Radio New Zealand operates in a competitive market but its Checkpoint team has some curious ideas about markets and competition when it comes to the pricing of petrol.
This was reflected in the question line when they decided to question Energy Minister Megan Woods about the spike in oil prices this week.
Checkpoint was especially exercised by Z Energy and BP raising prices 6 cents a litre for 91 but failing to rush to lower their prices on Wednesday, despite global crude oil dropping more than 6 per cent as concerns about supply from Saudi Arabia eased.
AA fuel analyst Mark Stockdale had told Radio NZ only the fuel companies can actually answer why they adjust their prices according to the current commodity price, and not the price they actually paid for the product.
Checkpoint presenter Lisa Owen nevertheless questioned the Energy Minister (who similarly advised her to question the companies about bringing prices down).
Woods also tried to persuade Owen that motorists had choices about which fuel they bought at which price.
We are not sure Owen got the message.
The Checkpoint item started by noting Radio NZ’s discovery of two petrol stations – barely two kilometres apart in central Wellington – differently charging $2.41 for 91 and $2.08.
We think competition helps to explain this, but Owen demanded of Woods:
“How can they justify such a wide gap?”
Asking them would be a good idea.
Woods gave it a shot, anyway. She referenced the Commerce Commission inquiry into fuel pricing which is looking at questions such as this.
And she explained the general rule: a cent a litre rise at the pump will be the response to a $1 lift in a barrel of oil.
That’s more or less what had happened, she said – but not all oil companies chose to do this immediately.
She seemed keen to say more but was interrupted by Owen, who insisted:
“So what does that tell you because two of them moved with six cent increases and they moved really quickly.
“Yet one of the companies said nah – we’ll wait till the end of the week and see how this plays out.”
The answer was so bleeding obvious that we are astonished the question needed to be asked.
As Woods explained, it tells us different companies are making different commercial decisions – and she supposed motorists would make their decisions accordingly.
Then came another observation from the redoubtable Owen.
Oil prices had dropped since the price spike “but when we got up this morning none of the prices seem to have moved.”
What did the minister make of that?
The minister said the government will be watching very closely.
She again reminded Owen that not all companies had raised their prices and motorists were free to decide where to fill up their cars.
Owen: “Are they moving fast enough, though, in your view?”
We think we heard the minister sigh, then answer:
“What we do know is that there is volatility in the commodity market for crude oil. It does move around. We have seen the movements that have been in line with what analysts would predict – as I said – which is about 1c on a dollar increase for a barrel of oil.
“We saw about a six dollar rise in a barrel of oil and we saw 6c at the pump… People will make choices about where they can get the best price for their petrol. Some companies decided to wait for a couple of days to see how the international situation played out. Because there were always questions marks over how quickly the Saudi facility would be restored.”
Owen took a different tack :
“Where do you fill up Minister?”
The minister’s reply was instructive:
“Actually I drive an electric car so I don’t fill up. But I certainly represent an electorate full of people who do fill up and get constant feedback from my constituents on this.”
Then it was back to those pesky petrol companies and the pace at which they (or some of them) were lowering their prices.
Owen: “What do you think is a reasonable time frame for the prices to go back down again?”
Woods: “Well, I think what we saw was the prices increase in parallel with the international prices rising – so I guess if you were going to measure speed based on the speed at which things went up, you would want to look at the speed for which things come down.”
That seems clear enough.
But hey. This is Checkpoint, whose listeners are assumed (it seems) to want questions like this put more than once.
Owens: “To be clear Minister, do you think prices should already have gone down at the pump now?”
Woods: “Look I think they are coming down. I would want to see that passed on to motorists – yes.”
Owen: “Do you think the local companies have lowered prices quick enough now that prices have stabilised?”
Woods; “My point, Lisa, was this – some never put them up and so I think it’s very hard to generalise …”
The Minister said she would be looking over the coming days to see how those prices are coming down.
Then she tendered some good advice: she suggested Owen interview the companies about what they intend to do.
“ … because it’s ultimately their responsibility and consumers will make decisions . I imagine motorists pull in to fill up where they are getting the best p;rice.”
Owen (as sharp as the proverbial tack) was quick to follow up:
“So should we question BP and Z Energy, you reckon, about why their prices aren’t going down?”
The minister affirmed that they had the answers when it came to timing.
Fair to say, Owen did question Z Energy chief executive Mike Bennett (here) and Radio NZ has reported (here) the differing positions of Z Energy, BP and Gull. whose chief executive, Dave Bodger said its competitors had jumped the gun by increasing prices on “day one”.
But with regard to government policy and the prospect of some intervention by the state – well, maybe we missed the question about what Woods would do if the companies did not behave as Checkpoint would like them to behave.