Fuel initiatives a mixed bag

Energy Resources Aotearoa has welcomed the announcement from the Minister of Energy that provides certainty on timing of the biofuels obligation, but warned that other policies announced today will lead to higher costs for motorists.

Energy Resource Aotearoa Chief Executive John Carnegie says:

"We are glad that the Government has acted on our recommendation and pushed back the biofuels mandate, providing much-needed clarity for industry. Global diesel prices are already expensive enough at the moment, without adding a further 6 - 10 cents to the price per litre by mixing diesel with biofuels. We welcome the delay, but New Zealanders should still be under no illusion that the mandate will increase costs when implemented."

Carnegie says that he agrees with the Government on the importance of fuel security and notes that the resilience of our fuel supply chain has actually improved.

"Since the closure of the Marsden Point refinery, New Zealand fuel companies have established strong and distributed supply chains to refineries across the world. This has significantly enhanced New Zealand’s fuel security."

"Mandating minimum fuel stockpiling and introducing a government fuel reserve to an already resilient and robust supply chain will inevitably add unnecessary costs to the price motorists pay at the pump."

Carnegie says that these proposals are rife with fishhooks and Energy Resources Aotearoa will work with the Government to iron these out.

He further warns that allowing the Commerce Commission to set wholesale fuel prices will have unintended consequences and will likely prevent further competition.

"The Government itself has pointed out that increased competition and transparency in the fuel market has driven fuel margins down over the past few years. The problem needs to be proven before any new powers are conferred."

"Price controls do not work. They did not work in the 1970s and they will not work now. They will create barriers for competitors and leave consumers worse off. The Government should instead be looking to create better conditions for competitors to set up shop in New Zealand. It’s through competition that consumers get better prices."

"The risk of price controls will be a red flag for any international firm weighing up whether to enter New Zealand. Today it’s fuel companies, who’s next?"