New Zealand fuel market financial performance study

Abstract

Our study addresses three questions: 1. Are retail fuel prices reasonable? 2. What factors could explain regional differences in those prices? 3. Is there evidence of cross-subsidisation between products and markets? One of the key focuses of the study was to determine if retail prices were reasonable by assessing a market Return on Average Capital Employed (ROACE) and comparing this market return to a market Weighted Average Cost of Capital (WACC). This analysis, based on financial information provided by the majors, would have then been used to determine if the market was earning significant returns in excess of the market WACC, which may have indicated that retail prices were unreasonable. However, we were not able to complete this analysis as financial data provided by the majors was not provided on a comparable basis. In addition, some of the majors were not able to provide sufficient information within the timeframes for us to report. We discuss the limitations in respect of data received in detail in Section 4 of our report.