Fuel Industry Bill

Thank you, Madam Speaker. I rise to take a very brief call on this Fuel Industry Bill, which is a bit of a saving grace, really, to try and bring—not try; in actual fact, to bring—better pricing for New Zealand customers and start holding the feet to the fire for the big fuel companies. In fact, it’s there to drive—excuse the pun, by using the word drive—better pricing throughout. It does create some transparency, which is much needed, and some pricing methodology which can be seen by the retailers when they’re dealing with those large fuel companies. New Zealand First absolutely, 100 percent commends this bill to the House to see it progress. Thank you.

Thank you, Madam Speaker. Well, it is a pleasure to speak on the Fuel Industry Bill. It’s a difficult time, I understand, for the Greens, whose default position is to actually want fuel to be more expensive and as expensive as possible. But this bill, of course, seeks to do the opposite; to, in fact, introduce enough competition through the terminal gate price that that would allow competition in another sector part of the market.

Actually, there is plenty of competition there now, and certainly in the retailers. On my patch, through my electorate, the significant difference is in fuel prices, depending on where you go, as to how remote you are when you’re—not you, Madam Speaker, but myself when I’m driving through the electorate. The price does vary quite considerably, but we certainly have a number of Nelson Petroleum Distributors (NPDs) that have been put in in the last few years, and more to come, and that has driven the price of fuel down through that competition. But the Greens are having difficulty with this one. I know this is a difficult time for them anyway, given they’ve had to cancel their campaign launch due to lack of interest. But maybe the fuel price going up overnight with excise taxes might make them feel a little better.

But I do note this morning that the Road Transport Forum made some comments about the increase in road-user charges, which is going to be quite significant. This is why fuel prices are important, because it does go right through to the consumer. I note this morning that they say experience from the 2008 economic downturn indicates road wear is going to decrease, and we know that. So these road-user charges and excise taxes that are just going up at the moment are there to cover the costs of fixing the roads. But, actually, during this period we’ve had a drop of about 60 to 70 percent in truck traffic during the lockdown. So the road wear will have gone down significantly. So the whole industry is feeling that. We’re in a difficult time now. All of those prices go directly on to the costs of fuel.

But, of course, they say they don’t care about that. They aren’t worried about that. They think somehow it’s going to be magicked up by a business. Obviously, they don’t understand how pricing and markets work. That probably is what’s driven this, because, quite clearly, even in the Minister of Commerce and Consumer Affairs’ own Cabinet paper, it states that competition is emerging quite strongly in the fuel markets. I think that we see that all the time. But we see that Allied Petroleum have opened 16 new fuel stations in the South Island, and NPD—21. So it’s a significant number of new operators in the market, and that has driven down the price.

It’s a very complicated market and it’s quite interesting to note my colleague Jonathan Young saying last night that, actually, the industry has been trying to explain it to the Commerce Commission, who simply didn’t understand how the markets work. It is highly complicated, and maybe with the advent of electric cars, that will start to sort out that fuel market, as time goes on, as it faces competition from electric vehicles (EVs). But, of course, that’s going to be a long time, if ever, to get right through to the heavy transport industry, which is really reliant on liquid fuels. I think, for the foreseeable future, it will be.

We have seen quite a bit of money, and some of that money from those taxes, go towards a pipe dream that was light rail and rail, but heavy rail—nearly everything that a consumer touches will have been on the back of a truck at some point. That’s how stuff is delivered around New Zealand. It’s interesting to note that since the lockdown, actually, the profile of freight has changed completely, because so much of the stuff that we all buy is now being bought online, and that has far more touch points through the chain than the normal freight and goods and services that we would normally purchase through the normal links, through the chain stores and so on. It’s going now by courier much more often. So they are absolutely impacted by fuel and fuel costs.

So we’re going to see how this goes through the Finance and Expenditure Committee. It is rushed yet again. I remember in the last term that the Green Party railed about urgency on everything and said it had to be an absolute emergency to have urgency—I think they were the terms that they used. But their principles—they’ve gone out the window. [Interruption] Yeah. I don’t know what their principles are, but they are certainly not what they were in the first term.

