Oil industry deregulation ‘stalled’ by problems

Press, 17 October 1987, Page 6

Oil industry deregulation ‘stalled’ by problems

By

OLIVER RIDDELL

in Wellington

The Brierley/Fay Richwhite move to move into retail service stations will not force the Government’s hand to deregulate the oil industry, according to the Minister of Energy, Mr Butcher.

He was commenting on the announcement that Brierley Investments, Ltd, and Fay Richwhite and Company, Ltd, will each take a 42.5 per cent interest in the new $4O million chain of service stations to be developed for convenience retailing. This move is expected to accelerate a shake-up

of the oil industry.

Mr Butcher said the Government was keen to get on with deregulation anyway.

This follows the policy of the Ministry of Energy in its briefing papers. They said the main target for oil industry deregulation was oil product retailing.

New Zealand had far too many service stations and competition was being choked by price controls, the papers said.

Conditions did exist for effective competition because there were many players in the market, it was relatively easy to buy

a service station, and the product was available from many different suppliers worldwide. Deregulation of retailing had been stalled by the inability to resolve problems in the refining and wholesaling sectors, the papers said. As long as the refinery and wholesalers enjoyed a protected position, similar protection needed to be afforded retailers.

In the event of deregulation, it was likely that wholesalers would wish to enter retailing and integrate their operations, the papers said. The independent retailers would

find it hard to survive, particularly if the wholesalers were the only suppliers of products allowed. That problem would be lessened if retailers could obtain products directly from overseas, or from new wholesalers who were product importers.

While the economic efficiencies from deregulation were clear, it would have other consequences, the papers said.

The most obvious was the likely introduction of price differentials, for petrol particularly, favouring urban areas at the expense of the provinces and rural districts.