Fuel prices: No plan to lower excise tax despite $3 pain at pump

The Government is not considering lowering the petrol excise duty despite motorists feeling pain at the pump as prices cross $3 a litre at some stores.

A quick scan of 91 petrol prices on price-tracking app Gaspy in Wellington show prices surpassing $2.80 a litre. For 95, it's closing in on $3, with Z Miramar and Z Broadway both charging $2.99 a litre. In Auckland, which has a 10 cent regional fuel tax, premium petrol is getting as high as $3.07.

Prime Minister Jacinda Ardern is putting this largely down to international factors affecting the cost of Crude oil, such as tensions between Russia and Ukraine, supply chain issues and companies moving towards renewable fuels. A barrel currently costs US$91, up 15 percent in January alone, with prices over the last week among the highest since 2014. 

"What we can see now is we are in an international environment where many other countries are experiencing the same insecurity based on issues that are outside of any country's control at the moment, particularly the international environment," Ardern said on Tuesday morning.

"We, of course, continue to monitor the market, do what we can domestically where in fact it is domestic issues at play, but at the moment, very much we're in a global environment where petrol prices, Crude prices are on the rise."

Fuel prices in New Zealand are made up of a number of duties, taxes and levies on top of the price fuel companies place on petrol and diesel. This can change depending on the cost of Crude oil and operating costs. Fuel companies also like to make a profit.

The last rise in petrol excise duty (PED) came in July 2020, the last of three annual increases of 3.5 cents per litre. The PED and road user charges are legislated rates and go towards the National Land Transport Fund which funds New Zealand's land transport network. 

The PED on fuel is 70.024 cents per litre. Other levies take the tax to 77.274 cents per litre, according to the Ministry of Business, Innovation and Employment. But that's excluding GST and there's also a rising Emissions Trading Scheme levy. Regular petrol had an average overall tax of about $1.15 in late January.

Fuel prices: No plan to lower excise tax despite $3 pain at pump

Following the 2020 increase, the Government ruled out any increase to PED for the next three years. 

Ardern said the Government isn't planning to lower the excise duty.

"Those are obviously legislated and set by regulation. That is not something we have given consideration to. 

"We are looking at where there is anything domestically at play in terms of our domestic market, but at the moment you can very clearly see we are not alone in the experience we are having."

She pointed out the Government has taken steps to try and make the fuel market more competitive in the hope that will lead to lower prices. The Fuel Industry Bill was passed in 2020 off the back of a Government-ordered fuel market study by the Commerce Commission, making several changes to increase local competition and transparency. That, however, doesn't influence global oil prices. 

National's finance spokesperson Simon Bridges says petrol prices are getting "ridiculous".

"We are heading towards, in fact in Auckland, Ponsonby I think it is, we are at $3. Unbelievable," he said on Tuesday.

"Reality of it is, yup there are international factors that Grant Robertson and Jacinda Ardern will blame. But what is true is that about a third of that on any given day is tax as well and they have increased those taxes in their four years in office."

Bridges supports ditching the regional fuel tax.

Motor Trade Association (MTA) energy and environment sector manager Ian Baggott said on Tuesday motorists shouldn't blame petrol companies for the increasing prices, and especially not staff working behind the counter. 

"All indications are that due to the rising cost of crude and the weak Kiwi dollar, prices are likely to continue rising here.

"There is certainly a possibility that we will see $3/litre for 91. We would ask motorists to remember that to a very large extent, these increases are beyond the fuel companies' control - so don't give the attendant an earful when you’re getting a tankful."

The rising cost of fuel comes as inflation jumps. The price of goods and services in New Zealand increased 5.9 percent in the last three months of 2021 compared to the same period in 2020, according to Stats NZ. It was the biggest jump since a 7.6 percent annual increase in 1990. 

According to ASB Bank, petrol prices saw a 30.7 percent annual increase.

The NZ Herald reported last month that as of December, less than half of the $515 million collected via the regional fuel tax had been spent. The tax is meant to go towards key transport projects in the city. 

Auckland Council says spending will ramp up as projects move into the construction phase, some of which have been delayed by COVID-19.

National's transport spokesperson Simeon Brown said at the time the tax should be scrapped if the revenue isn't being used.

"This will also benefit Aucklanders who are hurting from the cost of rapidly increasing fuel prices and high inflation," he said.