A jump at the pump: Government has little control as petrol tops $3 a litre

Thursday, 10 March 2022

Petrol prices are expected to rise in the next few weeks.

As petrol prices topped $3 in most parts of the country this week, the Government says it can do little to ease the pressure at the pump.

Finance Minister Grant Robertson said on Thursday it was “not the end of the road” for petrol and diesel price hikes.

“I can’t give you a specific dollar term, but it's quite clear petrol prices will continue to rise while the impacts of the Russian invasion are felt,” Robertson said.

But he would not say if the Government had looked at temporarily scraping or lowering taxes on fuel.

“When we make a decision like that, we've got to be aware of the consequences of it for longer term issues in terms of how we fund transport,” he said.

Prime Minister Jacinda Ardern talks petrol prices while on a visit to Dunedin.

* Economics aside, the Budget rules were self-imposed for entirely political reasons

* Higher petrol prices are better for us in the long run

In Ireland, the government agreed to slash excise duty on petrol from midnight on Wednesday by 20 euro cents (NZ40c) on unleaded petrol, 15c on diesel and 2c on agricultural diesel until the end of August at a cost of €320 million.

That was expected to reduce the cost of a 60-litre tank of petrol by €12 and €9 for diesel.

The New Zealand Government collects 77.28c a litre as fuel excise, while Aucklanders pay an extra 10c a litre for petrol and diesel through the regional fuel tax.

But less than half of the $515 million collected through the tax had been spent.

Petrol prices in Auckland were above $3.

Robertson said the Government was focused on alleviating pressure on middle- and low-income families, and hoped an increase in the minimum wage and Working for Families tax credit would help.

“But it sits among a number of ways in which we can help alleviate the impact of the increasing cost of living,” he said.

Prime Minister Jacinda Ardern said the Government had committed to not increase the fuel excise this term.

The last time oil prices were this high was in 2008, at the time of the global financial crisis, when Brent Crude oil topped US$143 (NZ$209) a barrel.

Brent Crude oil was trading about US$114 a barrel on Thursday, down from a peak of US$132 on March 8.

“So what we're seeing here is the impact of a global energy shock,” Ardern said.

The recent increases were off the back of already high prices due to global supply chain issues caused by Covid-19.

AA motoring policy principal adviser Terry Collins said there was little the Government could do about the price of fuel.

Forty per cent was the cost of the fuel itself, duties, levies and tax made up another 45 per cent and the remaining 15 per cent covered logistics and profit margins for wholesalers and retailers.

About 70c a litre goes to maintaining roads, but the price of road repairs and building will go up, because bitumen comes from oil, he said.

Opposition leader Christopher Luxon in February called for the Government to scrap Auckland’s regional fuel tax.

But Collins said that would put the cost of Auckland's roading issues onto the rest of the country.

“Is there a lot the Government can do? The simple answer is no.”

Collins’ advice to drivers was to shop around, because there prices could vary up to a 50c a litre at service stations in Auckland and Wellington.