Government releases terms of reference on fuel price study

Friday 24th February 2017

The government has released the terms of reference of a study to determine how fair petrol and diesel prices are at the pump and the aim is to wrap it up by June, said Energy and Resources Minister Judith Collins.

According to data from the Ministry of Business, Innovation and Employment - which is undertaking the study - fuel margins have more than doubled over the last five years. "We need to know why this is happening and determine if what people are paying at the pump is reasonable or whether companies are making super-normal profits," said Collins.

“This study will offer new insights into our fuel sector and help us understand if there is an issue and, if there is, show where we need to focus to address it," she added.

According to the terms of reference the study will look specifically at returns on capital employed of the major businesses at different parts of the value chain. These returns will then be assessed against an appropriate cost of capital and compared with fuel suppliers in other countries.

The study will also consider margins and other market performance measures as another way of providing insight into industry profitability.

Collins said all the companies involved - Z Energy, BP, Mobil and Gull - have agreed to cooperate and were consulted about the terms of reference.

BusinessDesk.co.nz

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