Prices differentiated by location

We drove back to Wellington from Ohope yesterday and, having been intrigued by some incredibly low petrol prices in Otaki as we had driven north, my trusty research assistant set out to jot down all the petrol prices (for 91) we saw as we drove home again.  She only fell asleep once, necessitating a momentary stop in Foxton so that I could take down the  –  rather low – price there

To the owner of the G.A.S. outlet at Lake Rotoma I can only offer the advice that if you want passing motorists to buy your petrol, it probably pays to make the price visible from the road.

This is what we saw:

Whakatane           178.7/9

Awakeri                 188.9

Rotorua                  162.7/9    (this was three stations on the road to the airport; one other a few kms away by Whakarewarewa was advertising 182.9)

Waiotapu                178.9

Taupo                       185.9 to 190.9

Te Rangiita             192.9 and 194.9

Turangi                    194.9

Waiouru                   197.9

Taihape                    195.9

Hunterville             195.9/196.9

Bulls                          191.9

Sanson                      192.9

Foxton                       179

Levin                          176.7 to 180.9

Otaki                          205.9

Waikanae                  191.9/193.9

Paraparaumu           193.9

Plimmerton              206.9 to 208.9

Central Wellington   208.9

Given that the retail price of petrol has a very large tax component, it is an extraordinary range of prices: 46.2 cents from low to high.   The AA website tells me that on each litre of petrol there is a fixed 67.284 cents per litre tax component, with the variable (in terms of cents per litre) GST on top of that.    That means the price of petrol excluding excise is around 50 per cent higher in Wellington (141.6 cents per litre) than in Rotorua (95.4 cents per litre).  Yes, there are some differences in transport costs –  but not much between Whakatane and Awakeri, or between Levin and Otaki.  The biggest difference –  and the rather obvious one –  is the state of competition in the respective markets.  Gull (and Waitomo in Foxton) seems to more or less have guaranteed low prices.  Absent that sort of competition and prospects aren’t good at all.  Sadly for Wellingtonians there is no such aggressive competition here.

I don’t have a policy point to make, but surely there must be a market opportunity here? Levin just isn’t that far from Wellington, and they seem to manage.

On another topic, what to make of the Peter Thiel citizenship story?

Had the man wished to settle here I’d have had no objection.  He seems to be of good character, unlikely to burden the New Zealand taxpayer, and there might even be some of the famed spillover benefits (the immigration advocates are always championing) to New Zealanders had he done so.

But, and while the facts seem to be emerging quite slowly, there is no sign that he had ever intended to settle here. And, one would have to ask, why would someone like him seriously think of doing so –  being fully engaged in the US political processs, and heavily involved in industries that are centred in the US?

Against that backdrop, it looks as though we (well, the government) have simply “sold” him citizenship.     The sort of thing they used to do in places like Tonga and Panama –  and still apparently do in some otherwise respectable countries.

I’m not sure what advantages there are to a New Zealand passport for someone who doesn’t want to live here.  For some, perhaps it is the number of countries people can travel to visa-free.  For others perhaps, it is a way around the overseas investment restrictions on purchases of New Zealand land.  I think most of those restrictions should be abolished, but I don’t think our government should be offering sweetheart deals to wealthy foreigners to enable them to get around laws and restrictions that our Parliament has passed.

One of the newspapers today reports the government suggesting that up to 300 grants of citizenship are made each year under the “exceptional circumstances” provisions.  If so, that is extraordinary, and is being done with little or no transparency.  I’d have no problem with a very rare grant of citizenship to, say, an international human rights campaigner declared stateless (and passportless) by their own country –  which is the sort of circumstance a superficial reading of the statutory provision seems to suggest.

But citizenship is more than just a certificate of convenience.  It is about membership in a nation.  Mostly it comes by birth or descent.  For most others, it involves moving here, settling here, and intending to stay –  to become an ongoing part of the group of people who are New Zealand.    Sure, the boundaries can be fuzzy.    There are people who were born here, who no longer live here and have never paid New Zealand taxes, who are still New Zealand citizens.  But a relationship by birth/blood is different than one by administrative grant.

