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Photo of the day: Fuel Subsidies

Spotted at my local Pak’n Save. I wonder what food prices would be if they weren’t being used to subsidise petrol.

Fuel Subsidies

47 comments to Photo of the day: Fuel Subsidies

  • Lance

    I wonder what food prices would be if it were not for the political stupidity of Bio Fuel. We can all thank Greenpeace for soaring food prices.

    • Pete g

      Typically biofuel is waste from other processes, converted from Algae or grown on secondary land so in NZ, it should not take productive land. And from memory the amount of biofuel is a tiny percent of the total transport fuel used. Pac n save typically have unmanned sites so one big overhead is removed in terms of staffing costs. British airways are even attempting to run their London city operations on it and Z are looking to build a plant in Wiri so business can’t be all bad

    • Stu Donovan

      Lance, I suspect you’re attributing blame to the wrong organisations. I’d expect the political pressure for bio-fuels subsidies originate with agricultural lobby groups.

    • In this country, not very different at all. As has been said, NZ’s (very small) biofuel industry uses waste from other industries as feedstock; tallow and wood waste are the main two. We have no grain industry worth a damn, and certainly not one with enough clout to force subsidies that raise food prices as a result of food diversion into fuel. This is not the US, and American political issues are irrelevant to the situation in this country.

      You’d do well to remember that before bitching about something that’s not an issue and even if it were would not be the fault of the group at whose feet you lay the misplaced blame.

      • JJ

        Bio fuel was once the [edited as per user guideline #1, #3, #4, #5, and #6].

        While NZ may produce some of its Bio from Tallow it has a history of also making Bio from Rape Seed and imported Sugar Beat ethanol. NZ is a long way from being able to say we use only sustainable Bio Mass.

        [edited as per user guideline #1, #3, #4, #5, and #6].

  • Jammer

    probably not much different. they are only using to get people to go to their store rather than a competitor. claiming that they are subsiding people’s petrol is a little alarmist/leftist

    • Stu Donovan

      Hmmm … then why has the Australian Commerce Commission and the Supermarkets signed an agreement to cap fuel discounts?

      • John Polkinghorne

        I’d imagine the Commerce Commission is mainly interested in the potential of these vouchers to reduce competition in the petrol retailing sector, since petrol stations which aren’t involved in the deals from any of the supermarkets can be left out of the fun. The CC wouldn’t be involved if the vouchers were for something where there are a larger number of competitors, e.g. fashion stores. There is also the possibility that rival chains running similar promotions of this nature can indicate collusion, whether deliberate or otherwise, and that could be a factor I guess…

      • Molly Woppy

        Personally, I have more of an issue with the card promotion Countdown are running at the moment – more rubbish for no benefit. At least fuel vouchers are useful for many, although I take your point that they are less accessible to people on lower incomes (if you are a non-driver, perhaps consider donating them to a local charity). Supermarkets spend money on promotion to increase their market share. If it wasn’t spent on petrol vouchers (or if the voucher scheme wasn’t driving sales) it would be spent on something else that brings in business.

        • Bryce P

          The Disney one? The one that the kids love? That’s a bit mean.

          • Molly Woppy

            I am a mother. Mean is part of the job requirement :) I have seen these “collectable” cards come and go for a number of years now and the kids love them for five minutes before the next thing comes along (leaving a mountain of rubbish in their wake). Plus it is basically marketing Disney’s product* to the kids (as well as encouraging parents to make unnecessary purchases).
            Sorry – a bit off topic but I was really responding to the argument that if you don’t use the petrol vouchers, you are paying for other people’s petrol. The same goes for any of these promotions.

            *FWIW – I love many of the Disney movies.

    • Loraxus

      Bull. Essentially, they are giving you free petrol with your food. If you don’t take that up because you have no car, or because you don’t buy enough to get the big discounts ($200 groceries is not something everyone can afford) then yes, you pay for other people’s petrol.

    • doloras

      People who use “leftist” as an insult should really not be on a public transport blog. Buses are socialist and have poor people on them, you know.

  • What’s that, about a 20% discount? Nothing to sneeze at.

