BP, Z defend 6 cent fuel price hike after concerns about supply eased

7:06 pm on 18 September 2019

Both Z and BP are defending yesterday's 6 cent price hike saying it was based on global oil prices, exchange rates and how much it costs to buy new fuel to replace what's sold.

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Photo: 123rf

But neither company had lowered their prices today despite global crude oil dropping more than 6 percent as concerns about supply from Saudi Arabia eased.

It was standard practice for fuel companies to hike prices quickly, but they need to explain why this affects the price of fuel currently in their tanks that was bought at a different price, AA fuel analyst Mark Stockdale said.

"A lot of motorists don't understand why it is that they do it so quickly when in fact the fuel in the tanks in New Zealand has been there for a while and they purchased it at a different price.

"It's how the market works, but really only the fuel companies can actually answer why it is they adjust their prices according to the current commodity price, and not the price they actually paid for the product," he said.

BP said there were a number of influences on its fuel price.

"Including the refined barrel price, which has risen overnight. We understand that the cost of fuel can be a reasonable proportion of household expenditure and continue to monitor the situation closely," BP said in a statement.

Z said it too used "current cost" pricing to determine prices at the pump.

"Essentially, 'current cost' works on the basis that as fuel is sold, a roughly equal amount is bought at the same time.

"It's sort of like how a house's value is reflective of price it would fetch on the market if it was put up for sale today, not how much it cost to originally buy the house. It's typical in the fuel industry," it said.

It had not reduced its prices today because it was still facing cost pressures, the company said.

"When we moved the price up we didn't reflect all of the increase in the price of the barrel, as we had planned to move the price by 3 cents on that day anyway. We took on the other 3 cents because we know it's hard when prices go up so we wanted to keep it affordable as we could."

Gull chief executive Dave Bodger said its competitors had jumped the gun by increasing prices on "day one".

"That's over the top," he told Morning Report.

But Z disagreed with his assessment, saying the Australian-owned company was "shielded" by cost fluctuations affecting New Zealand.

"We think this is Gull giving the impression they care about New Zealanders when in fact they are owned by Caltex Australia and send all their profits offshore. And perhaps it's the size of the Australian market that is shielding Gull's cost base and that is how they are keeping their prices down.

"We're customers too so we don't like the price going up either, but the reality is this is the real cost. This is the cost of getting fuel to New Zealand from overseas. These real costs are going up and competition is more fierce, which is why we had our profit downgrade last week."