Thiel, it seems, has never lived here, and probably has no intention to do so.  By contrast, a typical migrant who moves here –  0r indeed someone who has citizenship by descent (including two of my children) but wishes to be a fully naturalised New Zealand – not only has to have lived here for a sustained period (typically five years) but must intend to keep living here.  As the Department of Internal Affairs website puts it

You have to plan to keep living in NZ. If you don’t, it has to be because you’ll be:

  • working overseas for the New Zealand government
  • working for an international organisation the NZ government is a member of (like the UN), or
  • employed by a person or organisation that’s based in NZ.

There is simply no sign that Peter Thiel would have met that test.   Again, perhaps there is a case for fast-tracking a grant of citizenship on rare occasions (eg to represent the country in an international event) but even then surely only for someone where there is an intention to stay living here.

It isn’t even clear what contribution Thiel has made that might have enabled the Minister to be satisfied that there were exceptional circumstances.  There are reports of a large donation to an earthquake charity in 2011 –  which looks uncomfortably like a “fee”, but with the benefit not even going to the public purse –  and talk of investment in some New Zealand companies, which seems mostly like private benefits all round (to the investor, and to the invested in).

At very least, if we are going to grant ministers of the Crown authority to make discretionary grants of citizenship, the public needs some more protections.    Perhaps in any case where the Minister proposes to exercise this discretionary power, the name of the person should be notified in the Gazette for, say, two months prior to the grant of citizenship? Ministers could be statutorily required to have regard to any submissions made on the proposed citizenship grants.

Granting citizenship to Thiel isn’t corruption in any direct sense –  no doubt it was done quite lawfully.  But the statutory provisions, when used in this way  –  even for an otherwise blameless individual – risk corrupting what it means to be a citizen, and gives too much discretionary power to ministers and their officials who can use the power of membership of this country to serve their own interests.  Citizenship is a privilege; one that should be secured by birth or prolonged residence (I’d probably favour a period longer than five years, but that is incidental).  And it should be a matter of entitlement once specific pre-specified detailed conditions are met.  Citizenship in a serious country shouldn’t be on offer to people with no familial connection to New Zealand, no evidence of having settled here and no plans to make New Zealand their primary location, and certainly not to people –  however able – who are willing to disburse money to favoured causes.

Finally, in a week when on the one hand “alternative facts” has entered the political lexicon, and on the other when the latest Demographia housing numbers are out, one is reminded that this citizenship grant occurred under a government led by a Prime Minister willing to assert, in defiance of all the facts, that high and rising house prices were simply a mark of how well New Zealand was doing, and how desirable New Zealand was as a place to live.  As distasteful as Trump’s are, alternative facts aren’t new.

 

33 thoughts on “Prices differentiated by location

    • The seat of power and prime directive decisions are made in Wellington. Xero is headquartered in Wellington. So I guess the stench starts in Wellington I would guess.

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  1. My parents report that Otaki has had cheap petrol in the past, but had thought it had gone up recently. Seems to match your observations. Did I see something about Gull being sold recently?

    Thiel – I think we still have a citizenship for sale program, probably a few million required to be invested, and I think most put it in government bonds. So doesn’t really cost anything other than lost opportunity to do something better.

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  2. Yes, Gull was sold, but from reports I’ve seen the new owners claim to be planning to maintain the business model, and as another commenter pointed out there is a new outlet just opening in New Plymouth.

    The “for sale” programme only earns residency, and getting from residency to citizenship takes residence. It isn’t a particularly compelling programme – in terms of benefits to NZers – and even MBIE/govt seem to recognise that, but it doesn’t sell a passport without (a) residence, and (b) intent to remain

    Liked by 1 person

  3. I agree G.A.S has a branding problem. There is one on Stoddart Road in Mt Roskill. It is only recently I realised that GAS is a petrol station. I must have driven past them thousands of times without realising its petrol they sell.

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  4. Interesting, when I visited NZ a few years ago I was struck on how little change in petrol prices there were from the north down to the south Island. It was a far cry from OZ

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    • Difference would be

      In AU the further you drive from a main metro centre the more expensive the petrol

      In NZ from Michaels observations the reverse seems to be so

      The further you drive from a port of entry the less expensive it is

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    • The question this raises is, Did Michael use the same brand petrol station throughout his pricing study? Which is unlikely as GAS stations are few and far between and pretty difficult to find.

