Fuel prices to come under govt scrutiny

The Government will look into whether prices at the petrol pump are fair, and the minister in charge is confident oil companies will cooperate.

Energy and Resources Minister Judith Collins announced the market study into fuel prices and returns on Thursday. It is expected to be completed within months.

It comes after the AA noticed prices between the South Island and the rest of the country varied by as much as 40c a litre.

Watch the video below for Newshub's latest report on petrol prices.

Ms Collins says Ministry of Business, Innovation and Employment (MBIE) data shows fuel margins have more than doubled in the past five years.

MBIE will run the study, which will delve into the finances of oil companies and report on their returns, and look to see whether they're making "super-normal profits" or not.

Ms Collins says the market study can be done reasonably quickly "and will help to build a more informed picture of the overall performance of the fuel market".

She is confident the companies will work with MBIE.

"It is in the best interests of everyone, including oil companies, to make sure New Zealand has quality, reliable and reasonably priced fuel."

The national price of fuel rose by five cents per litre in January and government figures show the difference between what the fuel companies pay for petrol and what they sell it for has risen to 35 cents per litre.

But the AA says that doesn't make sense.

"When we look at commodity prices and exchange rate movements we don't understand why prices rose by five cents," AA Petrol Watch spokesman Mark Stockdale says.

"In fact, if anything the retail price should have fallen and not gone up."

The terms of reference of the study will be finalised shortly.