Fuel Industry Bill

I move, That the Fuel Industry Bill be now read a third time.

This bill is a significant step forward towards a fuel market that works for consumers, which is a priority for our Government. The bill will bring in a suite of measures to boost competition in the wholesale fuel market, and the benefit will flow through to the prices that motorists pay at the pump.

I’d like to take a moment to reiterate the findings from the Commerce Commission’s retail fuel market study, which is a key reason that we are here today. The Commerce Commission carried out an extensive analysis of the state of competition in the retail fuel market and concluded that competition in the fuel market is not working as well as it could be. It found that fuel companies had been making persistently higher profits over the past decade than would be expected in a competitive market. Regional differences in retail fuel prices reflect variations in local competition and not solely differences in cost of supply. Premium petrol margins have grown faster than regular petrol and do not reflect actual cost differences in supply. Competition largely occurs in retail markets, and this is less intense than could be expected. The report confirmed concern over successive Governments that consumers are paying higher prices for petrol and diesel than could be expected in a competitive market. The changes that this bill make will address that, and we expect these benefits will flow through to motorists.

The introduction of a terminal gate pricing regime and a review of wholesale contract terms will increase competition at the wholesale level, which will filter down to the retail market, and, in turn, to prices on the forecourt. The Government’s focus on making changes at the wholesale level may mean low-cost brands, such as Waitomo and Gull, can access fuel more cheaply and in more locations, which will provide opportunities for them to further expand in New Zealand. This will force other retailers to adjust their prices or lose customers.

The Commerce Commission identified a need to enable consumers to make more informed purchasing decisions on fuel. They noted that fuel firms earn higher margins on premium fuel compared to regular fuel, and the gap has been rising. They also noted that the price of premium fuel is not commonly listed on price boards, which may be contributing to the trend. The bill provides for the regulation-making powers that can be used to require the display of this pricing information. I expect to make regulations to require the display of premium prices on price boards soon.

The bill also includes an information disclosure and monitoring regime. This will allow us to assist the effectiveness of the measures implemented in this bill and test whether they enable a more competitive market over time. There will be long-term benefits from improving the information available on the fuel sector. There is a high level of interest in the effectiveness of competition in the sector, and if higher quality information is held by industry or by Government this would significantly improve the timeliness and quality of decision making on the fuel industry.

It is my great pleasure that we are able to commend this bill to the House because motorists have waited too long for action on the entrenched problems that we see in our fuel market. We know that the cost of fuel is a significant issue for households and businesses, and we make no excuse for acting with speed, for allowing competition to flourish.

Thank you, Madam Speaker. You know, we’ve gone through probably three years of studies from the Ministry of Business, Innovation and Employment, the Commerce Commission, officials—and thank you for your work—to come to a piece of legislation that we think our No. 1 job as parliamentarians was to try and stop it making the cost of fuel more expensive. And all we really needed to do was probably buy every motorist in New Zealand a smartphone and get them to download Gaspy. If I look at my hometown, New Plymouth, there’s a range of prices that are being displayed in all the different petrol stations for 95 from $1.98.9 up to $2.13.9, and I can then go and choose to buy my fuel at the cheapest place. And all it takes is seconds. I mean, we’re living in a time where technology is enabling people to be very selective in where they purchase their products.

But anyway, we’ve gone through a very convoluted process that took a long time at the beginning, but was very rushed at the end. And I’d have to say at the very end, when we came to the select committee process, I was quite alarmed at the concern that people who were fuel suppliers were expressing to the committee. And it’s easy to say, “Well, of course, they’re vested interests. Of course they would be saying that it’s all wrong.” No, I don’t think so.

