Petrol prices: BP reveals what it spends your money on

Fuel retailer BP has been offering customers a glimpse at just what goes into the cost of a litre of petrol.

Newshub found glossy pamphlets explaining where the money goes at one of the nationwide chain's stations.

According to BP:

  • 37 percent is the cost of the product
  • 2 percent is shipping
  • 2 percent is the Emissions Trading Scheme levy, otherwise known as the 'carbon tax'
  • 44 percent is taxes, including excise duty, GST and ACC levies
  • 15 percent is operating costs and margin.

"In New Zealand, taxes make up around 44 percent of the retail petrol price - the single biggest component," the pamphlet claims. This isn't including the 10c Auckland regional fuel tax, which itself generates another 1.5c in GST.

Newshub put these claims to the Automobile Association (AA), which has its own fuel price breakdown on its website that differs from BP's claims. According to the AA, as of December 14 when the national price was $2.04, fuel importer margins were higher - 21 percent.

BP pamphlet
Photo credit: BP

But AA spokesperson Mark Stockdale said BP's figures were fair, because they would be based on the average price BP had charged over the stated time period - July 1 to September 30 of last year.

"That's actually quite fair to use the average fuel price. The AA doesn't use the average fuel price - the price that we calculate the margin from is what we euphemistically call the 'national price'. It's sort of a high price - it tends to be the price that's charged in Wellington and the main centres in the South Island.

"But the reality is there's a lot of price discounting going on... where it wasn't uncommon for service stations to be charging 20c a litre or below that national price the AA quotes."

Those discounts come out of the fuel retailers' margins, hence the lower figure of 15 percent in BP's pamphlet.

The Ministry of Business, Innovation and Employment tracks fuel prices closely, and its figures say importer margins are at around 29.5c a litre - almost bang-on the 15 percent that BP claims.

Increasing margins
 

That margin has increased over the last decade. After decades of decline, it bottomed out in 2009 at 10c a litre, before steadily rising back up to levels not seen since the mid-1990s.

Petrol margins.
Petrol margins. Photo credit: MBIE

But at the same time, the average cents-per-litre discount for customers with loyalty schemes has risen from 2c to 15c.

Petrol discounts.
Petrol discounts. Photo credit: MBIE

Before deregulation in the late 1980s, margins were as high as 75c a litre (in 2017 dollars). 

Mr Stockdale said correspondence from members regarding the cost of petrol peaked in September-October, when prices reached as high as $2.49 a litre, but has since fizzled out.

"Since then prices have dropped significantly... and now they're around $2 a litre, and lower in some places."

Why is still cheaper to buy petrol in Auckland?
 

Last year, the Government passed legislation allowing Auckland Council to slap a 10c/litre fuel tax on the region's pumps, with GST on top of that. Prices instantly jumped, but are now below what they were when the tax was introduced - and cheaper than many other locations around the country.

And petrol doesn't seem to be any more expensive in remote North Island locations than port cities, such as Picton and Christchurch.

That's because the price we pay at the pump isn't wholly dictated by taxes and costs, says Mr Stockdale.

"People often get confused and think the price of fuel should be cheaper in port cities than in Taupo because fuel doesn't have very far to travel - whereas you've got to truck it a long way to Taupo. So they think the price should be higher in Taupo because of the additional trucking costs - no, that's not the case.

"The retail price is due to local competition, and at that time it was lower throughout much of the North Island because there is just more intense price competition in the North Island. They will simply charge a lower retail price.

How do we compare with the Aussies?
 

Taxes do play a massive part in the difference in cost between Aotearoa and Australia.

"Australia's fuel is usually 60c to 70c cheaper than New Zealand's because of tax. We are paying 50c to 60c a litre more tax - the difference being the Auckland regional fuel tax.

"So depending on where you are, we are paying 50c to 60c a litre more tax than they are, then when you add in the slight differences in the exchange rate, usually we see a difference of around 60c to 70c a litre. That is almost all due to tax."

Even then, the AA notes New Zealand has the six-lowest fuel taxes in the world, with many in the OECD paying two-thirds of the pump cost in tax.

Prime Minister Jacinda Ardern has previously said New Zealand, due its remote location, pays the highest pre-tax price for imported petrol in the OECD.

BP did not respond to Newshub's request for comment. It's not clear how long the pamphlets have been handed out. They are also available on the fuel giant's website.

Newshub.

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