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      • We noted down every single petrol outlet we saw, including the brand for each. I didn’t mention it because there was no obvious material differences, except that in places where Gull and a mainstream brand were both available together (eg just across the road from each other) Gull seemed to set prices 0.2 cents per litre lower than their competitor.

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  5. From what I have read there was no ‘selling’ of citizenship – donation notwithstanding – we gave it to him in the hope he’d invest here more. To me it smacks of being flattered by someone important – which is cringe worthy in itself. It will be interesting if the case put to Nathan Guy ever gets released.

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    • Sounds like a plausible interpretation, altho the timing of the donation is enough to raise questions. Clearly it isn’t just about “fee for service”, but politicians simply shouldn’t be able to confer citizenship on those they happen to become enamoured with.

      Liked by 1 person

    • Not too sure why the Isreal spies bothered to procure fake NZ passports in the first place. I am sure if they asked for a couple of spares with a investment in Kiwi bonds, they could have legitimately bought kiwi passports and save themselves the embarrassment of being caught with fake kiwi passports.

      Liked by 1 person

  6. Michael I hope you had a good holiday with your family. But on a personal level it is good to have you back : )

    I have written an article which follows on from your “Perhaps there is a way” article about Tokyo’s affordable housing which you might be interested in.

    View story at Medium.com

    Liked by 3 people

    • “Michael Reddell -the economist who frequently advocates for large cuts in New Zealand’s immigration rate.”

      Brendon, you have got the first sentence in your article wrong. Immigration consists of 5 major categories.

      1. Migrant arrivals
      2. International students
      3. Foreign workers
      4. Returning New Zealanders
      5. Long stay tourists

      Michael frequently advocates for a reduction in the governments Residency target from 50,000 to 15,000. He does not actually advocate for large cuts in the immigration rate. There is a difference.

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      • Brendon, as immigration is the very first line in your article and you are quoting someone else and the subject matter is about a migrant granted a citizenship rather than Tokyo affordability, I thought it is more appropriate to comment about the inaccuracy on the correct subject matter which is immigration and migrants and the fact is, it is not the same. The definition is important because the housing needs are different for the different immigrant category.

        There is a 6th category which is not part of the immigrant or the residency migrant category but they do take up accomodation space and that is the impact by the 4 million tourists a year plus also domestic travellers. Air BnB has 17,000 private residential home owners registered. In effect as many as 17,000 properties have been removed from normal tenancy.

        Liked by 1 person

      • There is a 6th category which is not part of the immigrant or the residency migrant category but they do take up accomodation space and that is the impact by the 4 million tourists a year plus also domestic travellers. Air BnB has 17,000 private residential home owners registered. In effect as many as 17,000 properties have been removed from normal tenancy.

        Not so fast.
        Air BnB is not always a full house. I have customers who rent a room on a nightly basis. They do not discriminate between locals (well sometimes) and tourists from offshore.

        But the general gist of what you say is right. People forget that we are bedding these 3.5 million tourists and that this adds to the needed accommodation.
        some numbers about that;
        Thats some extra 67000 people per week or 67k bednights.
        or 9570 each night.
        Add the 70k immigrants and the temporary visa’s etc and you can begin to understand the housing problem.
        Imagine what it would be like if people didn’t rent rooms per night. and of course Air BNB are not the only ones doing this. Add in Bookabatch and others.

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  7. I also have qualms about selling citizenship but I think in the case of Thiel he really was a special case. Private investors who can back companies like Xero are rare, even in the UHNW community, due to the extreme uncertainty. The reputational and networking impact of having Thiel as an investor would be very large. Clearly both his investment philosophy (described in Zero To One) and his political philosophy (informed by Rene Girard’s theories of performative sacrifice) are way out there. But he does seem to get it very spectacularly right from time to time. I would rather have 1 Peter Thiel here for 6 weeks a year than 1000 Kim Dotcoms here full time.

