Would We Benefit from More Independent Oil Companies?

While the term ‘privatisation’ is generally not consumer friendly, the latest research from New Zealand suggests that drivers could stand to benefit from an increase in the number of independent oil companies. The claims come from petroleum giant Gull, with experts predicting that petrol prices would drop if it was easier for new players to enter the market.

A lack of healthy competition

Gull isn’t the only one calling for more competition, with a recent government-commissioned report confirming that profit margins for retail petrol have increased significantly over the past five years. Prices were especially high in both the South Island and Wellington, where gross margins hovered at around 30% higher than other parts of New Zealand. According to Gull general manager Dave Bodger, the discrepancy in pricing could be reversed if more independent companies were allowed to enter the playing field.

Cheap petrol trapped in the north

Currently, high transport costs make it uneconomical for Gull to sell its petrol south of Levin. This is because it’s closest access port is in Tauranga, more than 500 kilometres to the north. This creates high price points for both New Zealand’s capital, as well as the entire South Island. Bodger maintains that if the government offers independents access to ports in Lyttelton or Timaru, it would significantly push down prices.

"We can't get fuel into the South Island or, effectively, Wellington ... but if there was open terminal access, then potentially us, and others, could bring greater competition," explains Bodger.

South burdened by unfair disadvantages

Taxi Federation executive director John Hart is just one of many business owners concerned about the price discrepancies, commenting "We virtually have a two-price structure in New Zealand, where the price in most of the North Island is at one level, and in the South Island and Wellington, it's at another level.”

Wellington Regional Economic Development Agency economist Jeremy Harding agrees, stressing that it’s unfair that some regions are forced to pay more for a key commodity.

"I know often there are good reasons for it, but what this report has done is taken the first steps to identify just what those reasons are,” he says. "It means that Wellington's disadvantaged, relative to the rest of the country, given that a key product is overpriced."

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