You go back to what the officials said, in terms of their comments to the Government, in terms of the advising agency, Ministry of Business, Innovation and Employment, to the Minister of Energy and Resources, the Minister of Commerce and Consumer Affairs, and they said this—and this is going back months and months: “The terminal gate price regime may impose additional costs for stockholding, investment, increased shipping frequency, or shortages for own supply, which could lead to higher retail prices if wholesale competition does not increase.” We’ve already heard the comparison between New Zealand and Australia in terms of scale for that spot market, and that New Zealand is very small, and you’ve got cities that have terminals that are small provincial cities. And here we are. Here we are hearing from submitters a very high degree of alarm that actually this bill will actually do the very opposite to its intention. And it’s because, I think, in the end we went too fast.

OK, so everybody agrees that we want to have competitively priced liquid fuels. Nobody disagrees with that. That’s one of the reasons why we do support this. We do support the terminal gate price regime. But as we’ve heard, there are concerns that it needs to operate in a very efficient way, and if it doesn’t actually promote increased wholesale competition, actually it’s going to be quite counterproductive.

Of course, some of the fuel companies were saying, “Sure, we can put a terminal gate price on the gate of our terminal—that’s what it is—to say you can buy a tanker load of petrol at this price.” But if they keep rolling up week after week after week, they’re probably going to form a commercial relationship and have a contracted price, which will most likely be cheaper than what the terminal gate price is. So the terminal gate price exists for a new entrant, for somebody to come in who doesn’t have to form that commercial relationship, who just says, “By right, I can buy a tanker full of fuel off you at a certain price and set up my petrol station down the road.” or whatever they are.

That is a very kind of temporary mechanism, because if they are serious participants in a market, they’ve got to want a better price on that. They’re going to want to form a commercial relationship that would enable them to compete against those other participants in the market who have commercial relationships. And if the Government get upset about that, they’re going to make everybody disclose what price they’re paying in those commercial relationships, and that is not how business works.

One submitter, Mobil, said, “This bill should not proceed in its current form. At the very least, there should be a full six-month select committee process so the bill can be well scrutinised by Parliament and stakeholders be given an appropriate amount of time to make considered submissions. Stakeholders had less than one week from the time the bill was introduced to Parliament to prepare their submissions. Mobil remains very concerned that some of the proposed changes will bring to fruition the unintended consequences to which Mobil has previously given warning.”

So it’s not as if the Government weren’t told time and time again. But, you know, Governments know better—“These companies have vested interests”—but maybe not. Maybe they just understand how the market works. And as the Minister was saying, you know, making the comments about New Zealanders paying far too much—the Prime Minister said that a number of times. The editorial of the New Zealand Herald said a month after the Prime Minister inferred that people were being fleeced—the opinion piece was “Maybe you’re not being fleeced”, because they had time to look at it.

But Z said, across the 2016 and 2018 period—we’ve heard it. Michael Woodhouse said it. I said it in the second reading speech. Included in the draft report, the Commerce Commission: “Z returns, as calculated by Z, went from 12 to 10 percent. Last year, they declined to 8.5 percent. This year we forecast them to be about 7 percent.” And guess where the wealth transfer is going? It’s going to the motorist. They are getting less of a margin because the motorist is getting a sharper price because of competition.

So, look, we say that this competitive market does exist. We’ve seen a proliferation of independents. We’ve seen huge number of new outlets around the country. I know Mr Gareth Hughes probably doesn’t like that, but anyway. And just can I say, all the very best for your next step in life. I’ve really enjoyed being here in Parliament with you over these last 12 years.

We will support the terminal gate price, but we’re going to keep an eye on this to make sure it works. The Government are absolutely convinced that it will; we are not so convinced. The Government say that competition is not as good as it can be. We say that it is a competitive market and we can see that by the margins that are reducing and have been reducing over these last five years in particular.

We acknowledge the Commerce Commission. They ran a good process. I was surprised at the outcome of their report, but it was a very short process and a very complex area of commerce, so no discredit to them. They did their very, very best. I think, you know, time will tell. And let’s hope in the next year or two, three or four years, we can look back and see whether these provisions actually work or just make it more expensive, more regulation, more complexity that in the end could reflect in a higher price for motorists.

