Praneeta Mahajan
Hamilton, June 11, 2024
Kiwi motorists are collectively losing an estimated $15 million a year due to the slow response of fuel retailers in dropping prices at the pump, according to the Commerce Commission’s latest fuel monitoring analysis.
Uneven Pricing Practices
The Commission’s data reveals that while fuel retailers are quick to raise prices in response to increased costs, they exhibit a marked reluctance to lower them when global oil prices fall or when favourable exchange rate changes occur. This phenomenon, known as “rockets and feathers,” has led to sustained higher costs for consumers.
Bryan Chapple, Commissioner of the Commerce Commission, highlighted the issue, stating, “We see clear evidence that fuel companies maintain temporarily higher margins after a decrease in their costs, lasting up to two weeks – at great expense to Kiwi motorists.”
The Commission’s findings indicate that petrol prices surge rapidly in reaction to rising costs but descend more slowly when those costs decrease. This disparity results in consumers paying more than necessary for extended periods.
“If fuel companies adjusted prices downward as swiftly as they hike them up, motorists would benefit significantly, saving around $15 million annually,” Mr Chapple noted.
Impact of Auckland Regional Fuel Tax Removal
These findings are particularly relevant as the Auckland Regional Fuel Tax is set to be removed on June 30, 2024. The Commission expects that the elimination of this tax, which will reduce the cost of fuel delivered to Auckland by 11.5 cents per litre from July 1, 2024 will be promptly reflected in retail prices.
“If fuel companies fail to pass on the tax reduction swiftly, Aucklanders could end up over-paying by nearly $1 million in the first week alone,” said Mr Chapple.
In a well-functioning and competitive fuel market, such changes in underlying costs should be promptly mirrored in retail prices. The Commission will be closely monitoring fuel pricing tactics and the pass-through of cost reductions by fuel companies. This scrutiny will include observing pricing trends within and around the Auckland region before and after the tax removal and subsequently reporting on its findings.
Motorists’ Reactions
Local motorist Te Aroha expressed his frustration, saying, “It is really unfair that we have to pay more for fuel when prices should be going down. Every cent counts, especially with the cost of living being so high. It is good to know the Commission is looking out for us, but we need action from the fuel companies now.”
Another motorist, Mark Smith, echoed this sentiment and said, “Being a tradesperson, I drive a lot for work, and these add-on costs add up quickly. Knowing that I could be saving money if prices were adjusted more promptly is really frustrating. I hope the removal of the Auckland Regional Fuel Tax is reflected at the pump immediately, so we can all benefit.”
The Commission’s proactive stance aims to ensure that consumers benefit from cost reductions without undue delay, fostering a more equitable and transparent fuel market.
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.
