Bryan Chapple: Commerce Commission Commissioner on major fuel companies being slow to bring prices down

Competition is starting to improve in the fuel market. 

The Commerce Commission has called out retailers for being quick to put prices up, but slow to bring them back down. 

They believe it’s costing motorists $15 million a year. 

Bryan Chapple, Commerce Commission Commissioner, told Mike Hosking that there's no evidence its collusion, but rather companies just aren’t incentivised to lower their prices. 

He said that companies such as Gull and Waitomo coming into an area and building stations forced majors to lower their prices to match. 

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Episode Transcript

Speaker 1 (00:00):
Commerce Commission, as I'm sure you're well aware, is way
back into the petrol market. Retailers too quick to put
the prices up, too slow to bring them down. Bill
for the behavior falls on the punting you and me
to the tune of fifteen million dollars a year. The Commission,
to Brian Chapel is with us. Very good morning, morning,
make How would you describe the market in Lamer's terms?

Speaker 2 (00:16):
Is this a rought?

Speaker 1 (00:16):
Are they ripping us off or not?

Speaker 2 (00:20):
Look, I think it's just not as competitive as we'd like.
We can certainly see competition that's starting to improve. We
can see more of those unstaffed sites coming in and
bringing down prices in the areas around them. But this
study shows that, you know, prices going up faster than
they come down, that you know there's more work to do.

Speaker 1 (00:38):
Their counter argument, as it always is the complexity of pricing,
because we all look at the price of a barrel
of oil and go hats down? Why and so it's
much more complex than that. Does your work take that
into account?

Speaker 2 (00:49):
Well? A really good thing about this is it just
looks at increases and decreases and how they get treated.
And it's over quite a long period of time. So
this is a pre robust finding that prices go up
faster than they come down. I don't think they can
escape that.

Speaker 1 (01:05):
Right, But they would counter it by saying, look, we
look at the price of a barrel of oil, it's down.
Why isn't the price down? And they go well, at
the same time the dollar moved as well, or the
cost of shipping changed, and therefore it all equated out.
Do you dismiss that or not?

Speaker 2 (01:19):
Yeah, you'd have to say that on average. You know,
we're looking over several years, so there would have to
be a systematic change in the exchange rate or oil
prices or sorry not. You know, there'd have to be
a systematic change in some of their costs going in
different directions to explain this. And I just don't think
that's credible.

Speaker 1 (01:38):
Okay, is it collusion, No.

Speaker 2 (01:41):
There's no evidence that there's collusion. I think it's just
a you know, as one of the things factors they give,
it's they look at local competition, they see what others
are doing. If they're not forced to lower prices, they
don't necessarily do it.

Speaker 1 (01:53):
So that's a market Why doesn't it work in the
sense we had the right time of people on Gull's
been a similar sort of player. They go, we're not
like them different we lead the market. If they lead
the market, why don't the majors follow?

Speaker 2 (02:05):
Well, they do in the areas where those stations are,
and so you do see when a new station comes in,
it brings down prices in that area if it's one
of those unstaffed sites. So making it easier for them
to access fuel, which is what the regulatory regime does,
and then making it easier for them to open more
of their stations, which councils have a role in that helps,

(02:28):
and then motorists choosing to shop there that forces the
majors to allow prices to match.

Speaker 1 (02:33):
Having muddied the waters, I think a little bit when
you talk about the tax rate coming off the Auckland motorists,
for example, I mean, of course it will come off instantly,
won't it, Because it's an external input. So in other words,
when the tax goes, it goes. It's easy, whereas what
they're arguing is the complexity of day to day pricing
is way more problematic than that.

Speaker 2 (02:53):
I don't think it's maybeing the waters. I think if
there's a tendency for prices to come down more slowly
than they go up. We don't want to see that
happening when the fuel tex comes off.

Speaker 1 (03:02):
Right, Sure of you saying what you've said, What else
can be done? What's been the point of this market study,
of your involvement in the market and all of this,
what's actually changed?

Speaker 2 (03:12):
Well, what's actually changed is that companies like Way, Tomo
and Gull can now more readily get fuel at more
reasonable prices. And we've seen that they've been much more
able to open stations than was the case in the past,
and that that is driving down prices for Kiwi motorists.
So I think we've got evidence that it is working,
and so what perfect No, but it's working, Okay?

Speaker 1 (03:34):
How much does the punter play a part in this?
In other words, if I wanted to put a bit
of energy into it, get a gas y app shop around.
There's plenty of competition and there's plenty of price by variability.

Speaker 2 (03:45):
Yep, yep, especially in a place like Auckland. Look, Terry
Collins from the AA has been talking about that in
the last day or so. Is absolutely right. If everyone
shops at the lowest price station, the others are going
to have to match, all.

Speaker 1 (03:57):
Right, Brian, appreciate time, Brian Chapple, who's the Commissioner the
Commerce Commission. For more from the mic Asking Breakfast, listen
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