    Liked by 1 person

    • Can’t disagree (at all) with your final sentence. I guess the question is whether he’d have invested in Xero without being a citizen. If it was a good opportunity, it was whether or not he had a NZ passport (esp as he apparently had permanent residence).

      Liked by 1 person

  8. Re petrol prices, Gull only has a terminal at mt Maunganui. A truck driver’s road hours are limited by law. That limits the distance Gull can profitably move fuel in a shift. That is why Gull is not in Wellington.

    The regional price differential is down to localised competition to maintain volumes.

    It’s always funny when people complain when prices differ because usually they complain about collusion when they are all the same.

    More concerning on prices is the steep increase in margins that has been a market feature since Z entered the market. Margins on petrol have doubled. That’s why the sale price for Gull recently was so high and why Caltex wanted into the market. Z shareholders have done very well and the other companies have ridden their coattails.

    Liked by 1 person

    • Thanks for the detail re truckdrivers’ hours. That was the bit of the picture I was unaware of.

      As I say, I don’t have a policy gripe on this issue – and am usually sceptical of the case for competition policy interventions – but over time, presumably, if the margins are that large (a point Hamish Rutherford’s piece in today’s Dom-Post also makes) the economics would look favourable for Gull or some other entrant to set up a terminal at Wgtn, and in the South Island?

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      • Building a terminal is really expensive and hard with planning rules. I suspect to be self sufficient you have to build at least 3 large tanks to cater for diesel and petrol and swing capacity when you have to do maintenance. It could be $10m a tank.

        The other companies share assets which gives them a huge advantage. I assume Gull either hasn’t been able to negotiate access on favourable terms or the others refuse to seriously negotiate.

        I don’t know if Gull asked, but I thought the comcom might have forced Z to divest tanks on favourable terms when they took over chevron – they forces the sale of a bunch of service stations. It could be that gull was happy where they were in the market – bigger may not be better – or were more focused on their sale.

        Note that truck issue is a real problem for the resilience of Auckland if the Marsden pipeline fails significantly.

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    • I actually did my honours thesis on the petrol pricing disparity between metro Adelaide and regional towns. The distance coefficient was positively correlated with price margin (over metro), but the coefficient for the number of vendors was negative (no surprise there). More interestingly perhaps, I built out some coefficients to estimate the amount of informed demand (via the local traffic population) and uninformed demand (coming from major highway traffic counts), and that ran as expected: large uninformed demand resulted in positive impact on prices, and large informed demand resulted in a negative impact on prices.

      Which is another way of saying that if you live in a small town with one petrol station and lots of through traffic, the vendor will charge up to the marginal cost of transport to the nearest alternative (and maybe even beyond it depending on how informed that through traffic is). This probably correlates with your own personal experience too – when you arrive in a town in a hurry and you’re not even sure how many service stations there are, you’re not usually in the mood to shop around to save a few cents.

      Not sure what the policy option here is. Western Australia tried to run with some compulsory price notification system, which may have actually led to price rises, not falls. When I worked at a service station in a two station town, my boss always told me to note down the price at the competitor station (first hand evidence of tacit collusion if you ever needed it). I think most of the policy options available look worse than the status quo. I might wonder what the impact of planning rules (either around land use or traffic management) might impact the decision to build a new service station. Likewise health, safety, and dangerous goods handling regulations – the impact of these regulations might deter a lot of very small operators who seem to have disappeared from the sector in the last generation, who could have been well suited to undercutting some lazy regional pricing strategies.

      Or alternatively, it just might not be worth it in most cases, or it might not be economic for many existing operators aside from all those sunk costs. Retail margins are nothing, and most places only make money from the shop.

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  9. On Peter Thiel we can’t know his motivations, but we do know he has invested in New Zealand businesses (at least Xero) and seems to be a fan of this country.

    The fact that he is not ‘resident’ is irrelevant as there are many New Zealand citizens who live and work abroad, and in Thiel’s case his work in Silicon Valley really doesn’t afford him the luxury of being in NZ. Maybe when he wants to ‘retire’ he will relocate to NZ and live here.

