In 2019 the Commerce Commission spent millions of dollars on a study of the fuel market which was ordered by the
Government to look at issues surrounding rising fuel prices. Released in early December 2019, the report did nothing but show show how inept the Commerce Commission really is, and rather than focussing or trying to understand why fuel prices are set like they are, they instead focused on setting regulations in place to ensure that the wholesale fuel market would work efficiently, somehow believing this would drive down retail fuel prices.
It largely ignored the impact of the Auckland Regional fuel tax and how this tax is effectively being paid by all NZers. It also largely ignored how and why regional discounting is occuring. It could have talked about how fuel is being sold below cost in some regions of New Zealand, leading to inflated prices in other regions to recover these losses, but that barely got a mention.
It barely touched on the issue of discounting schemes such as AA Smartfuel and instant discounts at BP, Z, Caltex and Mobil and how they inflate retail prices, nor did it mention how the AA profit from Smartfuel by licencing their name to the joint venture and receiving a share of the profits from retailers who pay to be part of the scheme.
The least the Commerce Commission could have done would have been to ask Aucklanders to thank the rest of the country for paying for their roads with the introduction of a 11.5c Auckland region fuel tax by transport Minister Phil Twyford. But it didn’t.
We've ended up with an intensely competitive retail fuel market with very slim retail margins that is relying on average pricing across the country in order to deliver returns. Those areas with super cheap petrol are effectively being subsidised by areas selling petrol at a higher price, which in turn averages out returns across the whole country. It's an incredibly intense job for those actually setting pricing for any of the big fuel companies.
The industry is so competitive that in November, Z Energy reported a net profit per litre of 3.5 cents per litre after tax for the first half of the 2020 financial year. That's an incredibly slim profit on something being sold for over $2 per litre.
But the Commerce Commission weren't interested in this. They weren't interested in the fact that big fuel companies have turned buying petrol into a game where you have to shop around for discounts, drive around putting $40 in each time to stack discounts, or even stand pumping gas from two different pumps. None of that interested them. They just took their millions and ran all while delivering a report that they were convinced would drive fuel prices down by regulating wholesale. It won't.
A key focus for Z Energy last year was to look at ways to differentiate themselves in an incredibly competitive retail market. One concept that came out of Z Energy was Sharetank. I talked about fuel companies turning buying fuel into a game - Sharetank is just that.
So what is Sharetank?
Sharetank allows Z customers using the Z app on their phone to prepay for fuel at the cheapest possible price within 30km of their location. It uses your phone's GPS location (which can't be fooled by spoofing apps - they thought of that) and looks at prices at every Z station within a 30km radius and allows you to prepay for up to 1000 litres of fuel at the cheapest price.
Right now you're probably thinking that's rather boring.. But wait. You probabably aren't understanding the potential way it can be used.
You can join a Sharetank group with up to 5 friends who do not need to be in the same city as you. This has meant that Sharetank has been a great way for people to effectively avoid paying the Auckland fuel tax.
Somebody (or a company even) who is say based in Rotorua where petrol has always been priced well below prices in Auckland or Wellington could prepay for petrol at the pump price in Rotorua and then others anywhere around the country simply scan use their app at the pump and receive petrol at the cheaper price. This can mean dicsounts of up to around 40 cents per litre.
It was a way for Z to maintain or even gain market share in areas where regional discounting wasn't occuring. They knew that people would play the game and then visit Z over other chains due to the discounts that Z could offer in regions where petrol wasn’t being discounted.
Right now in Wellington playing the game means you can have an instant saving of up to 34 cents per litre on fuel.
With the opening of Gull in Petone last week the price of fuel in the Wellington regional varies greatly. At the time of writing this 91 is currently being sold for 204.9 at Z Petone and 238.9 at Z sites in Wellington City including Taranaki St, Vivian St and Miramar. 95 is being sold for 218.9 at Z in Petone and 252.9 at those same City sites.
If you use the Z app anywhere within a 30km radius of Petone you can currently purchase fuel at the cheaper Petone price and then redeem that at a local Z site anywhere in the Wellington region where pricing is higher, meaning you can instantly save up to 34 cents per litre on fuel. There is no need to drive to Petone to save on fuel.
So how do I use it? It’s simple. Download the Z app to your phone and click on Sharetank. Select your preferred fuel type and then select how much you would like to pre purchase. You can maintain a balance of up to 1000 litres of fuel.
Once you’re done click on checkout. You’ll need to enter your credit card details and your purchase will be complete. Don’t forget to add your Airpoints or Fly Buys card number to earn points – it’s important to note that you will not get an additional 6 cents per litre “Pumped” discount off this price.
When you now go back to the Sharetank page in the app it’ll show your current balance of fuel. You can mantain a balance of multiple different fuel types – 91, 95 and diesel.
So now you’ve purchased your discount fuel, how do you redeem it? That’s dead simple as well. Simply drive to your nearest Z site and select the Sharetank option from the self service pump. If the Z site does not have a self service option you’ll need to head into the counter and tell them you want to redeem your Sharetank fuel.
After you’ve pressed the Sharetank button click the “Redeem Balance” option in the app and scan the QR code displayed on the screen of your phone. You can now fill up.
Once you hang up the pump the app will immediately be updated to reflect the new balance of your Sharetank account.
I disagree with the concept of Z turning buying fuel into a game, but when that game allows instant savings that are so significant even I’m willing to play.
With fuel prices being what they are in Wellington now, Sharetank means anybody in the Wellington region outside Petone will be within a 30km radius of Petone and will be able to purchase fuel at present for up to 34 cents per litre less than their local Z is selling fuel for. That’s winning in anybody’s books.
And as the Commerce Commission.. Well. Better luck next time. When you fail to understand how a market actually works you’re highly unlikely to be able to make changes to it.
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