Petrol, electricity and LPG

As if having the skyrocketing price of bread wasn't bad enough, petrol has been on the way back up again. Not that you'd know it by looking at the world price of crude oil, which has been hovering under US$50 a barrel since last November.

It's not the oil producers that are to blame for this. The culprits are the international refinery companies, which seem to have taken the opportunity to expand their margins. Caltex Australia's latest half-year review shows how they do this - with "major planned maintenance" shutdowns and "unplanned shutdowns".

Basically the international refineries have been putting the brakes on production as quickly as they can, to "better align" supply and demand. And it seems to be working ... at least for their shareholders.

Electricity

When we looked at electricity price increases last June the standard industry justification was "demand has increased and electricity generation hasn't kept up".

Current wholesale prices for electricity are below last year's levels - so there's no obvious sign of a short-term mismatch between supply and demand. But retail prices keep rising. Meridian Energy is the latest to implement an increase: up 6.5 percent in mid March. Increases for some of Genesis's and Trustpower's South Island customers are coming soon. Since February last year electricity prices to residential customers have increased by around 13 percent.

Big profit increases

Recent profit announcements from the electricity companies give a clue as to what's going on. State-owned companies Genesis Energy, Mighty River Power and Transpower have been enjoying huge profit increases. Genesis Energy's profits in the six months to December were 56 percent up on the same period of the previous year; Mighty River's were up 34 percent; Transpower's were up 27 percent.

To justify these profit increases, the companies point to their plans to expand generation capacity and upgrade facilities. Transpower, for example, has $3.8 billion of investment planned over the next five years and is bringing forward maintenance work because of electricity failures in Auckland in February.

It appears, though, that the government may be getting less tolerant of the companies passing on anticipated costs through price increases. Simon Power, the Minister for SOEs, has said he wants to make sure the SOEs are "contributing to the economy in an efficient way". We hope that will mean closer public scrutiny of electricity-company costs and less tolerance of price hikes.

LPG no answer

If you don't like what's happening to your petrol or electricity prices, don't think you'll do any better by changing to LPG. The price of this has soared in the last few years. LPG is an industry concentrated in the hands of few players and its pricing is unclear. We think the LPG industry should get a re-look by the Commerce Commission (see our LPG prices report).