Fuel Quarterly Monitoring Report Explanatory Note
Changes in fuel importer cost model from quarter ending June 2025.
Purpose
The purpose of this note is to provide an overview of the data and methodology changes in the fuel importer cost model used in the Commerce Commission’s Fuel Quarterly Monitoring Reports. It also outlines the relative impact of the changes to overall fuel importer costs. The changes took effect from the quarter ending June 2025.
Changes to the fuel importer cost model were developed in consultation with industry stakeholders, including importers.
Prior to the quarter ending June 2025, importer costs for Fuel Quarterly Monitoring Reports were sourced from estimates published by the Ministry of Business, Innovation and Employment (MBIE).1
Changes to fuel importer cost model
From the quarter ending June 2025, the fuel importer cost model:
- includes costs related to the operation of fuel terminals;
- reflects industry informed assumptions for shipping, insurance and losses, demurrage and wharfage; and
- accounts for fuel purchase costs which more closely reflect New Zealand fuel quality standards.
The key differences between our importer cost model and MBIE’s importer cost estimates are outlined in the table below. The relative impact of each of the changes is also noted.
|
Changes |
Commission’s importer cost build model |
MBIE’s importer cost estimates |
Impact of Commission cost build model on overall importer costs |
|
Terminal costs |
Inclusion of costs associated with the operation of terminals |
No inclusion of terminal costs |
Increase in costs associated with importing and storing fuel |
|
Assumptions for shipping, insurance and losses and demurrage and wharfage |
Updated assumptions for insurance, losses and demurrage, informed by industry consultation. Shipping and freight adjustments from Worldscale (annual) and Baltic Exchange (daily). Average of wharfage fixed rates for the relevant period from Ports of Tauranga, Wellington and Lyttleton. |
Quarterly rates for insurance and losses determined by an independent advisor –Envisory. Shipping and freight adjustment from Argus Media (weekly) and Envisory (quarterly). Wharfage from Envisory (quarterly). |
Small decrease in cost |
|
Diesel: Fuel purchase costs |
Use of 10 sulphur ppm2 (New Zealand standard) |
Use of 50 sulphur ppm |
Small increase in cost |
|
Regular 91 and Premium 95: Fuel purchase cost |
Using market prices and comparator fuels, a blended model provides an estimated cost for purchasing Regular 91 and Premium 95. |
Fixed quality differential applied at the start of each quarter. |
Increase in cost |
|
Refining costs for Diesel, Regular 91 and Premium 95 |
Addition of a fixed quality premium of:
|
Included in the fixed quality differential (see above) which is applied at the start of each quarter. |
Increase in cost |
Impact of fuel importer cost model changes on wholesale and retail prices
Following the changes outlined above, we now use different approaches to how importer costs feed into wholesale and retail prices.
For wholesale prices and their components (eg Figures 1-3 and Tables 3 and 9) we calculate importer costs based on the specific terminal. Each terminal has unique associated costs depending on factors like shipping routes and operational expenses.
For retail prices and their components (eg Figures 8-10 and Table 5) the importer cost is not tied to a specific terminal sale, and instead we use a national average importer cost figure weighted by the volumes drawn from each terminal.
The difference in the two approaches reflects the fact that the information disclosures provide terminal-specific information for wholesale market transactions which enables a terminal-specific approach for wholesale prices and their components. For retail prices and their components we do not have terminal-specific level information for retail sites and so a national average approach is appropriate.
1MBIE Weekly Fuel Price Monitoringopen_in_new calculated by MBIE using their Weekly Fuel Price Monitoring Methodologyopen_in_new.
2ppm = parts per million, to express the concentration of sulphur in diesel
3bbl = barrel, where one barrel is equivalent to 42 US gallons (approximately 159 litres)