11 February 2022

Will petrol prices ever stop rising?

Petrol prices are hovering close to $3 a litre and the rises show no sign of abating. We take a look at what’s going on and what we can expect in the coming months.

Why have petrol prices suddenly got so high?

The high prices are due to a number of factors, which makes the answer to this question quite complex.

The Commerce Commission found in its recent market study that fuel companies have been making persistently higher profits over the last decade than would be expected in a competitive market. This is due in part to the structure of the market, including the lack of an active wholesale market and the major fuel companies’ joint infrastructure which allows them to control the supply chain, giving them an advantage over other fuel importers.

This lack of competition amplifies other factors, such as the volatility of crude oil prices, rising supply chain costs and the reality that petrol and diesel are also subject to a range of domestic taxes added onto the price charged by the fuel companies.

On top of all this, inflation is also at a 30-year high, and, just like rent and other essential goods and services, fuel is subject to inflationary pressures.

What about petrol taxes?

The Petrol Excise Duty, or PED, combined with other levies comes to 77.274¢ per litre. This money goes to the National Land Transport Fund, which pays for our roading networks. The last rise in PED was in July 2020, and at the time the government ruled out any more rises for the next three years – but has also said it has no plans to lower the excise tax.

Once you include GST, the Emissions Trading Scheme levy and the Auckland fuel levy, the total taxes and levies come to around $1.15 per litre.

From MBIE, week commencing 7 February.

Are petrol prices likely to keep rising?

Don’t expect relief from high prices any time soon. Based on current economic forecasts, it is highly likely that fuel prices will stay high for the foreseeable future. This will be influenced by the potential for more fuel companies to leave the New Zealand market, leading to greater concentration and even less competition, and continued pressure to tax fuel to mitigate the environmental impacts of fossil fuel use.

Wasn’t the market study by the Commerce Commission in 2019 meant to deal with high petrol prices?

From Friday, 11 February, service stations will be required to advertise the standard prices of their petrol on roadside sign boards – not just the cheaper price you might pay if you have a loyalty card or supermarket voucher. This was one of the recommendations made by the Commerce Commission to improve competition between fuel retailers.

At the same time, under the new Fuel Industry Amendment Regulations, petrol retailers now have to report their costs, prices and sales volumes to the Commerce Commission. This won’t have an immediate effect on prices, but it will introduce greater oversight and transparency into the market and will allow the Commerce Commission to more easily take action against fuel companies if they are acting anti-competitively when setting prices.

Will this make any difference?

It’s hard to say. The Commerce Commission’s recommendations for changes to the industry are still filtering through, so at the moment we don't know whether what consumers are currently being charged at the pump is a fair price.

Increased transparency into how retailers are charging for fuel and how much of the end price is made up of their margins will give a better indication of whether competition between industry players is putting the downward pressure on prices we would expect from a normally competitive market. Unfortunately for motorists, any answer is going to take time to emerge.

In the meantime, consumers will continue to be subject to the vagaries of the market, including geopolitical influences on the price of crude oil, supply chain issues and taxes – which are all likely to keep prices high.

Member comments

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Mark & Heather C.
13 Feb 2022
EV'S ??

There is not a lot we can do about the prices every few years there is always a grumble about them and nothing gets done about it. Reading the comments about EVs is the next complaint going to be about the price of ELECTRICITY going up ???

Paul S.
06 Mar 2022
Electricity prices going up

Electricity prices are indeed going up, and are going to hit Solar and EV owners hardest. With the introduction of RUC in March 2024 it is now making me wonder whether buying an EV and Solar was a good idea. Our playback period is going to be greatly impacted

Matthew Davidson
13 Feb 2022
Retailer margin - taxes

I take it that the retailer's margin is included in the importer margin?
I understand GST needs to be on the lot to keep GST system simple. But the other levies should be per litre, not a percentage, as it just goes up and up as the import cost goes up. But then again goes down when import cost goes down. But is that happening in the foreseeable??

David W.
12 Feb 2022
TAX

Does anyone think it reasonable that the Government adds their Petrol Excise Duty and other levies to the base cost of fuel, then charges 15% GST on the COMBINED amounts?
Effectively they are treating the PED etc as a "service" so are in fact taxing a tax.
Surely this should be challenged, and GST only charged on the cost of the fuel prior to adding PED and other levies??

B & H M.
13 Feb 2022
agree

100%

Peter L.
12 Feb 2022
Maybe convert to a hybrid personal fleet?

