Rhetoric rather than action on fuel costs

Last week, we saw the Prime Minister accusing petrol companies of fleecing New Zealanders. She came out all guns blazing, but then said those of us being fleeced will just have to wait for a solution.

The report she was so incensed about was after all, just a draft. She will have to wait for the final report from the Commerce Commission into the retail fuel sector, due in December this year, before deciding what to actually do. Cynics might say slashing petrol prices as part of an election campaign could be the action taken. The Government is certainly taking enough in tax at the pump to make a price cut.

The strident prose from the Prime Minister fell a bit flat when she had no action plan to back it up. She broke about every rule of politics, management, communications, and making an announcement, by having nothing to really announce after blowing up a situation into a “really big thing”.

She’s left a void of five or six months where people will continue to be “fleeced at the pump”. If the situation was so dire, she’s the Prime Minister, she could have announced some immediate actions. Instead she promised the Government would “make a difference at the pump”, but couldn’t say when that might be, or what that might be.

So, for most people, life goes on trying to make ends meet and worrying about the increasing cost of living in an economy that no one has much confidence in.

This is all part of the confusing messaging we continue to get from this Government when it comes to roads, cars, trucks and the use of fossil fuels. One minute they are saying there is no money for roads; they are ending all support for fossil fuel industries in New Zealand, including exploration; and telling us fossil-fuelled vehicles are ruining the planet. The next minute they are the defenders of users of fossil-fuelled vehicles, ignoring the fact that the biggest fuel cost is the taxes they have imposed to further incentivise people to move away from such vehicles.

They have once again shown they are anti-business and do not understand basic economics, it is no wonder business confidence is so low.

The above graph from the Market study into the retail fuel sector Draft report (page 24) shows taxes at about $0.97 per litre on 91 Octane. The importer costs, about $0.83 per litre, are the costs of importing fuel to New Zealand. Importer margins, about $0.34 per litre, represent the gross margin available to fuel importers to cover domestic transportation, distribution and retailing costs in New Zealand, as well as profit margins. So that $0.34 per litre is not profit.

When you put the $0.97 per litre tax, which goes into the Government coffers, against the $0.34 per litre that is not profit, but the gross margin available to fuel importers, who is doing the fleecing becomes a bit blurred.

The tax take is made up of fuel excise, ACC levies, Emissions Trading Scheme (ETS) levy, and the Auckland regional fuel tax; mostly fuel excise and Auckland regional fuel tax which is supposed to be spent on roads. Our industry is concerned that tax take isn’t being put back into roads, which are deteriorating badly.

As trucks will be reliant on fossil fuels for some time, until someone comes up with a viable mass-market alternative, we are also concerned this Government runs the risk of running the oil companies out of town by failing to understand they are commercial businesses that need to make profits, not benevolent societies.

If this Government really wants to make a difference at the pump, they may want to consider their high tax take on fuel and their role in creating a competitive wholesale market before they criticise the fuel companies.

And they need to be clear on their messaging and make announcements that are actually about doing something, not just more talk and blaming the previous Government for everything.

–  Nick Leggett, CEO, Road Transport Forum


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