Cost of living: Labour minister Andrew Little expects petrol prices will 'continue to fluctuate' after tax cut expiry

Senior minister Andrew Little says petrol prices will eventually come back down again as New Zealanders flock to the pump ahead of Saturday's dreaded end to discounted fuel.

The Government will add 29 cents per litre worth of tax back on at midnight after more than a year of cheaper petrol. 

It was first introduced to help Kiwis tackle the cost of living crisis when fuel prices had climbed above $3 per litre.

The Government, in Budget 2023, announced alternative cost-of-living support for New Zealanders - including the expansion of the early childhood subsidy (the viability of which was criticised by the sector) as well as half-price and free transport fares for people under 25 and no charges for children aged between 5 and 12.  

But from Saturday the tax is being reintroduced which means more pain at the pump for Kiwis. 

Little told AM on Friday petrol prices have always fluctuated and that's not going to change. 

"Even with the cut in the fuel tax, prices went up and down - they'll continue to go up and down," he told host Ryan Bridge.

"That won't change."

Asked whether he thought petrol prices would rise on Saturday, Little pointed to that being the nature of the industry.

"This is the life of retail, right? So the opportunity to justify a price increase - expect the prices to increase but, over time, the petrol prices will continue to fluctuate [and] that reflects a whole bunch of other factors other than just the fuel tax," he said.

A Commerce Commission market study into the New Zealand fuel retail market, published in 2019, highlighted several ways Kiwis were being forced to pay more than they should. Since then, however, the COVID-19 pandemic and the Russia-Ukraine war have caused further volatility in the global oil market. 

In the 2019 report, the Commerce Commission made multiple recommendations - including regulating wholesale supply contracts to allow greater freedom for resellers to compare offers and switch prices. 

Late last year, the commission was given the power to set fairer fuel prices by the Government. 

The Government first announced a 25-cent fuel excise duty reduction in March last year. Initially, it was only meant to last three months but has since been extended multiple times.

At the time, Finance Minister Grant Robertson said the policy had directly helped Kiwis and brought inflation down by about 0.5 percent.