Global fuel storage capacity is at a premium. There is an oversupply and there's been a crude oil price crash. Photo / AP
Global fuel storage capacity is at a premium. There is an oversupply and there's been a crude oil price crash. Photo / AP
ON THE ROAD
The car has hardly been out of the garage for five weeks. A couple of kilometres down the road and back was all it got and the weekly 40 litre, $80 per week refuel didn't happen. Multiply this by four million cars in New Zealand and a lot of fuelis not being pumped, shipped, refined, delivered and used in motor vehicles right now.
If you multiply that around the world, as a consequence of Covid-19, there's a lot of oil that's already been pumped out of the ground and is on the water to locked-down countries. Storage capacity is at a premium, there is an oversupply and there's been a crude oil price crash. Why then has the pump price in New Zealand not reduced to reflect that?
The AA's Petrolwatch spokesperson, Mark Stockdale, explains that a drop in crude oil price does not necessarily lead to an equivalent lower price at the pump.
"The price of 91 petrol has dropped 26c from $2.13 on March 3rd to around $1.87 on April 20, but that's probably as good as it gets. The petrol commodity price is now around 25c/litre compared to 77c/litre at the start of the year. All this reduction has not yet been passed on to motorists, but the largest component of the petrol pump price is fixed tax, at $1.05/litre."
The largest component of the petrol pump price in New Zealand is tax. Photo / File
The New Zealand Government extracts a range of taxes at the petrol pump which go into various funds. The largest is fuel excise at 66.5c/litre, followed by ACC at 6c/litre, Emissions Trading Scheme at 6.7c/litre, Auckland Regional Fuel Tax at 10c/litre and GST on the whole cost, which goes into the general account.
The retail price of diesel is made up differently to the petrol price. The excise component at the pump is replaced with road user charges which are purchased separately at a rate per 1000km depending on the type of vehicle. This is currently $72 per 1000km for a light diesel vehicle.
All these road user charges and fuel excise taxes are vested in the National Land Transport Fund. This then provides the funding for roading improvements and maintenance, public transport, road safety, road policing and walking and cycling.
Local authorities receive part of this fund through a Financial Assistance Rate (FAR) so they can maintain local roads. The FAR varies from council to council and must be made up to 100 per cent from local rates to qualify.
There is a natural tension about motorists providing the funding to provide alternate transport modes such as public transport, walking and cycling. This is rationalised, however, in improving the efficiency, safety and enjoyment of moving around.
There are some interesting questions which arise from the current interest in the price of fuel.
Firstly - the industry accepts that there is a National Fuel Price. This is the price the big brands try to charge at full service stations as if there were no competition.
The current national price is 195c/litre for 91 fuel. The pump price varies throughout the country based on local competition. My own experience of the cheapest price is a self-service Gull station in the middle of nowhere at Atiamuri.
Prices between Northland and Canterbury vary significantly and a role of AA Petrolwatch is to call these differences.
Secondly - fuel excise is a fixed tax on fuel and GST on this, is a tax on a tax. There are very few commodities in New Zealand which carry a double tax and the Government collects more GST with every excise tax rise. The $1 billion GST collected on fuel could be separately accounted and applied to specific road safety measures.
Finally - the increasing 20,000 electric vehicles in New Zealand pay no road user charges or any fuel-related tax. They make no contribution to the development and upkeep of the roading network they use.
Arguably they make a difference to the environment and are cheaper to run. I would hate to imagine though, that not having to pay road user charges is factored into the buying decision or any Freebate government policy.
• John Williamson is chairman of Roadsafe Northland and Northland Road Safety Trust, a former national councillor for NZ Automobile Association and former Whangārei District Council member.
