Regulator gains power to set fuel prices
The government has announced a series of new rules for the fuel industry, including giving the Commerce Commission the power to “step in and set fair prices” if needed.
Megan Woods, Minister of Energy and Resources, also revealed the requirement for biofuels to be added to the fuel supply will be delayed by a year to give the sector more time to prepare and to reduce prices.
She says giving the Commerce Commission the ability to set prices aims to encourage more competitive wholesale market pricing.
Under the change announced on November 9, officials estimate it may take six to 12 months for the commission to set a fair price after investigating any allegation of anti-competitive behaviour.
Woods, pictured, says a terminal gate pricing regime was one of several changes included in the Fuel Industry Act 2020 to improve competition at the wholesale level and increase the transparency of the fuel market.
However, she notes there are some outstanding risks to the success of the terminal gate pricing regime.
“For example, the increased price transparency helps competition, but there’s a risk that wholesalers could co-ordinate prices, due to the greater wholesale price transparency, unless there are some disincentives built into the system,” explains Woods.
“Following consultation with the sector in 2020 we are now pushing through on development of the backstop regime, which would allow for terminal gate prices of one or more wholesale suppliers to be price regulated if excessive terminal gate prices are found to be offered. It is expected to come into effect in mid-2023.”
Other new rules for the fuel industry include the biofuels obligation being pushed back to April 2024 and minimum stockholding levels will be introduced to ensure New Zealand has sufficient fuel stocks in the event of “major disruptions to international oil and fuel markets, natural disasters and infrastructure failures”.
The government says it is delaying the imposition of biofuel obligations partly to avoid pushing up diesel prices for consumers at a time when they face cost-of-living pressures.
“While biofuels will account for a very small part of the overall fuel price, we recognise that motorists don’t need any extra costs in the current cost-of-living crisis,” explains Woods.
The addition of biofuels was estimated to prevent one million tonnes of emissions over the first two years, going up to nine million tonnes by 2035. The government will now need to find other areas to make those emissions savings over the short-term following the biofuels delay.
With regards to the minimum fuel stockholding levels, Woods says these will equate to about 28, 24 and 21 days’ worth of petrol, jet fuel and diesel respectively.
“The government will also procure additional onshore storage of reserve diesel stock of at least 70 million litres of diesel, providing approximately seven days’ cover,” she adds.
