Fuel rage: Could petrol prices for 91 also hit $3 per litre?

Motorists have been urged not to vent their frustration at petrol station staff as prices exceed $3 per litre in some parts of the country.

The Motor Trade Association (MTA) has reminded drivers that petrol companies and their staff aren’t to blame for the high prices.

MTA energy and environment sector manager Ian Baggott suggested that there was more pain to come and the price of 91 could also exceed $3 in the coming months.

“There is certainly a possibility that we will see $3/litre for 91,” Baggott said.

“We would ask motorists to remember that to a very large extent, these increases are beyond the fuel companies’ control – so don’t give the attendant an earful when you’re getting a tankful.”

Baggott said the bulk of the price drivers pay for petrol is made up of taxes.

Over the weekend, the Herald reported that 95 had hit already per $3 per litre in some parts of Auckland, and was on track to hit that mark in Wellington.

“It’s understandable that motorists feel frustrated – for many people it’s the last thing they need right now,” Baggott said.

He noted that 52 per cent of the cost is made up of taxes, including the fuel excise duty, the emission trading scheme levy and GST.

“Another 37 per cent is made up of production and shipping costs,” he said.

“That leaves 10.6 per cent as the wholesaler and retailer margin, out of which they have to pay staff and operating costs, leases, distribution and other costs.”

Speaking on the AM Show this morning, Prime Minister Jacinda Ardern said she was keeping an eye on what was happening at the pump and knew the prices were high.

She said she wasn’t going to make the cost of petrol worse and denied the Government had contributed to it.

Because New Zealand imports fuel as either refined product or crude oil, the price is dictated by international oil prices, which have increased 25 per cent between December and January.

Last week international oil prices rose above $90 per barrel for the first time since 2014, with analysts anticipating that $100 per barrel was likely before the end of the year.

Baggott said growing demand was pushing up prices.

“As countries around the world open up after Covid restrictions, they are resuming normal bulk fuel buying, which puts them at the head of the queue.”

And Kiwis aren’t the only ones feeling pain at the pump – in Australia costs are approaching A$2/litre, but the tax component there is considerably lower.

“All indications are that due to the rising cost of crude and the weak Kiwi dollar, prices are likely to continue rising here,” Baggott said.

Asked why fuel prices varied so much across the country, Baggot said there were various factors at play.

“Aside from basic market competition factors, location and distance from the fuel supply terminal can affect price variation across regions,” he said.

“Compare the price of a pint of beer in Hunterville versus what you pay in Queenstown.”

There is also a perception among road users that fuel prices are always quick to follow oil prices on the way up but not quite as fast on the way down.

Baggott admitted that this does happen, attributing it to a number of factors.

“In some cases this does occur but is dependent on whether the fuel supplier has forward supply contracts at a competitive rate,” he said.

“Normally, the decision to pass on savings or not is based on replacement cost of fuel that needs to be bought later.

“Think about if you’d just bought something for $100 and had planned to sell it on for a $110 to cover your overheads and make a profit. A potential buyer had seen the same item for $90 and thinks $100 is a fair price, would you be willing to make a loss on your initial purchase price just to make a sale?”

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