Lower fuel prices could be on the way as new laws come into force , but it could take some time, according to Gull and a competition law expert.
From tomorrow, the changes under the Fuel Industry Act 2020 will be kicking in. That legislation was passed in August last year after a Commerce Commission study found shortcomings in the competitiveness of New Zealand’s fuel markets.
The changes include:
- Wholesale fuel suppliers must publish a spot price for their fuel, known as “terminal gate pricing”. They are now generally required to sell fuel in bulk to any wholesale customers that want it at that price, even if they’re competitors.
- New rules to ensure contracts between wholesale fuel suppliers and their customers are fair, transparent, in plain language and support competition. Under new rules for contracts, distributors will be more free to shop around for the best deal to meet their needs.
- Requirements for retail fuel sites to display premium fuel prices on forecourt price boards
- Requirements for fuel companies to collect and disclose certain information, so the market can be better monitored
For discount fuel retailer Gull, well-known for triggering the “Gull effect” and lowering competitors’ prices, the changes are good news.
Gull's general manager Dave Bodger told Breakfast that even the thought of regulation, before changes were introduced, had already led to some changes.
Before the Government had signalled the legislation would be coming in, he said their opposition in the South Island could choose not to supply them with fuel. In the North Island, Gull had to rely on its own terminal to get access to fuel.
Since the legislation came in, “we’ve gone from a flat 'no' to ‘yes we’ll supply you’. Now we have the right to take supply”, Bodger said.
The savings the company makes with better wholesale deals would then be passed onto the consumer, he added.
“It’s an expensive business to run. The people who do the best out of the fuel at over a dollar a litre is the Government. So, if people really want to affect fuel prices, excise tax and other taxes is one way to look at it for the consumer.”
Competition law expert Andy Glenie said “steps” are being taken toward a more competitive fuel market in New Zealand.
He said “fear of regulation” would commonly trigger the market to start to clean up its act before the law comes into force.
“Part of what this regime will do is introduce the risk of a more direct, more interventionist regime coming in if they don’t play ball.”
Glenie said the lack of competition in New Zealand’s fuel market has been decades in the making. That was because the market was largely controlled by a small number of players.
“That made it hard for players at the retail level to make competition and to, therefore, drive benefits for consumers.”
Glenie said it was a matter of waiting and seeing how suppliers comply with the terminal gate pricing regime, which will “allow people to pull up a tanker to a terminal and take a truckload of fuel away” at wholesale prices.
“It’s hard to buy fuel on the spot market because it is unpredictable and comes and goes. That’s one thing that, at least, [the new legislation] increases: the clarity and transparency of what’s going on in the market,” he said.
“We will be able to see some posted prices, which will be helpful.”