  • Stu Donovan

    it’s ridiculous. Assuming 40 litre fill-up you get a $16 discount = 8% of food bill. Given slim margins in food retailing that almost certainly has to be anti-competitive pricing. Plus everyone else buying food/petrol is paying more than they should be. Plus the people who don’t qualify for these discounts will tend to be lower income, i.e. it’s regressive.

    These kinds of discounts are undesirable in every shape or form. There’s no way it can lead to lower prices or more competition, on average.

    Commerce Commission where are you …

  • Bryce P

    Just give me a cash discount thanks.

  • Stranded on the North Shore

    The same deal applied to Countdown last weekend… And if you shop online, you only get $10 off with the same amount of spend… what is that about?

  • Felix Alexander

    Sort of. If the internet is any guide (I haven’t bought petrol this year), the discounts are still happening but they can’t be more than 4c a litre instead of 8c like they were so often last year, and supermarkets can’t cross-subsidise.

    But seeing as while the practice lasted almost all of the independent servos closed and Coles and Woolies servos are the most common chains, I think this can be counted as a success from their shareholder’s terms, and they aren’t likely to lose very much.

    Mind you, I think Coles might’ve been pleased it ended. It looked like they were struggling a bit: while I was driving I usually avoided their joints because they were charging 2c/L more than the rest so often.

  • I can understand why the commerce commission won’t go after this: The schemes are very popular with New Zealanders, and if something is popular, there’s little reason to regard it as an issue. New Zealand also doesn’t have truely independent fuel retailers like Australia does, so they are all accepting the vouchers and redeeming the subsidy. All service stations in New Zealand get their fuel through the big four fuel companies, whether they are owned by those companies or are independent.

    The commerce commission btw has already stated its position on this.

    http://retailnews.co.nz/2013/12/commerce-commission-looking-follow-aussie-counterpart-seek-slash-supermarket-fuel-discounts-market-different/

    Transport Blog could always try making a complaint to the commission, which they would be obligated to consider, but I would expect a public backlash against the blog if you did (assuming the complaint was reported in the media anyway). You would very much be a lone voice of dissent.

    If it ain’t broke, don’t fix it!

    • Stu Donovan

      You know the saying “if it’s too good to be true it usually is?”.

      It’s certainly broke – the only question is how long the uber-markets can get away with it.

  • Simon

    I can’t comment on whether offering the discounts is legal as I don’t have sufficient understanding of that part of our law. However, I don’t see why the Commerce Commission would care whether the discounts are popular or not. As a crown entity they are once removed from popular and political pressure. Surely their role is to undertake their regulartory obligations within their scope. Clearly there is an issue here with benefits to drivers coming on the back of non-driving shoppers and the exclusion of shoppers with an inability to spend $200 in one go.

    • There’s nothing illegal about fuel discounts. Minimum spends for eligibility of discounts or loyalty rewards is normal practice in most businesses that sell anything.

      • Stu Donovan

        This is not a minimum spend discount/reward.

        A minimum spend discount = spend more than $100; get $5 off.

        A minimum spend reward = spend $1000 on Air New Zealand airfares; get $50 in Airpoints.

        This is a strange “minimum spend subsidy” for a product sold by another company that is used

        It’s so bizarre, so so bizarre.

    • Peter

      I have unability to spend $200 in one go cus i use PT i cant carry that much shopping. I usually by on demand as opposed to stocking up which also keeps fresher food in the cupboard. But either way vouchers are useless to me as i choose not to use a private vehicle.

  • Bryan

    Pak’n’Save only did it because Countdown did it first. I made sure I stocked up on a few items to get over the threshold, but as Pak’n’Save’s prices are lower than the Countdown across the road, and the I can fill up the car while I’m at the supermarket, it saves having to drive further to a petrol station.

    The real question is how many of these fuel vouchers are actually redeemed? And is it any worse than the loss-leader “specials” or all the money wasted on gloosy brochures from Countdown and New World (12km away!).

  • Ari

    If you don’t like the policy, then don’t shop there. No one is forcing you to shop there. It is a free country and businesses can do whatever they like to make money. Supermarkets arent there to give you cheap food. They are there to get you to pay the most they possibly can for their goods. Food prices would be STILL THE SAME with or without the policy. It is a PROMOTION and obviously it is an effective one, else it would have been stopped a while ago. If they didnt run the promotion, they would still keep all the money to THEMSELVES. They wouldn’t start subsidising food for no reason or handing money back to people.

