Oil, overheads, taxes – the price at the pump


Oil prices have slumped on world markets. But petrol and diesel prices have not fallen by anywhere near that amount. Why?

It is because crude oil is only one of several factors that determine the pump prices. They are not even the biggest influence.

Crude oil is selling for just over US$30 a barrel on the US market. But the refined product ranges from around US$46 a barrel for diesel to US$48 a barrel for petrol.

The price of refined fuel accounts for about 25 percent of the petrol pump price.

Around 25 percent of the cost at the pumps is the operating costs (and profits) of the fuel companies.

The rest is the tax.

Taxes account for around 50 percent of the cost of each litre of petrol. There is no tax on diesel except for GST.

The AA says that taxes account for 92 cents of the price of a litre of unleaded 91 petrol. That compares to 53 cents per litre back in 2003 when crude oil was last at these levels.

The revenue from the tax is mostly spent on roads, road safety and public transport.

But one of the taxes is GST. It means there is a tax on a tax. The AA has called for the removal of the GST on the petrol excise tax. It says this would reduce the cost of a litre of petrol by around 10 cents.

The fall in the price of crude has seen winners and losers this week on the New Zealand and Australian share markets.

Air New Zealand is one of the winners.

It made a net six month profit of $338 million, an increase of 154 percent.

The airline's pre-tax earnings increased 132 percent to $457 million dollars. It says lower fuel costs and a rise in passenger numbers drove the increase in profits.

But its arch rival Qantas is also benefiting from the drop in aviation fuel prices. It announced a record six-month profit of Australian $921 million. That was due in large part to the fall in the price of aviation fuel. Its lower fuel bill saved the company $448 million.

New Zealand Refining is one of the winners. It has announced a $150 million dollar six month profit, with its revenue almost doubling to $445 million dollars.

It is benefiting from the gap between low crude oil prices and the higher prices that the refined product is fetching on world markets

Mining giant BHP Billiton is one of the companies that is suffering from the fall in crude oil prices. It has announced a US$5.66 billion dollar loss for the six months to December. Underlying profit of US$412 million turned into a loss once the company accounted for write-downs on its oil assets.