    HIs emergence of a support of Trump only came out in the last 12 months, long after his citizenship was granted and seems to have been a surprise to many many people. This so called story is just a summer beat up by bored and disaffected media.

    So Thiel has the ear of Trump… so has Chris Liddell and he is also a New Zealand citizen. Big whoop… nothing to see here…

    Liked by 1 person

  10. I disagree (and that is despite having nothing in particular against Thiel,despite his out-there views – gay libertarian etc)

    I think there is a profound difference between citizenship by birth, and that acquired later. That latter should, in my view, quite reasonably require an expectation of residency and an expectation of continuing residence/allegiance. One could think of family parallels – family members go their separate ways often enough but are still family, but one wouldn’t adopt someone who wasn’t going to live with the family or identify with them in any material ways.

    I’m not aware that there is anything much a citizen can do that a resident can’t – standing for Parliament and a few national security sensitive jobs aside – other than sensitive land purchases and a NZ passport.

    And, to be clear, I still find much more egregious the Labour govt”s grant of citizenship, against the advice of officials, to Bill Liu

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  11. Citizenship for sale

    I’m a cynic – Whenever this stuff blows up the first thing that comes to mind are brown-paper-bags

    There are 200 to 300 exceptional cases a year which bypass the criteria applied to the peons

    Who are they – lets have a published list instead of the usual behind closed doors stuff

    Then there is the exception which paved the way for Treasury Secretary Gabriel Makhlouf to get his own citizenship outside the usual criteria and with it a valuable New Zealand passport

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  12. The reason Gull is not in Wellington is probably related to zoning rules. I don’t think an extra day’s pay for a truck driver is driving a decision not to operate a large station in the region. There is a Gull in relatively isolated Masterton – one hour from the next metro or Gull station, to serve a region with 10s of 1000s of people, in contrast to the 100s of 1000s in Wellington/Hutt/Poririua.

    The truth of the matter is probably related to the slow Council zoning processes and NIMBY objections to a new petrol station. That is in addition to the potential for cartel-like behaviour from incumbent petrol retailers blocking new sites (or picking them off themselves), given they stand to lose the most (those $0.40 / litre rents you note above Michael). The three large retailers club together on their fuel imports/refining at Marsden Point. As another poster noted, Gull import already refined fuel into Tauranga.

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    • Interesting angle. You may be right, altho (a) presumably Gull’s margins are pretty tight, so the significance of the truck driver costs could be larger than they would otherwise be, and (b) it can’t be wholly coincidental that Gull has managed to establish in a wide range of North Island places, where presumably the incentives/constraints (planning, existing operators) are also pretty real, but not in the largish city at the outer limits (or just beyond) of a working day’s drive from Tauranga. Of course, flat land is at more of a premium in Wellington – but less so in Porirua or the Hutt.

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      • I think the resources required to truck fuel to Wellington would be far lower than the likely resources required to secure a site in the region: 3-5 years on RMA proceedings, addressing NIMBY concerns, Council ‘design requirements’, monopolistic pricing of urban land which is also probably bid up by the petrol retailing “competition”, council planning ideology and “centres” policies opposed to anything other than hipster cafes… That would see to your tight margin pretty quickly.

        Why are we assuming the fuel has to be delivered in one day from Tauranga. With stations in Palmerston North, another in Manawatu/Horowhenua somewhere, one in Wairarapa and one or two in Wellington/Hutt/Porirua, it would probably be economic to have a bunker/depot in Palmerston North.

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  13. Fun (and interesting) article on petrol prices!
    All I’d add is that
    – in my experience petrol stations that don’t display their prices have a good reason for it (they’re high), and
    – you might be interested in this comment: “Commissioner Walker’s dissenting view is that there is evidence to suggest that coordination of retail prices is already occurring in some local markets, which would become more firmly entrenched with the [Z/Chevron] merger. Moreover, the permanent removal of a competing supply chain means the potential for Chevron’s assets to disrupt coordination in the future is gone”. From
    http://www.comcom.govt.nz/the-commission/media-centre/media-releases/2016/z-energy-cleared-to-acquire-chevron-subject-to-divestments/

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