So as I just conclude, we reluctantly will support this bill because we do support any attempt to bring the price of fuel down for motorists. We know that we’re in very difficult, challenging economic times. We want New Zealanders—and I believe so do the fuel companies—to be able to get through it and to be able to afford things. We’re just not sure whether this bill will actually do it. Thank you.

Madam Speaker, thank you for the opportunity to speak on the third reading of this Fuel Industry Bill. Before I commence my brief remarks, I just really want to acknowledge the member who just spoke prior, Jonathan Young. This is a particular issue that has a particular impact in his region, and having had the opportunity to work with him and garner the learnings that he’s brought to the table, he’s engaged with our side of the House very generously. Just acknowledging too that we, across both sides of this House, have a collective desire to see those fuel costs come down for all. I note your hesitancies and acknowledge those, and am grateful that your side of the House will be supporting this bill. We listen, and we can hear the caution that you’ve reserved; so thank you for your remarks.

We’ve sat through a couple of readings of this bill in this House this afternoon; so the complexities of this particular area of regulation have been set out. From having had the opportunity to sit through the deliberations on the Finance and Expenditure Committee, I too just really want to extend my gratitude to the officials who did an absolutely, stonkingly good job to ensure that we, as committee members who might not have been so fluent in the language of the fuel marketing pricing regime, could get to a place where we, hopefully, were able to contribute in some way, shape, or form.

The benefit of the bill that we’re introducing this evening is for the purpose of enabling transparency around pricing for those consumers at the terminal, and there have been a lot of people from industry, officials, and again, like I said, contributions from all sides of this House, that I think have worked collectively very well to get to the point that we have landed on tonight. So, without further ado, I commend this bill to the House.

Thank you, Madam Speaker. Yes, we’re coming to a screaming halt after a process that started back in 2017 and here we are—virtually, the penultimate day of the 52nd Parliament—here we are rushing this bill through urgency at 10 to 9 and with certain comments from officials ringing in my ears, who said to us quite clearly that we are ending up rushing this legislation through the House because the work hasn’t been done.

I think that’s unfortunate. I think the issue around the substantial—well, the need for substantial regulations is going to be an issue for the industry. Everyone wants to see reasonable fuel prices, but we’re at risk of creating a market that has a high degree of uncertainty around it because we simply haven’t provided the clarity in this bill. And I think that’s only going to be bad for people—everyone who uses fuel, goes to the bowser and fills up their cars—because that may be the thing that we see, which is an increase in fuel prices because of that uncertainty. And I think that would be very disappointing.

But anyway, as everyone knows, we will be supporting this bill. I urge the Minister of Energy and Resources—and she made a comment before that she was looking at making a regulation around how fuel prices are to be signalled. I urge her to do that quickly. But there are substantial parts of the bill that need other regulations. That needs to be done quickly and as efficiently as possible having regard both to the interest of the fuel users, but also the fuel companies because they need to achieve a return on capital investment they make. So it is one of a balancing act but let’s bring it to a conclusion that everyone can live with and benefit from.

Thank you, Madam Speaker. I don’t intend to take too much of the House’s time to go through this speech in the third reading, but New Zealand First will be supporting this bill. The Minister actually outlined in good detail about the intent and the history of this bill and the importance of this bill, but it’s important to note that, I guess, the whole aim of this is to bring, as members have already said, transparency to the market, but also it surrounds the consumer at the end of the pump. It’s designed to bring competition to the market that ensures better prices, and better prices obviously benefit the consumer. It will particularly help, actually, the smaller retailers as well, with the competitively priced fuel, and in turn push larger retailers to lower their own prices, helping end consumers as well. So I think it’s important, although this has been a long process, and there are some issues that the National Party have and questions that they have raised—I think that in the end, if we concentrate on the fact that this is all better for the competition, for transparency, and for the consumers at the end of the pump, I think that it’s right that all parties in this House are supporting this bill. We commend this bill to the House.

Bill read a third time.