Petrol has topped $3 a litre but why are prices rising so quickly?

Tuesday, 8 February 2022

Experts say the cost of petrol is likely to keep rising.

New Zealanders are used to seeing petrol prices head north, but the speed of recent increases has been enough to make even the most level head spin.

Fuel prices hit record highs at the weekend, with several stations across Auckland advertising unleaded 95 fuel for more than $3 a litre and 98 octane costing as much as $3.07 a litre at one site on Saturday.

Prices in Wellington and Christchurch were also approaching the $3 mark, with some coming as close as $2.99 for 95 octane.

So, why has the cost of filling up suddenly gone through the roof?

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While pointing the finger at the usual suspects including taxes and international unrest, experts said some newer factors were also at play.

Automobile association principal adviser Terry Collins said the Omicron outbreak, import costs and supply problems were also contributing to higher prices.

Domestically, the Emissions Trading Scheme levy had doubled over the last year and the reopening of New Zealand’s border could also increase demand for fuel, with more flights, the return of tourism, and an increase in commuting.

Motor Trade Association energy and environment sector manager Ian Baggott said it was important to remember 52 per cent of the price drivers paid for petrol was made up of taxes like fuel excise duty, the ETS levy, and GST.

“Another 37 per cent is made up of production and shipping costs. That leaves 10.6 per cent as the wholesaler and retailer margin, out of which they have to pay staff and operating costs, leases, distribution and other costs,” Baggott said.

“It’s understandable that motorists feel frustrated – for many people it’s the last thing they need right now. But don’t blame the petrol companies, and especially, don’t blame the person behind the counter.”

New Zealand imported much of its fuel either as refined product or crude oil and had no control over the price of this commodity on the international market, Baggott said.

For example, crude oil prices had increased around 25 per cent between December and January with a barrel now costing $92.

“Covid-19 has also had an impact. As countries around the world open up after Covid restrictions, they are resuming normal bulk fuel buying, which puts them at the head of the queue.”

And New Zealanders weren’t the only ones feeling pain at the pump – in Australia prices were approaching A$2 a litre, but the tax component there was considerably lower, he said.

“All indications are that due to the rising cost of crude and the weak Kiwi dollar, prices are likely to continue rising here. There is certainly a possibility that we will see $3 a litre for 91.”