission greater powers.

Energy Minister Judith Collins is accusing the fuel industry of 'cynical' price changes, as a battle brews over the accuracy of official data.

On Thursday Collins revealed she had written to fuel companies formally registering her disappointment at recent price increases.

In late August the retail price of petrol in Wellington and many other parts of the South Island hit $2 a litre for the first time since May. Prices have since risen by another 3c a litre.

While she said she did not have evidence to accuse the fuel companies of collusion, Collins said the companies were quickly matching each other on price movements.

Earlier this year Collins ordered a report into the fuel market. Shortly before the study - which warned prices may be too high - was released, official figures from the Ministry of Business, Innovation and Employment (MBIE) suggested fuel margins plunged.

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But in recent weeks the figures have showed margins rising quickly, as retail prices for petrol climbed above $2 a litre for the first time in months.

Earlier this week, the retail price in much of the country were raised by another 3c a litre.

Collins has linked the timing of the drop with the release of the study, and the timing of the increase 'to the disappointment of many New Zealanders' with the school holidays in July.

'I would like to formally register my disappointment at this recent reversal in margin declines,' Collins wrote in the letter, which her office released on Thursday.

'The significant drop and more recent margin rises could appear to be a cynical move on the part of the fuel suppliers around the timing of the release of the Fuel Market Financial Performance Study.'

Judith Collins' letter to Z Energy chief executive Mike Bennetts

The fuel market study, conducted by officials at the MBIE and released in July, didn't say for sure whether fuel prices were reasonable or not, but the author's noted 'we have reason to believe that they might not be'.

Collins warned the fuel companies could face greater scrutiny, with Cabinet approving a plan to give the Commerce Commission more power to conduct detailed market studies, without needing to have 'actual' evidence of collusion. The change would require the agreement of Parliament.

'I don't think that the companies should think this is going away. It is a very serious issue and every one cent margin increases takes $30 million dollars from buyers of petrol and diesel and puts it in the hands of those who are selling it,' she told Radio New Zealand.

Asked if she was suggesting the fuel companies were colluding, Collins said she did not have proof that was the case, but the situation was 'very serious'.

'It's pretty clear that one puts their prices up and they all put their prices up…They're just watching the prices of each other,' Collins said.

'They're very quick to go up and they're very slow to go down.'

Z Energy, which also owns the distribution rights and brand of Caltex in New Zealand, hit back, raising issues with the data which Collins appeared to be basing claims from.

Spokesman Jonathan Hill said data published by MBIE would suggest it had faced a sharp decline in margins followed by a bounce.

This was 'completely at odds' with the situation the company had seen.

'If Z was to be faced with a collapse in margins to this extent we would be very carefully considering whether or not we had an obligation to inform the market, perhaps by way of a downgrade to earnings,' Hill said in a statement.

'We have not changed our guidance. Actually, Z's margin has been fairly constant over this period.'

Collins dismissed questions about the quality of MBIE's data.

'It is pretty standard for the companies to complain that MBIE's margin calculations are wrong,' Collins said.

The economists engaged my MBIE to conduct the fuel market study 'pretty much agreed' with what MBIE had said.

'I take what they're saying with a grain of salt, based on the fact that MBIE has no reason whatsoever to provide incorrect advice,' Collins said.

'If it walks like a duck, and it quacks like a duck, it's possibly a duck, and I think what we've got at the moment is something where the prices, the margins have been going up, when everything else tells us they should have been going down.'

BP denied its pricing was related to the fuel market study. Mobil has not responded to a request for comment on Collins' statements.

The fuel companies have until the end of September to respond to the fuel market study.