But, of course, we do know that principles are only principles when they’re tested. Otherwise, they are just ideals, and clearly their ideals don’t have any real commitment to them. They gave them away quite quickly for the baubles of power. So with that, I commend this, in a qualified sense, to the House. Thank you.

I really appreciate it when the Opposition members of the House continue to talk about the Green Party. Please keep talking about us. I figure that they don’t have too much to talk about when it comes to talking about themselves.

The Greens are supporting this, the Fuel Industry Bill. Essentially, it incorporates a lot of what the Commerce Commission’s study into fuel pricing in New Zealand put forward as a way to benefit consumers, and that is the provision that we are supporting in this bill today in the House. I wanted to put a short call on the Hansard record to be very clear about the Greens’ position. We absolutely support this strengthened consumer protection legislation and measures to support consumers exercising their rights at low cost, and that is the core principle that is at play here, essentially, through introducing a terminal gate pricing regime, which is similar to that in operation in Australia at this time. So the Greens can and do support initiatives to make sure consumers are not further subject to unreasonable and unfair treatment by fuel companies.

Of course—and it’s not the biggest issue in this bill for the Greens—we overall are going to continue to want to push for and see helpful, just transition alternative fuel provisions, and that’s across all of the legislative and policy work of the Government. However, in this bill we are very happy to stand and support benefits for consumers, benefits for our communities and our peoples who are just trying to get by day to day and live their lives, and so we are happy to support the Fuel Industry Bill. Thank you.

This is a fantastic opportunity to speak on the Fuel Industry Bill in its first reading. Can I just start out by saying this is another case of incompetence with this Government. Think back to 2018 and 2019 when this Government was dealing with some serious issues around fuel prices. In Auckland, fuel prices got to about around $2.30, or over $2.30 for a litre of 91. So there was pressure on the Government at the time to commit to doing something on fuel prices, so the Prime Minister came out and gave this glossy announcement: “We’re going to do a fuel market study.” And in December 2019, the Commerce Commission published that study, which recommended some of the changes that we are debating today.

But that is very distant to the New Zealand we’re faced with now, with fuel prices tanking, not because of fuel taxes but because of global supply and demand for fuel, and now we’re discussing a bill that actually is quite outdated given that we faced some pressures nearly two years ago on that matter.

But speaking now to the substance of the bill, let’s talk about the fuel market and what the Commerce Commission has come out with. They’ve said that it is not competitive. Well, I disagree with that. Of course on this side of the House we adore competitiveness, and that is why the markets will reach a point at which fuel prices will be lower for consumers. This House has already heard my colleague Jonathan Young talk about the fact that there is competitiveness in this sector. Yes, there were some oligopoly companies, large companies, but in the last few years, what you’ve seen is a whole range of regional and niche suppliers. Waitomo is a classic case—a great company supplying New Zealanders—

💬 Barbara Kuriger: Great area of the country.

A great area of the country—a few Bidois’ down that way—and they are providing really low-cost alternatives for the sector.

Then there’s Gull, and I must say I’m a supporter of Gull—very, very low-cost retail prices there. I think this reflects, actually, the general sense of other sectors in New Zealand—the fuel sector’s no different, whether you’re talking banking and financial services, whether you’re talking electricity, or whether you’re talking telecommunications. My belief is that what makes these sectors competitive is actually when you get low-cost players—whether it’s 2degrees in the telecommunications sector, or whether it’s companies like Kiwibank and the value that they have provided in the financial services, where they’ve provided low-cost banking services to the sector. Actually, what you’ve seen here is a maturity of the fuel market where there’s been an oligopoly in the past, and yet there’s low-cost providers that come in and have made a substantial contribution to that sector.

So we absolutely, on this side of the House, support competitive markets. And let me talk to you about the way we get those competitive markets in New Zealand. Greater transparency of pricing—that is something we absolutely can support and that is why we’re supporting this bill to select committee. We want to see how those wholesale prices are determined and whether there are opportunities to actually improve the transparency of pricing of fuel in New Zealand.

And then there’s the aspect of competition, which I’ve talked about, and whether we can encourage greater competition, and maybe it’s just regional competition or competition in certain cities that needs to occur, but we will look at that in the select committee process.

💬 Chris Penk: Something to look forward to.

Absolutely, something to look forward to, as my colleague Chris Penk just said here.