Many households in NZ have more than one vehicle in their fleet. Now may be a good time to rationalise your fleet based on household needs?
For example, if your household has two vehicles, consider switching one of them to a cheaper EV such as an earlier Nissan Leaf for the short-range running around. That way, you have a fossil fuel vehicle for the longer trips, if you need it, but your Leaf for the running-around and commuting chores.
We have done this and have made great savings on fuel and maintenance costs.
I realise this might not meet everyone's needs, but at least it's worth a thought. It's also a great way to dip your toes into the EV experience to see how it works for you.
If you decide to make the change, I recommend joining one or two of the on-line EV forums. They are very happy to help with answers to your questions and concerns. And also, if buying from a dealer, look for one with a genuine commitment to EVs; they are keen to help and also protect their reputations.

Ken M.
12 Feb 2022
Climate change

Rising petrol prices are a subtle way of getting people to switch to a less polluting car. In NZ EVs have a real advantage as so much of our electricity, and all new generation, is renewable. Many people only respond to economic signals. A petrol car with a lifetime travel of 200,000 km at 5 L/100 km will use 10,000 L of petrol as a current cost of over $25,000. Mentally we should add that to the purchase price of a petrol car and that will help one see EVs as better value.

Hector T.
12 Feb 2022
Removing NZ distribution risky

Marsden Point refinery closure so the oil majors can introduce an untested new operating model, removing NZ distribution to be completely dependent on overseas shipping for our fuel could lead to global supply chain congestion and increased prices. This issue is not just about electric cars, we still need jet fuel for Air NZ and other fuels in the interim, for our first responders, army, navy and air force.

Chris O.
12 Feb 2022
EV Owner

Sorry, but as the owner of a BEV Kia Niro, I feel shamefully smug every time the price of petrol goes up. We mostly charge from our PV Solar panels. so we don't even pay much for power. We can go at least 450km on a charge, so no "range anxiety". We have traveled nearly 50,000km now, and topped it up at a public charge station only 14 times. The initial cost is a bugger, but EV's last semi-indefinitely, and second hand ones are coming on line. I know not how the Govt will make up for lost petrol sales taxes. If you, or the Company you work for can afford one, do consider an EV for your next car; you will wonder why you didn't get one sooner! There is an ever increasing range of well-spec'd EVs coming on the market.

Paul S.
06 Mar 2022
Power prices increasing

Power prices are going to increase rapidly over the next 4 years, and with RUC coming in March 2024 our EV's aren't going to be as cheap to run as they are currently

Gary H.
12 Feb 2022
Higher taxes

Higher petrol taxes but the state of our roading network has deteriorated so badly over the last few years. Something is wrong here, maybe this petrol tax money is being used for other pet projects?

Adriaan
12 Feb 2022
INFLATION GONE RAMPANT

OIL PRICES SEPT2008 US$141 P/B BUT PETROL DID NOT GO UP OVER NZ$2.20 TODAY AT NEAR US$ 90 PETROL PRICE HAS GONE OVER NZ$2.80
I THINK WE ARE BEING HOODWINKED BY THE GOVT AND COUNCILS AS WELL AS PROFITEERING BY THE FUEL COMPANIES.

Peter
12 Feb 2022
Good

Good. They shouldn't come down. We need to move away from burning fossil fuels if we want an habitable earth. We need to drive less, and we need to walk, bus, and bike more. Or buy an electric vehicle.

Adriaan
12 Feb 2022
WALKING

I HOPE YOU DON'T OWN A CARBON EMITTING VEHICLE.

Michele M.
12 Feb 2022
Not everyone can do this

I'd love to be able to bike, walk and take buses but I can't due to disability. Lots of other people can't either for various reasons.

Jackie M.
12 Feb 2022
Rural

Do you live in a town or city? What about rural? If I could walk, bike or take a bus for work but I can't. And like another poster said, how they going to charge EV in the future? EVs still have to travel on roads.

Paul T.
12 Feb 2022
Electric and hybrid vehicles

I have sent emails to MP asking how they intend to tax these vehicles without reply
The Government must have plans to match taxes on petrol and diesel vehicle but getting a reply from them is next to impossible
Will they introduce user K like diesel increase power prices I would appreciate any feedback as we are looking at the above vehicles

Michael T.
12 Feb 2022
RUC Charges on Electric Vehicles

Last year there was a mention that the Government would not be introducing RUC charges on electric vehicles before the end of 2023. So it is likely to happen sometime.

Paul W
12 Feb 2022
Australian Price.

The current price of 91oct today is A$1.71. Why so dear here?? Not the Exchange rate. Retail margins are too high here??

Andrew
11 Feb 2022
Crude price and NZ$ weakness or strength.

You have made no mention that crude oil is now nearing
$100 a barrel (up from $70 a few months ago) and the NZ$ is now at 68c/US$.