Oil deregulation some time off

Press, 6 February 1986, Page 6

Oil deregulation some time off

By

MARTIN FREETH

in Wellington

Deregulation of the oil distribution industry, which could open the way for petrol price discounting, is still some time away.

The Government now has proposals from officials for deregulation. But oil distribution is the nation’s most controlled industry and deregulation is a highly complex issue, likely to require long consultation with interested parties. Oil company sources said yesterday they were uncertain what to expect in deregulatory moves. Petrol and other oil products have been under price control for 50 years, and both wholesale and retail margins are fixed by the Government.

Petrol outlets are licensed, and the four big oil companies hold the only wholesale licences. The companies are not permitted to own petrol stations, other than a few acquired before the early 19505.

Pricing and licensing changes could see oil companies acquiring outlets and competing for motorists’ custom with discounted prices in main centres.

Deregulation proposals are part of the Government’s drive towards a freer market economy, and awareness of the present slump in world oil prices. The heavy debts incurred in the Marsden Point refinery expansion are a big consideration for the Government.

Under present financial arrangements, the costs are borne by a levy on domestic petrol sales and the oil companies are encouraged to continue using the refinery, even though importing refined product may be more economic. Eventual deregulation could change arrangements for Marsden Point to permit more refined oil imports, and reduce the debt burden which has been blamed for preventing lower world prices being reflected in local retail prices. The Government has indicated that discussions on the proposals will involve the oil companies and the Motor Trade Association, which represents petrol retailers.