Energy Minister Megan Woods says if the Government reversed its fuel taxes, petrol companies would probably keep their prices at record highs and "gobble up" the difference.
The Government recently allowed Auckland Council to put an 11.5c tax on fuel in the super city region, to help pay for its much-needed transport infrastructure. It comes on top of a nationwide 3.5c increase in excise tax.
There have been calls from the Opposition to can the increases to give Kiwi motorists a break, but the Government says it's fuel companies that have been "fleecing" their customers, in Prime Minister Jacinda Ardern's words.
Ms Woods told Newshub Nation on Saturday only a "fraction" of the 39c rise in the average price of a litre of petrol over the last 12 months is tax.
"Since 2008, New Zealand has gone from having one of the lowest pre-tax prices of petrol to the highest in the OECD so that we've seen that as increasing. So I have absolutely no faith - and, certainly, the Prime Minister has absolutely no faith - that if we were to simply remove the excise, that we wouldn't see that… gobbled up."
The Commerce Commission will soon be given power to get information from the petrol companies so it can better understand how the market if functioning.
"We are literally changing the law so the Commerce Commission can go in and demand information from the fuel companies," Ms Ardern said earlier this week.
Ms Woods says the price differences between regions can't be fully explained by the companies' costs.
"In the South Island and Wellington region, where we don't have the same number of players able to enter the market, that we're paying higher prices."
She says the construction of a new terminal in Timaru may bring others into the market in the South Island, but other options - including price regulation and forcing companies to operate in more areas - are being considered if that fails.