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Aucklanders are paying up to $140 million more for their fuel every year - Economist

Contributor:
Fuseworks Media
Fuseworks Media

In a report entitled, ‘The curious case of Auckland fuel prices,’ leading economist Shamubeel Eaqub says Auckland fuel prices have not fallen as much as the national average, or many parts of the South Island.

"Over the past year, fuel board prices have fallen by 29 cents across the country, but only 24 cents in Auckland and a huge 40 cents in Christchurch.

"Unless there has been a marked change in the cost of delivering fuel and cost of doing business, it could indicate Aucklanders are paying 5-15 cents too much for their fuel (excluding the 11.5-cents regional fuel tax). We estimate such a price difference would add $45m-$140m to Aucklanders’ annual fuel bill across retail and business users," Eaqub says.

"Within this, Auckland and Christchurch illustrate this tale best. In June 2019, Auckland prices were 10c - 15c lower than Christchurch. In the two weeks to 14 June, prices were 4 cents higher, excluding the regional fuel tax. Prices over the past year have fallen by 27c in Auckland, 50c in Christchurch and 29c nationally. These differences can cost a lot.

"The outsized price falls in Christchurch are notable. This is of obvious benefit to Christchurch fuel buyers, who are now paying a lot less for their fuel."

Discount fuel retailer NPD asked Eaqub to look at North Island fuel prices, as the family-owned discount fuel retailer readies to expand its southern network into the North Island with a planned $100 million plus investment in 32 sites over the next four years.

Competition is the key

Chief executive Barry Sheridan says competition is the key to lower fuel prices for motorists, as proven in the South Island where NPD will have over 80 sites by the end of this year.

"North Island motorists are simply paying too much. We want to make people aware of the significant discrepancy between north and south pump prices. This clearly signifies a lack of genuine competition in the North Island fuel market."

This sentiment is echoed by Eaqub whose analysis found that independents were most likely to locate new retail sites close to the majors.

"Independents are competing aggressively in Christchurch and Dunedin. The majority of new fuel stations to open over the past year (95% in Christchurch and 100% in Dunedin) were independents."

He says the outsized falls in retail fuel prices over the same period confirms the Commerce Commission’s market study view that competition from independents reduces prices and benefits consumers.

"The results from our analysis on the impact of NTI (new to industry) retail fuel sites on prices and volumes of majors shows that the entry of new NPD sites appear to benefit consumers to a greater extent than new entry by other resellers and distributors."

NPD has developed 25 new sites in the South Island in the past two years and will add a further 16 to complete its southern network.

With the North Island expansion now confirmed, NPD will open sites at Wiri in Auckland, New Plymouth and Hamilton before Christmas. NPD’s total planned capital programme over the next four years is $146 million.

Work on the 3400sqm Wiri site on Noel Burnside Rd, is scheduled to start in September, with NPD opening by Christmas. Wiri is one of Auckland’s fastest-growing industrial locations because of its central location and proximity to both State Highway 1 and State Highway 20.

Who is NPD? NPD is a Nelson based family business whose origins date back to the 1960s when the fledgling business was a contractor carrier for Mobil Oil NZ. In 1996, NPD became a wholesale distributor for Mobil - at that stage it had 11 retail sites and two trucks. Now it is a major fuel retailer in its own right with over 70 sites.

Its sites are a mix of Self-Serve and staffed full-service retail outlets that incorporate NPD’s Refresh Café offerings. They are a high-profile design with spacious forecourts, ease of access and exiting, large canopies for weather protection, CCTV cameras and good lighting for security.

Throughout its growth, NPD has been careful to retain its strong family values with a reputation built on catering for customer needs. Its profits stay in New Zealand and are re-invested into development and local jobs.

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