"Cost-Based" Verification Of Petrol Pricing In New Zealand

Abstract
The national media have recently exposed to "public attention", the very important subject of petrol pricing in New Zealand, and as I have special interest in this field, I am of the opinion that a new approach is needed if understanding between the parties concerned (The Government and the oil companies), is to be attained. The problem as I see it from current argument may be summarized as follows:

If it is accepted that the oil companies " In what could be considered as tacit collusion " are setting petrol prices free from outside competition or interference then does the government have the right to intervene in the pricing mechanism?

For example to suggest some "adjustable price formula" to ensure that petrol and other main oil products are sold on fair basis). And will companies accept such formulation? Both parties will argue a case of collusion versus regulations and interference but once all parties agree on a principle then a fair and correct way out could be found.

The other very important issue that needs addressing is the status of the Refinery as an independent enterprise. Here we have two contradicting views, while some argue that the refinery should run economically in a manner similar to say the "Singapore" refineries* and hence to set the Singapore export prices as a benchmark in comparing products cost at "Marsden Refinery" the oil companies could argue that the refinery is more expensive to run and has to continue operating (for security of supply and other strategic reasons).The truth is that the refinery is highly flexible and efficient, producing (high value products) and hence should be highly competitive. Again there is a good deal of truth in both arguments and a mid- way solution is possible.

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