6. Key Issues
The Petroleum Products Specifications Regulations have been in place since 1989. Sections 3, 4 and 5 of this Resource Document have described the technological and legislative context, and the commercial and political climate in which petrol and diesel are supplied and used in New Zealand. This information, together with the outcomes set out in the Discussion Document (see What we do and don't want from petrol and What we do and don't want fromdiesel - in the Discussion Document) and the guidance of the underlying principles for the Review (listed in Appendix A), provide the basis for assessing the specifications and Regulations in detail and making any recommendations for changes.
It is apparent that there are competing tensions in some of the underlying principles, and that trade-offs may have to be made in some cases. These have been outlined in developing the recommendations presented in Sections 7, 8 and 9 of this Resource Document, and this section summarises those key issues.
6.1 Key Issues for the Fuel Supply Market
- Any changes to the specifications and/or regulations must promote competition in the fuel supply market, both domestically and internationally, in both the retail and refining sectors.
- The continuing role of Marsden Point Refinery as the major source of supply in New Zealand must be recognised. The strategic value and economic benefits of a New Zealand refinery must be balanced against its ability to compete in the Asia Pacific refining market.
- There should be movement towards international harmonisation in specifications as far as possible. New Zealand is too small to support specifications that are significantly different from elsewhere.
- Fuel specifications need to be internally consistent, reflecting the interdependence within products and between products. We should avoid a hybrid specification that is difficult or expensive to produce.
- Given New Zealand's market size, geography, and fuel distribution infrastructure, the scope for regional or sectoral variations in fuel specifications is limited.
6.2 Key Issues for Fuel Use
6.2.1 Vehicle Fleet
- New Zealand's fleet is unique. Our fuel needs to match both current and future needs.
- Introduction of new vehicle technology should be encouraged and customer demand for cleaner/more efficient vehicles met by ensuring the ready availability of the fuels they require. Until now, fuel quality has not been a limiting factor in the performance of vehicle technology, but this is now changing. The timing of the recommended changes must therefore reflect expected development and uptake times for the relevant technologies (see Section 6.4).
6.2.2 Consumer Protection
- Fuels must provide reliable and consistent performance. Controlling variability can ensure this, but this must be balanced against over-regulation, which creates an unnecessary compliance burden on suppliers.
- The specifications must ensure that New Zealand does not become a dumping ground for poor quality fuel.
- Customer safety and product satisfaction must be assured, through identification and labelling.
6.3 Key Issues for Environment and Health
- While the effects of fuel quality changes alone on emissions from vehicles are relatively small, real benefits accrue when the fuel enables new technologies to be introduced. This is intrinsically linked with the timing considerations in aligning the required fuel quality with the vehicle fleet.
- New Zealand's air monitoring data confirms that reductions of some priority pollutants are needed now, to protect public health in some areas of the country, primarily urban road corridors. Some changes in fuel quality will provide direct public health benefits. (e.g. reducing sulphur in diesel to minimise secondary pollutant levels, reducing benzene levels in petrol).
- The potential environmental impacts associated with certain fuel constituents (for example, MTBE) must also be recognised. Where the risk is still unknown, or significant uncertainty remains, a precautionary approach has been taken.
- The potential for regional specifications to address local air quality problems must be recognised although, as noted earlier, this may be limited by the distribution infrastructure.
6.4 Timing
The proposed changes outlined in the following sections are timed to occur over the next five to six years. Some changes are proposed to have immediate effect. In most cases, this is to regulate for good practice already occurring. Other changes are proposed to coincide with technological advances in the fuel processing and vehicle manufacturing industries. Unless there are demonstrable benefits, it has not been recommended that any changes are made in advance of Australian and European requirements, as this may unnecessarily create barriers for suppliers. For some parameters (e.g. sulphur in diesel, benzene and distillation end point in petrol) a staged programme has been proposed that will allow suppliers to introduce changes over a period of time.
These stages recognise the timetables for changing specifications elsewhere in the region, estimated lead times for refinery upgrading and the availability of new vehicle technology. The proposed changes also recognise the strong interdependence of many of the specified fuel properties.
The amended Regulations will contain firm dates when the changes must be in place.
Immediate changes will be implemented as soon as the new Regulations can be issued. This is anticipated to be around mid-2002.
Stage 1 changes will be implemented in 2-3 years' time (2003 - 2004)
Stage 2 changes will be implemented 5-6 years' time (2006 - 2007)