Whaleoil transcript: Mike Hosking and Kris Faafoi on the Commerce Commission study on retail petrol prices

Mike Hosking.

 

Starts at 7:05

Mike

The long awaited, much talked about investigation into our petrol industry and whether we are being fleeced has got the green light; immediate downside, this is going to take a year. So, is anything tangible going to come out of this or is this just pure politics?

Commerce and consumer affairs minister Kris Faafoi is with us, good morning.

Kris

Good morning Mike.

Mike

Do you, hand on heart, think we are being fleeced?

Kris

Look, I think there are issues that we need to look at. I think um… you know, every New Zealander when they fill up their car will have to think about whether they are getting a fair deal.  So, I think making sure that we can have a look at the fuel markets, what competition issues lie behind that, making sure we can give New Zealanders some piece of mind is the right thing to do.

Because I think for some time, and there’s some volatility in the market right now, I’ve been… I’ve been quite rightly asking whether they are getting a fair deal.

Mike

What is a fair deal?

Kris

Well, I think um… making sure that… you know… the margins that companies are making aren’t excessive, aah… that there is good competition within the market, are the barriers aah… to competition coming in or with those who are already in the market.  And I think at the end of the day making sure that… that they are not paying an excessive amount um… that could be spent on other things.

There’s six billion litres of petrol purchased every year in NZ so it’s a big whack of our economy and most New Zealanders, I think, want to have some peace of mind that they are not paying too much for that.

Mike

What is a fair margin?

Kris

Well that’s what… that’s what the commerce commission will look at, I guess…

Mike

So, you’re telling me they will literally make that up?

Kris

No, they won’t. I think what they are going to do and what they’ve got the power to do now, which is a new power for them, is to be able to dig deep into aah… the details of the aah… wholesale, retail and refinery um… margins and competition and get an idea of how this industry works.

The previous government tried to have a look at it and didn’t have that ability aah… to dig deeper and ask those questions and that’s what the commerce commission will have the ability to do now. To ask for peace of mind.

Mike

Sure, but ultimately, what they are going to do though, they are going to unearth every little bit of information they want to find out in the petrol industry.  And say, for example, they find out that the margin’s four cents a litre, or six cents a litre or two cents a litre or 18 cents a litre, they’re going to arbitrarily decide, are they not, what’s acceptable and what’s not?

Kris

Well at the end of the day it will be up to the government aah… to look at the recommendations of the commerce commission aah… post the study, now I don’t want to pre-empt that, to determine whether or not aah…  we need to take action to ensure that we… to ensure that we have a… have a situation where we think um… that the petrol companies aren’t making excessive profits, and on the flip side, are New Zealanders at the bowser are getting a… are getting a fair deal. (Unintelligible)

Mike

Well, what in your mind is a fair margin?

Kris

We haven’t seen anything around the market studies to enable… to be able to ask those questions so we can make some determinations because at the moment we don’t have the transparency that we need.

Mike

But having asked the questions, got the answers, then you are going to have to determine what’s a fair margin.  You are going to need to regulate the petrol market.  You are not going to do that.

Kris

Well, well I don’t want to pre-empt what the commerce commission finds but there are (sic) going to be a range of options that the commerce commission will give us, and recommendations, and at the end of the day it’s going to be up to the government to respond to them.  If there are… if there are issues… rather large issues… then we will have to.  But at the other end of the spectrum we might come back and say that everything is sweet so I don’t want to pre-empt anything but you know, there’s no use doing a study and doing nothing at the end of it.

Mike

Well, they can’t say everything is sweet because the prime minister’s told us we are being fleeced.

Kris

Yeah, but let us do the study first, Mike. And then.. then we will come back. There are… there are a range…

Mike

Could the prime minister be wrong Kris?

Kris

But the commission is independent Mike, and that’s the way it should be.  We’ve given them some new powers to put some sunlight and some transparency into these markets and at the end of the day, from our perspective, to give consumers some more peace of mind, which I don’t think they have at the moment, because we haven’t had the ability to do this… deep dive into the details to see whether or not this market is operating efficiently.

Mike

All right. Appreciate your time very much, Kris Faafoi.

And I feel bad for him, sent out to swing a bat madly in the air to argue a lost cause.


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