The Government has begun the year-long investigation into the petrol industry – almost two months after Prime Minister Jacinda Ardern said consumers were being "fleeced". 

Commerce and Consumer Affairs Minister Kris Faafoi told Mike Hosking New Zealanders are concerned that they aren't getting a fair deal at the pump.

"There are issues that we need to look at. I think making sure that we can have a look at the fuel markets, what competition issues lie behind that and making sure we can give New Zealanders some peace of mind is the right thing to do."

"For some time they've [New Zealanders] been asking, quite rightly, whether they are getting a fair deal."

When asked, "what is a fair deal?", Faafoi said it's about making sure Kiwis "aren't paying an excessive amount.

"It's making sure the margins that companies are making aren't excessive. That there is good competition within the market, either barriers to competition coming in or to those already in the market."

"I think at the end of the day, making sure we aren't paying an excessive amount that could be spent on other things. There's 6 billion litres of petrol purchased every year in New Zealand so it's a big wack of our economy and most New Zealanders want some peace of mind that they aren't paying too much."

He said the Commerce Commission will decide what a "fair margin" is in their investigation.

Mike Hosking challenged the Minister over his statement asking, "so you're telling me they will literally make that up?".

Faafoi replied, "No, they won't. I think what they are going to do and what they have the power to do now, which is a new power for them, is to be able to dig deep into the details of the wholesale, retail and refinery margins and competition and get an idea of how this industry works".

He said at the end of the day it's up to the government to decide what's a fair margin.

"It will be up to the government to look at the recommendation of the Commerce Commission, post the study and I don't want to preempt that, to determine whether or not we need to take action."

Once the report is back there will be a range of options for the government to decide between, he said. 

"It's going to be up to the government to respond to them. If there are rather large issues then we will have to but at the other end of the spectrum  they might come back and say, "everything's sweet" so I don't want to preempt anything."

The Commerce Amendment Bill, which passed last month, gives the Commerce Commission power to initiate market studies into certain industries.

Prime Minister Jacinda Ardern has previously said petrol companies were fleecing consumers and questioned their high margins.

She said New Zealanders "deserve peace of mind that the price they're paying at the pump is fair."

"At the moment, we can't definitively say whether that is, in fact, the case across New Zealand so this is a market that most certainly warrants a full investigation."

She said the Government is committed "to easing financial pressure on families".

Under the legislation, the Minister of Commerce must officially nominate an industry for the Commerce Commission to probe.

The terms and reference of the market study said the commission would look into the structure of the industry, as well as "any factors that may hinder competition between industry participants".

It would also look at the conditions for entry for any potential entrant into the petrol market.

The commission would have the power to compel petrol companies to provide financial information.