Petrol and diesel margins lower than thought, says Ministry

The Government thinks it has been overstating the margins being made by petrol and diesel importers.

Every week the Ministry of Economic Development publishes its estimates of how the price of regular petrol and diesel are made up.

Late last year it decided it needed to work on its methodology after it became apparent changes in fuel specifications and other issues were having an impact on the accuracy of its calculations.

And while many suffering motorists hold dark suspicions about who profits from high petrol and diesel prices, the MED today said recalculations confirmed importer margins during the past nine months were lower than previously reported.

The most noticeable change was for diesel, where oil companies had found an increasing difference between the cost of high sulphur diesel and the new lower-sulphur diesel, the MED said.

The companies were having to pay a higher premium for the new product, due to several Asia-Pacific countries changing to the lower-sulphur diesel about the same time as New Zealand, with constrained refining capacity internationally for the new product.

MED said the new calculations used more representative international benchmark prices, and improved freight and insurance cost estimates.

Its estimates break petrol and diesel prices down into three subgroups -- the importer margin; duties, taxes and direct levies; and the importer cost which includes, on top of the price of the fuel to the importer, the importation costs of freight, insurance, losses and wharfage.

Latest figures, for the week ending last Friday, put the importer margin at an unusually low 9.6c a litre, with taxes and levies of 67.4c, and importer costs of 91.9c, out of the total cost of 170.9c.

For diesel the latest importer margin is 12.1c, while taxes and levies take 14.6c and importer costs 96.3c out of the total cost of 127.9c.

Small margins on petrol and diesel sales are said to be causing hardship for the roughly 850 independently-owned service stations.

Motor Trade Association spokesman Andy Cuming said the problem was the small fixed margins of 4c to 5c a litre that oil companies allowed the independents to charge if they were to sell fuel competitively.

Those historically-based margins had been all but wiped out by the spiral in other costs tied to the price of the fuel, Mr Cuming said.

With the price of petrol up 80 per cent in three years, interest charged by banks to service operating overheads for storing thousands of litres in underground tanks was also up.

Likewise, credit card transaction charges tied to the increased amount of individual retail purchases came out of the fuel margin.

One independent operator giving up pumping gas is Bev Rhodes who runs the SW Rhodes Garage in Temuka, near Timaru, with her husband.

After 29 years in the service station business -- 10 in Temuka and 19 in Central Otago -- they were to stop pumping gas to concentrate on repair work, she told National Radio today.

Commission on credit cards was probably half the problem, along with increasing competition.

Service stations virtually had to have a "supermarket" as part of the operation to survive nowadays, she said.

At the same time supermarkets were moving into the business and discounting petrol.

"When that happens the smaller independent person he won't survive because he can't afford to drop the price of fuel."

- NZPA