Energy crisis: How the world is combatting skyrocketing fuel prices as Cabinet considers options

Cabinet will decide on Monday afternoon how to alleviate the pain of an "energy crisis", with the Prime Minister signalling some form of fuel tax relief could be an option.

The Government has previously refused to commit to intervening at the petrol pump, but there was a change in tune from Jacinda Ardern on Monday morning as she finally acknowledged New Zealand is facing a cost-of-living crisis.

Inflation is at a 30-year high - mostly due to the pandemic, supply chains issues and geopolitical tensions - and Russia's invasion of Ukraine in February isn't helping, leading oil prices to head north. Petrol is well above $3 at many stations across the country and there are warnings it could soon hit $4.

"You can call it a crisis, an emergency, a shock. The point is, we need to do something about it," the Prime Minister told AM.

Ardern said Cabinet will this afternoon consider "options to try and ease the particular impact of the energy crisis right now", with an announcement likely at her subsequent press conference. 

Numerous levies and duties on fuel mean Kiwis pay about $0.77 in tax per litre, as well as GST and a contribution to the Emissions Trading Scheme (ETS) - plus the regional fuel tax if you're in Auckland.

Energy crisis: How the world is combatting skyrocketing fuel prices as Cabinet considers options
Photo credit: MBIE.

The Government's been reluctant to cut any of that as it funds maintenance and improvements to our transport network, something the Prime Minister acknowledged on Monday would need to be compensated.

"We are looking to move quite quickly because the impact of that war is happening quite quickly too," Ardern said.

However, she said there aren't many options that "allow you to move very quickly" and altering GST would "take a long time".

Other countries have already made moves to combat rising fuel prices.

On Sunday, French Prime Minister Jean Castex said his Government will introduce a rebate of 0.15 euros (NZ$0.24) per litre for four months from April 1. That would save a motorist about NZ$14.44 on a 60-litre fuel tank and is expected to cost France, which is about to head into an election, more than NZ$3 billion. 

Ireland and Portugal made similar temporary cuts last week. The Irish finance minister warned "we are experiencing the consequences of a war". 

"The government is acting now, with this excise measure in response to price rises that we have seen today but also in anticipation of further rises that we do expect to see over the short- to medium-term," said Paschal Donohoe.

However, it is reported that fuel retailers upped their prices in Ireland within 24 hours of that announcement. 

The Canadian province of Alberta said last Tuesday that it would pause collecting its CA$0.13 (NZ$0.15) per litre fuel tax. The measure will be reviewed quarterly. 

A number of US states are currently considering suspending fuel taxes and their leaders are calling on the White House to do more to curb prices. 

The UK Government is facing similar pleas but says it is already doing what it can to combat high prices. 

"The £12 billion in support that we’ve already announced to help with the cost of living includes a freeze on fuel duty for the twelfth year in a row – the longest sustained freeze in British history," Reuters reported a spokesperson as saying.

Across the Tasman in Australia, South Australia Premier has written to the federal government urging it to reduce fuel excise tax of AU$0.442 (NZ$0.47) per litre. 

Prime Minister Scott Morrison isn't committing to anything yet, but pointed to the fact the country's Budget will be delivered at the end of the month. He also noted that increases seen at Australian petrol pumps in recent months have been more than the excise tax itself.

Across her media interviews on Monday, Ardern pushed back on the suggestion there had been a shift in her approach to cost of living.

The Prime Minister, who last week saw Labour fall behind National in a new television poll, said she has previously acknowledged the cost pressures on Kiwis and that the Government was ready to assist, such as with increases to the minimum wage and Family Tax Credits in April as well as the Winter Energy Payment returning in May. 

National has called for the Government to scrap the Auckland Regional Fuel Tax and also help Kiwis by adjusting tax to match inflation. ACT on Sunday revealed a policy to give New Zealanders $187 each in a Carbon Tax Refund out of the ETS.

Finance Minister Grant Robertson spoke with his finance counterparts from the United States, Britain, Australia and Canada last Thursday about the global issue. 

"All countries on the call are facing high energy prices in dealing with the impacts of supply chain issues, the invasion and other drivers of inflation," Robertson said. 

"Obviously we do want to see increased oil supplies around the world to help the immediate situation but in the long-term moves towards energy independence are vitally important. In the short-term, the Government will continue to support low- and middle-income families to help deal with the impacts of this global energy shock."