Petrol prices have decreased, but is that just because of the Auckland Fuel Tax cut?

Thursday, 17 October 2024

Inflation data shows fuel prices are on the downturn, but is that just because Aucklanders got an 11.5 cent per litre cut last quarter?

Consumers price index data for the September quarter showed fuel prices had dropped 6.5% compared to the June quarter and 8.0% annually.

Economist Craig Renney said the fuel price change was largely due to the fact the Auckland Fuel Tax was removed on July 1, which immediately saw prices in the region drop about 11.5 cents per litre.

“Petrol pricing was supported by the one-off removal of the Auckland Fuel Tax, and with rising oil prices globally that fall is unlikely to be sustained,” he said.

But is this really the case?

AA principal advisor Terry Collins said the price at the pump was down to the price of oil, and as with any commodity, stock, or bond, the laws of supply and demand caused oil prices to change.

On September 11, oil reached its lowest price in three years, with a barrel of oil under US$70, falling more than US$12 in a month, a 17% reduction.

“The price was for October contracts which means we will see cheaper petrol and diesel coming and international market analysts predict this may last past Christmas,” he said.

The oil market had also become “bearish”, which exists in an economy that is receding, where most stocks are declining in value and because of this, it is expected demand will decrease thanks to a slow economic market in the US and China.

Tension in the Middle East was also causing uncertainty, with the market worried Israel would attack Iranian oil production facilities.

So what does this mean for petrol prices here?

“Our petrol and diesel come from Asian refineries who have purchased the oil. It is refined then shipped here. The purchase was in US dollars, so the exchange rate plays a factor,” Collins said.

“Once here we add fuel excise, ACC levy, emission trading scheme levy, a couple of smaller levies, supplier and retailer margins then GST to get our final retail price.

“Usually a $1 difference for a barrel of oil is reflected by 1 cent at the pump. So we probably have around another 12 cents of savings coming our way.”