7. Fixed Sales Requirement
7.1 This section outlines initial thinking with regards to a fixed sales requirement. The material presented here is "high level", and will be further developed by the Ministry of Economic Development following consultation.
Description
7.2 If there is a risk of fuel hoarding or panic buying, government could introduce regulations under the Petroleum Demand Restraint Act (1981) or the International Energy Agreement Act (1976) to restrict all individual fuel sales to a specified fixed quantity (by sales or volume). For example, all sales would have to be for exactly 25 litres of fuel. The purchaser would be required to pre-pay for the specified quantity of fuel regardless of whether or not there was room for that amount in their tank.
Purpose
7.3 The purpose of a fixed sales requirement is to prevent a supply disruption from escalating into physical shortages by ensuring against frequent topping-up of fuel tanks. It may also ensure a more equitable fuel supply to consumers during a supply disruption.
7.4 A fixed sales requirement would almost certainly be introduced as an interim measure if the government planned to implement rationing. A rationing scheme would need to be advertised in advance and would take time to roll-out, necessitating the use of a fixed sales requirement to prevent customers hoarding prior to the rationing scheme being introduced.
Further Implementation Details
7.5 A fixed sales requirement would need to be implemented very rapidly with no pre-warning to the public (advance notice would create incentives for customers to fill-up quickly before the scheme entered into force). At the time of implementation, the government would announce the scheme via TV, radio, and the press. The government would also provide the oil companies with signs to be displayed at all forecourts. Forecourts may be required to shut for a specified period of time (e.g. 1 hour) to receive instructions, erect signage, brief staff, and take any other measures necessary to implement the scheme. The posters and other government communication with the public would make it clear that this is a government imposed regulation - not an individual company restriction.
STEP 1: oil companies receive notification of plans to implement a minimum sales requirement and additional information on how to implement the scheme including government posters. Oil companies to deliver information to all retail sites under their jurisdiction.
STEP 2: The government announces the introduction of a minimum sales requirement to the public and all forecourts close briefly to erect signage and prepare.
7.6 It is likely that a fixed sales requirement would include a complete ban on sales of fuel in containers. This is to prevent customers filling up containers and then using that fuel to top up their vehicle tanks. A ban on sales in containers would also prevent potential hazards due to people hoarding fuel in unsuitable containers. Motorcycles and sales of LPG could be exempt from the requirement and there could be a different (or no) fixed sales requirement for heavy goods vehicles.
7.7 The decision on how to implement the requirement at each forecourt would be up to the companies. For example, it could involve controlling sales from the shop or having a forecourt attendant manage each pump (which may require restricting the number of pumps in operation).
7.8 The following table, from a study of New Zealand's available demand restraint options,9 summarises the implementation issues and costs and benefits of a fixed sales requirement.
Fixed Sales Requirement
| Component |
Comment |
| Description |
Sales of fuel are limited to a specified minimum, For example, all sales would have to be at least 25 litres. In practice this means that the purchaser is charged for 25 litres worth if the purchase is for less than this amount. |
| Legislation required |
Can be undertaken under the Petroleum Demand Restraint Act 1981 but requires a regulation to be drafted |
| Time to implement |
Clear instructions would need to be provided to all filling stations. Warning of this as a possibility should be provided as early as possible so that it can be implemented very quickly. If required, this measure will need to be introduced very rapidly. |
| Investment Required |
Minor. Need for instructions and publicity material |
| Central/local government |
Central government need to make a call on the need for minimum sales restrictions |
| Information Communication |
Publicity requirement via media and at filling stations. Clear instructions required for filling station attendants |
| Expected Costs |
Minimal costs for publicity material |
| Expected Benefits |
Avoidance of rapid problem escalation. Immediate filling of tanks could total as much as 10 days of consumption. |
| Time to achieve benefits |
Benefits are immediate |
| Effectiveness over short/long term |
Will obtain benefits throughout the programme |
| Effectiveness for severity of disruption |
Prevents a disruption escalating in severity. |
Comment
7.9 A fixed sales requirement is expected to be a cost-effective means of preventing an oil supply disruption from escalating into physical shortages.
7.10 It is estimated that panic purchasing of tanks could total as much as 10 days consumption.10 A fixed sales requirement would also ensure more equitable distribution of fuel in an oil supply disruption. The most significant cost is expected to be the cost of publicising the regulation. There may also be additional security costs surrounding the implementation and enforcement of any minimum sales requirement.
Areas for Feedback
This section outlines initial thinking with regards to a fixed sales requirement. The Ministry of Economic Development welcomes feedback on any implementation issues, costs, and benefits, of a fixed sales requirement.
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