So this is a good bill. There’s many aspects of the bill we will look forward to discussing in the select committee, and, as I said, we now face a very different situation than we did when the Prime Minister made a glossy announcement about the market study over a year and a half ago. My colleague Stuart Smith has raised the point that today, 1 July, fuel taxes are going up. I’ve got to ask this House and this Government in particular: is it in the best interests of New Zealanders that we have those fuel taxes go up? I don’t think it is, and I speak for every hard-working New Zealander out there that is facing lower fuel prices because of global demand, yet is facing increased prices because this Government wants to tax them more to then pay for projects like rail which, by the way, isn’t happening under this Labour-led Government.

So, look, we will support this to select committee, and we’ll support this because we on this side of the House see opportunities and want to find opportunities to improve the competitiveness and the competition of the fuel market sector. Where there are opportunities to do that, whether it’s increased transparency, whether it’s encouraging greater competition, we will support those measures. But until we get to select committee and hear those voices, we cannot commit further on this bill.

So it is, again, another case of the Government making a glossy announcement, doing nothing, and now we’re here in urgency discussing this law today. So we will support this bill to select committee—I commend this bill, at least to select committee, and to the House.

Thank you, Madam Speaker. It’s a pleasure to stand in support of this bill. This is an important bill because many, many families’ fuel costs are a significant chunk of their budget, I think, particularly in large rural areas where people have got to travel significant distances to get to work, or even in big urban centres like Auckland, where you’ve got to go across town. I think, in the context of post-COVID recovery many families are going to be—every single dollar will count in their budgets. They’re going to be looking at where they can cuts costs.

I think anything that’s going to improve transparency, competition, and the fuel market is going to be incredibly important, because it’s ultimately going to benefit consumers. So I’m very happy to stand in support of this bill and commend it to the House.

Thank you very much, Madam Speaker. I too stand in support today of the Fuel Industry Bill, but only through to select committee at this stage.

It is becoming a real pattern in this House that we are seeing legislation dropped on us in urgency to debate and give the House’s considered thought and process to these things. This bill was not even on the Order Paper. It was not even mentioned yesterday when the Leader of the House reeled off the list of bills that were going to be debated under urgency in this House. It didn’t appear until yesterday afternoon, I understand, so we have to wonder that it was probably still being drafted yesterday morning. So, again, another example of rushed legislation, and we’ve seen examples already—even yesterday, as we go back and correct the mistakes of rushed legislation. So this kind of process does no justice to this House.

The fuel industry is a very competitive model that we have in this country. But the one thing that does concern me is that when we’re talking about something so large and that makes such an impact on everybody in this country, we do not do justice to it by such a truncated process. We’ve got industry players in this country, such as the Road Transport Association New Zealand, the New Zealand Trucking Association, the Road Transport Forum, and the owners and operators of over 4 million vehicles in this country that will have an interest in what happens in terms of this piece of legislation. They need the opportunity to participate.

We have in this country a fleet, as I say, of over 4 million vehicles. It’s interesting to learn that the average age of those vehicles in this country is actually increasing. So over the past 15 years, we’ve seen that increase. The average age of vehicles in this country is 14½ years for passenger vehicles and it’s actually 18 years for heavy vehicles—heavy trucks. So we have more efficient vehicles on the road and we have vehicles that are actually lasting longer. So the impact that this bill will have on them, of course, as anyone with any sense will understand—you increase the cost of operating those vehicles, and the end user, the person who pays for the goods and products that are transported around this country in that fleet, are the ones that end up paying for it. The very people that in this day and age, post-COVID, when the world is in such economic stress—they are the ones that are going to be asked to pay for this increase in fuel tax.

I’ve spent some time pumping gas in my life. I spent quite a few years at a very small rural garage, so I understand the stress that is also on those businesses. I’d like to put a shout-out to a couple who live in Haast, Eamonnd and Heleen Johnston, who have Johnston Motors down there. They’re one of the most remote fuel stations that we’ve got, and, unfortunately, they do have to have a large fuel price. It’s probably higher than you will get in most places. But the reality is that to get a fuel truck to Haast is a long way from everywhere. The truck cannot get there and back to its depot in one day, so the driver has to overnight. So the cost of all of that delivery goes on to that retailer. He has no option but to charge enough for his fuel to cover those costs. So we see there is already 97c a litre in taxes, or it was until today—97c a litre already on his fuel bill. So he’s got to cover that extra transport, the extra cost of that person overnighting. Now, in a 24-hour period, we know that driver can only do 13 hours of work before he has to have a 10-hour break, so it’s expensive to get fuels to those areas.

