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Delay In Dropping Petrol Prices Costing Kiwi Motorists $15m A Year At The Pump

The Commerce Commission’s latest analysis of fuel monitoring data shows retailers are quick to put fuel prices up in response to increased costs, but slower to bring prices down when global oil prices fall or exchange rate changes reduce costs.

Commissioner, Bryan Chapple, says Kiwi motorists often pay more for longer than they should – due to this lopsided, or asymmetric, pricing known as “rockets and feathers”.

“We can see clear evidence showing that fuel companies maintain temporarily higher margins after a decrease in their costs, lasting up to two weeks – at great expense to Kiwi motorists.

“Our findings suggest that petrol prices shoot up at the pump in response to increased costs, but there is a noticeable lag in retail prices being lowered in response to decreases in underlying costs,” Mr Chapple says.

The Commission estimates that if fuel companies drop prices as quickly as they increase them when costs change, motorists would benefit by around $15 million a year.

Mr Chapple says these findings are timely with the upcoming removal of the Auckland Regional Fuel Tax on 30 June 2024, and the Commission has clear expectations that fuel companies will promptly pass the benefit of this reduced tax through to consumers.

Fuel delivered to the Auckland region from 1 July 2024 will be cheaper by 11.5 cents per litre. “If fuel companies don’t reflect this drop promptly in retail prices, Aucklanders could be over-paying by nearly $1 million in the first week alone,” Mr Chapple says.

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“In a healthy and competitive fuel market, we expect to see changes in underlying costs fully passed through into retail prices promptly.”

Mr Chapple says the Commission will be keeping a close watch on the pricing tactics and pass-through of cost changes by fuel companies. This will include observing the pricing within and around the Auckland region before and after the Auckland Regional Fuel Tax is removed and reporting on its findings.

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