    • Jordan

      “It is a free country and businesses can do whatever they like to make money.”

      Nope. Employment law (can’t pay your workers $2/hour just to make more money), health and safety obligations (can’t refuse to have fire exits just to save money), consumer protection (can’t mislead customers just to make more money), taxation (can’t not pay company tax just to save money), competition law, alcohol and tobacco law, company law…

      Or did you mean businesses can do whatever they like within the boundaries of the law to make money?

      Because then, well, sure. The original post is a thought experiment, not the promulgation of an enforceable ban on supermarket cross-subsidisation. We’re not discussing what Pak N Save can or must do, we’re talking what about Pak N Save should do.

    • Bryce P

      Shouldn’t be able to loss lead with fuel discounts though. They’ve removed most of that from alcohol sales I believe.

      • Steve D

        > They’ve removed most of that from alcohol sales I believe.

        There’s a cap on the percentage discount, but it’s something like 15% or 20%. Similar sort of range to a 40c fuel voucher.

      • JJ

        Why shouldn’t they be allowed to loss lead with fuel? I can understand not loss leading with alcohol and tobacco but why would bananas be ok and fuel not?
        Why would loss leading with full fat or high sugar or High GI be ok but petrol not?
        Sometimes I wonder if people think about what they post here before pressing enter.

  • Ari

    Obviously Jordan I meant legally. I am takling about what Pak N Save should do.

    Why shouldn’t supermarkets be allowed to do this?

    • Precisely, it’s their business, and most of their customers drive to get there, so it’s an obvious promotion to have. I can’t see any reason why it should be made illegal. There’s nothing actually wrong with it, or immoral about it.

      Every item in every shop of every kind will either be of relevance or no relevance to each person, you don’t see some silly rule dictating “only items of relevance to every single shopper may be price discounted”.

      The Australian action was over an issue that doesn’t apply in New Zealand, related to fuel retailers, and not the supermarkets themselves, so there’s just no comparison or relevance to New Zealand.

      • Stu Donovan

        I suspect this is anti-competitive on many levels: It’s supermarkets trying to strangle smaller food suppliers and restaurants (with which they do compete on one level) while simultaneously reducing competition in the fuel retailing business by “locking in customers”.

        Whether or not the Commerce Commission can intervene is actually of less interest to me. The reality is these discounts are a terrible development, basically an arms race between two oligipolistic supermarkets whereby sub-marginal discounting on one non-essential product (fuel) is cross-subsidised by higher prices on essential product (food).

        It also increases economic costs across the board: The costs associated with administering and marketing these “discounts” are a net economic loss to society.

        So so bad.

        And very different from a normal loyalty programme, which usually involves companies paying to collect information on their customers purchasing habits/trends so that they can better target their products.

        • Kent Lundberg

          Also a quick check of rates. The Pak n Save on Lincoln Rd pays $5.89/m2 a year in rates, while the Nosh on Dominion Rd $14.43/m2. The sprawl, wreck city, subsidise driving model is also subsidised by the ratepayer.

        • They are not anti-competitive on any level, as indicated by the commerce commission. The fuel discount offers are no different to any other discount offer of any kind offered by any business. It’s normal and very common to offer greater discounts the more one spends.

          You only object because it promotes driving.

  • Ari

    Personally, these promotions do not influence where I choose to shop. But I would say fuel is an essential item for 80% of Aucklanders. Hence why the scheme is an excellent form of promotion. The costs of administering and marketing the discounts are minimal. It is entirely automated. Again, if the scheme didnt pay off financially by attracting more customers, the companies wouldnt run the scheme. They would do something else instead.

    As I said before, if you don’t like it, shop somewhere else. If enough people do that, then supermarkets will change their tactics accordingly. It is the power of the semi-free market. Of course, most people probably get cheaper overall food from the two supermarket chains and it is more convenient than going to several smaller stores which may have cheaper items.

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  • Except it’s not a discount of your food shopping. What you save in fuel you’ve spent in higher grocery prices. Where do you think the supermarket gets the money to pay your fuel discount from?

    • Oops this was a reply to a comment that got removed (trolling I guess), I think I was reading an old cached version of this page – please delete as it’s no longer relevant.

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