The last thing our most remote and rural communities need is more tax going on their fuel bills. We need to support the people in the provinces. We need to support those communities in our most remote areas, and we don’t do that by adding more and more taxes on to those basic commodities that they have no choice but to have to buy. This Government is so removed from reality—they do not get that. We look forward to a very short select committee process.

Thank you, Madam Speaker; a pleasure to take a short call on the first reading of the Fuel Industry Bill.

💬 Hon Nathan Guy: Take a long call!

No, I don’t need to take a long call, because it’s fairly clear that this is a very longstanding issue. When the previous speaker, Maureen Pugh, spoke about a rushed process, it was rather disingenuous, because this is a problem that had been known by the previous Government for a very long time. Judith Collins had the same information available as what we are acting on. The report of the Commerce Commission clearly states that consumers are being fleeced at the pumps, and so we are addressing it, because this is a Government that is addressing those longstanding issues where the previous Government was too shy to. So I commend this bill to the House.

It’s a pleasure to take the final call on this side of the House on this bill. I, sort of, am somewhat incredulous as to what I’m hearing today about how important this is in the scale of things; how important it is to households; and how much the cost of everything is important, particularly in the post-COVID environment. On the very same day that fuel taxes are being hiked again, road-user taxes are being hiked again—and, as we know, hardly any new roads have been built by this current Government—so on the very same day. Where’s the money going, and what is it going to be spent on?

I venture to suggest that if this review had been done right at this point when fuel prices had dramatically reduced, then the Prime Minister wouldn’t have said that they’re being fleeced at the pump—there wouldn’t even be a priority for this. The fact of the matter was that a whole lot of market conditions ended up at a very high fuel price, that’s where we ended up, and suddenly the Government has to do something; so the Government commissioned a review. We will support this going to the select committee; however, the Government commissioned a review on the basis that somehow everybody was being fleeced. Well, I tell you what, in the last six months, I think you’ll find most oil traders, companies, and anybody involved in the oil industry will think they’ve been fleeced, because, if you’ve seen what’s happened to the price of crude, what’s happened to the market, what’s happened to the futures, for a period of time the forward price of fuel was in the negative. It had gone from $50 a barrel into the minus.

So the biggest impact of fuel prices is not what happened in this space, it’s what’s happens in global markets and global supply and demand, and it’s what happens with taxes. Today, this Government, without a blink of an eyelid, has just piled on more taxes on to the New Zealand citizens, and it goes right to the heart of affordability in households. Liz Craig commented that this is what this is all about because people are being fleeced at the pump. She said that in this very House, on the same day as they stick everything up, all the prices go up—the prices go up—not to mention the productive part.

Today road-user charges go up as well. Every single part of the New Zealand economy will be impacted by road-user charges.

💬 Hon Nathan Guy: Bad for Hawke’s Bay.

In Hawke’s Bay, exactly—our whole productive economy. At the same time where, in Hawke’s Bay, the place I represent, we’ve had zero investment on the State highway network, apart from some safety rails—some safety rails. So the Napier to Hastings expressway cancelled.

💬 Hon Nathan Guy: What’s happened?

Cancelled; not even on the programme. So it’s all very well at the same day to cry that the issue that fuel prices are impacting on households. I understand households are struggling, but the same day that fuel prices, we are told, are impacting on households, this Government just sticks the price up on households again, on the very same day, under urgency—they bring this bill under urgency. One could be tempted to think that it’s been brought into the House under urgency to try and mask the fact that on 1 July all these fuel prices are going up.

If I look at what are in these recommendations, generally, Minister Faafoi, there’s a lot of good things in the recommendations about transparency, accountability, and all those things. So I’m not against that. What I am saying is I don’t believe this will make a material difference to the price of fuel to mum and dad, Joe Citizen and their kids, who rock up to the pump.

💬 Hon Nathan Guy: What’ll they think in Mana?

They won’t be worrying about it now because the price of fuel has dropped, largely because market conditions have changed.

I look at some of the things on here and I’m quite intrigued. We’re going to put a sticker on the fuel cap to say what is the minimum fuel grade to be used in vehicle. We’re going to require that 96 is put on the advertising to know what the price of 96 is. I don’t know of anybody that uses 96; there’ll be the odd person, but I don’t know.

💬 Hon Nathan Guy: An older car.

An older car maybe—an older car maybe. Then there are all sorts of recommendations. Minister Faafoi, I do support, personally, the terminal gate pricing regime. I think that is a useful addition to the market.

But what I’m trying to get to is that it’s all very well to spend a lot of time and effort changing the regulations, but this is a complex industry. The existing players—the big ones: Z Energy, Mobil, and BP—largely are responsible for building all the infrastructure for our fuel system in New Zealand—all of it. Hundreds of millions, probably billions, of investments, including support for the refinery, that has been built by these companies. A lot of capital has been involved, and they have generally made it because they need a return on that capital.

It is harder for new entries to come in. It’s really not a lot different to the electricity sector. It’s harder for new entries to come in, because you’ve got sunk capital, a distribution and refining network, and then you’ve got new players coming along seeking to undercut those key players, and they need to manage and pay their share of those costs.

If you look at what has happened in New Zealand in the last period of time, and I read this out from the work that was given to the Commerce Commission, for example, in the last five years, Allied Petroleum has opened 16 new South Island service centres for distributing fuel and 13 in the North Island. NPD has opened 21 new sites in the South Island. Gull has opened 12 new North Island sites, and Waitomo has opened 14 new North Island sites. That is competition. That is competition working. The balance for this House to consider—and Minister Faafoi in your work—is to what degree do you interrupt that competition or change it or, sort of, nationalise the pricing structure, and what degree will that make a difference? Ultimately, that is running squarely up against what the large retailers and distributors—BP, Mobil, and Z Energy—have been doing for years.

It’s fair to say also that Waitomo—and I listened to them at the select committee earlier on, on the fuel tax increase. So when we looked at the fuel tax increase in Auckland, Waitomo came to the select committee, and they said they were having some difficulty getting to other parts of the market because they couldn’t get, at that stage, storage facilities in the lower part of the North Island. OK, that’s what they said, and that was probably a year ago. They said that that was causing an increase in the price of fuel. So those things do need to be addressed if you’re going to have an open market and you’re going to give best competition for all the operators, including Waitomo and others, then there does need to be a levelling of the playing field. But, once again, that needs to be measured against what the large players have already invested.

So we will support this to select committee, but not necessarily beyond that point. I remind the House and members of the public of New Zealand that we are doing this under urgency. There is a shortened select committee process. The Government is trying to get this done before the election as one of their priorities. I’m questioning that, as all the other things that New Zealand needs to deal with post-COVID, on the very same day that the same Government puts up the price of fuel and road-user charges, on the very same day we’re in urgency trying to get this piece of legislation through.

I just can’t understand, in the priority of things, why this is such a priority for this Government. I accept that work needs to be done, and I accept that a select committee is probably good to look at this. But when you look at what has happened to the price of fuel, and I think you can buy diesel, probably, in Hawke’s Bay now for under a dollar a litre, retail at the pump, and petrol is a dollar 60-something—around that. When you look at what happened, the pressure that fuel was placing on families is not nearly as great as it was about nine months ago. So I’m questioning the Minister and the Government of the need to put this through urgency, with a truncated select committee process, and for what.

The last thing I’d say, as I close, is there’s a whole lot of recommendations on this sheet, which is a summary sheet, on reviewing arrangements for the directive—sort of disincentivisation investment in shared storage. Now, that is the issue that Waitomo tried to raise with us at select committee, because, basically, what we were being told at that point was that the price of fuel in other parts of New Zealand that weren’t serviced by Waitomo was expensive because there wasn’t the degree of competition, and I have some sympathy for that. So we need to find a way of managing the distribution and the storage. I think, if this bill and this select committee hears about that and finds a way of doing that, that will be helpful to New Zealand. But ultimately, the private sector will invest and provide a competitive market, and, I believe, will have more impact on the price of fuel than this bill will ever have. Thank you, Madam Speaker.

It’s always a delight to have the last call on such a very good piece of legislation. You would think, listening to the other side, that they were very confused about their arguments on this particular bill—“Yes, we’ll take it to select committee.”; “Oh, we like competition, but actually we’re a bit anti-competition.” I was actually starting to lose where they were going in their arguments.

This is a great piece of legislation, and I commend the Minister of Energy and Resources for this, because the changes proposed in this bill are expected to increase competition across the wholesale market, and that, over time, will lead to lower fuel prices for consumers. So, on that, I commend this bill to the House.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.

on behalf of the Minister of Energy and Resources: I move, That the Fuel Industry Bill be reported to the House by 21 July 2020 and that the committee have authority to meet at any time while the House is sitting (except during oral questions), during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, and outside the Wellington area, despite Standing Orders 191, 193, and 194(1)(b) and (c).

As I outlined previously during the first reading debate, it is important that the bill be passed without undue delay to signal to consumers and the fuel industry that this Government is serious about introducing more competition in the fuel market. The underlying problems in the industry have been in place over a long period of time and there is no reason to further delay solving them. While this report-back date requires a much shorter time in a select committee than usual, there has already been a significant consultation over a number of years with the fuel industry on the issues underlying this bill. I’m therefore confident this process will be substantial in achieving our desired outcomes and allow the Government to take prompt action to address those issues.

With the election approaching, the House will meet for just a few weeks between now and the end of the year. The referral to select committee for between four and six months would, in practice, mean that the bill would not be passed before next February or March, and New Zealanders deserve a quicker solution to this issue. They’ve waited long enough and there is plenty of evidence that this is a popular move. In the current uncertain economic times, a need for a rapid conclusion to this issue is more pressing.

In the first reading debate the Opposition was arguing why this was being debated under urgency. Well, the previous Government had nine years to do this. On this side, the Government, in three years, has introduced the market study power from the Commerce Commission, which allowed this market study to be undertaken. Those recommendations have come back and we will act swiftly to make sure that New Zealanders get fair treatment at the pump.

As my colleague Jan Tinetti pointed out, there were also a number of arguments from the Opposition that this is not the time to do it post-COVID. Well, this is exactly the right time to do that. New Zealanders, as they sit around their kitchen tables, are worried about their weekly costs. If they are paying more at the pump than they should do, then this Government is committed to making sure that we help them by making sure that that money stays in their wallets for them to use, for their families, rather than giving it to fuel companies who for decades have been taking this money off hard-working families.

The other issue I’d like to raise is that the Opposition said that this is complex.

💬 DEPUTY SPEAKER: Can I just remind the Minister that this debate is about the timing, not a general debate about the bill.

The other opposition I heard from the other side of the House is that this issue is complex. Yes, it is complex. But this has been doing the rounds for some time. If that Opposition can’t handle the fact that this complex issue, which has been around for more than a decade, has been round the traps many times through a market study and only needs three weeks to go through a select committee, well, they are setting their agenda firmly in the camp of the fuel companies and not in the camp of those consumers who desperately need help right now.

Thank you, Madam Speaker. The Opposition opposes the shortened report-back date, and just for the interest of the public who are watching this this morning, the Minister has just stood up and talked about nine years and 12 years. The Minister’s been in Government for nearly three years.

💬 Hon Kris Faafoi: We did more in three years than you did in nine.

He put up a bill yesterday—which is, effectively, today because we’re in urgency; so in Parliament it’s the same date as it was yesterday—and all of a sudden he realised that it’s three sitting weeks until the election, and the Minister says it’s urgent.

💬 Hon Kris Faafoi: Nine years of mucking around and we did it in three.

💬 DEPUTY SPEAKER: Order! Minister, you’ve had your turn.

After three years of sitting around and not doing something, all of a sudden it’s urgent. So I suggest that the Government gets its act together. It’s only got three more sitting weeks as a Government, because we all know what’s going to happen on 19 September, and I suggest that rather than review the expenditure of everybody else, this Government should review its own expenditure, because it’s spending up large and not measuring. Thank you.