Petrol prices have dominated news and opinion columns for the last week or so as they reach record levels. In most cases the blame for them has been directed at the government following the most recent increase in petrol tax that was introduced last week. One such example is this piece from the Sunday Star Times pointing the finger directly at taxes.
Aucklanders are already paying a regional fuel tax of 11.5c per litre. As of last week, taxes went up by an extra 3.5 cents nationwide, with similar increases scheduled for the next two years. ACC must have been feeling left out of the action, because it’s just proposed its own hike.
All this is happening while underlying crude oil prices are well off their peaks. If they start rising, or the Kiwi dollar weakens, we’re really in trouble.
That’s right – the pain at the pump has little to do with actual oil prices. It’s all about tax, which now amounts to about $1 on every litre. In a lovely little sleight-of-hand, the government also collects GST on the excise, so you’re actually paying taxes on your taxes.
A near identical piece appeared on Interest.co.nz last week.
And of course the opposition has been jumping up and down about it with Simon Bridges proclaiming:
“Every time a New Zealander puts $1 of petrol in their vehicle, 53c of that is going straight into the Government’s coffers, and the Government’s share and the costs faced by Kiwis is only going to get worse as fuel prices climb,” he said.
I’m not quite sure who did the math though as for that to be true, even with the latest tax increases, petrol prices would need to be $1.87 across the country or $1.98 in Auckland. It’s also a bit rich for him to complain about fuel taxes when they rose significantly under the government he was a minister of.
The below graph shows how the fuel excise duty has changed over the last four and a half decades along with the currently planned 3.5c per litre increases over the next two years. As you can see, since the early 2000’s the tax rose fairly consistently and the current planned increases remain below that general 15 year trend. Note: this doesn’t include GST or the Emissions Trading Scheme charge, currently 4.62c per litre.
These fuel taxes are fully hypothecated and go straight to the National Land Transport Fund which is what pays for a large chunk of our transport system. Without it, the government wouldn’t be able to pay for their share of transport plans, such as those from ATAP or projects elsewhere in the country.
But the suggestion a 3.5c per litre fuel tax increase (4cp/l with the added GST) would be primarily responsible for the rapidly rising and record fuel prices is ludicrous though when you think about how much they’ve risen of late. This can be seen more easily in if we break down the fuel prices into it’s various. The data for this comes from the Ministry of Business, Innovation and Employment’s weekly monitoring of fuel prices. The data is to 28th September as at the time of writing this it hadn’t yet been updated with the most recent week’s data which should include that tax increase. As you can see, the component that has moved the most in recent times has been increasing importer costs.
Along with the Importer Cost is a steadily increasing margin for importers which currently accounts for over 33c per litre. A decade ago it was less than 10c per litre. These costs combine to give New Zealand one of, if not the highest cost before tax of all countries in the OECD.
Another way of looking at this was this fascinating chart put together by economist Sam Warburton. It also interestingly shows that the advent of the regional fuel tax has put Auckland’s fuel prices much more in line with those in other parts of the country, having previously been much lower.
"Government tax increases are responsible for record high petrol prices" pic.twitter.com/IbCIbAxnqT
— Economissive (@Economissive) October 5, 2018
This brings us to yesterday when the government announced they were going to pass legislation to enable the Commerce Commission to investigate fuel prices and margins.
What a lot of the discussion around fuel prices does help highlight is just how dependent we are on petrol and diesel for moving people and freight around the country. We need to, where possible, be building a transport system that delivers realistic options to opt out of fuel prices. Current government policy is at least heading in the right direction in this regard but it’s going to take a long time.
In the meantime, perhaps this is an opportunity that Auckland Transport should look at grabbing. Since the last time fuel prices peaked there has been significant progress on improving PT (in Auckland at least). We’ve had the rollout of electric trains, the introduction of integrated fares and of course just over a week ago they completed the implementation of the new bus network. With the weather improving it is also an opportune time to push cycling as an option. Both PT and cycling are seeing solid and consistent growth in recent times and if AT were to start actively promoting PT and cycling as an option to avoid fuel prices, growth could increase further. Unfortunately this option is primarily an Auckland thing as there are very few others for that
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We recently traded in our aging ICE car for a Leaf and I’ve been riding an e-bike to almost 3 years for commuting and some other trips. It’s becoming more feasible to avoid the direct costs of petrol in some parts of the country where PT is ok and/or biking is a good option. Good quality second hand EVs are somewhat affordable now too – $15-20k. Obviously the indirect costs of increasing fuel prices like increasing costs of all other goods can’t be avoided. However, we do now mostly look on with bemusement at the hysteria over fuel prices currently playing out.
Who doesn’t have a spare $15K rattling around to just buy an EV. Bloody lazy proles.
@Buzz… Sure – cars are expensive. But in the context of replacing a car anyway, the difference between a used EV and an equivalent used ICE car is not that much (especially when operating costs are factored in).
The difference was still quite a lot when we looked at buying an ev earlier this month. A Leaf is about $12K. An equivalent condition Suzuki Swift is $6K.
But depending on how much you drive you will make that difference back quite quickly at the equivalent of 30c per litre https://www.energywise.govt.nz/on-the-road/electric-vehicles/advantages-and-challenges-of-evs/ev-running-costs/
Try replacing a seven seater.
People sometimes talk about subsidising ev’s and ebikes.
Maybe the first subsidies should go to people with 7-seaters and community services cards.
I’d say a significant proportion of the population would pay that much when they buy a car.
Expensive petrol tends to drive down the price of older and more fuel hungry cars anyway. Ironically buying a V8 when petrol prices go up is often the most economical thing to do as people tend to overreact and try and avoid gas guzzlers.
My partner was reluctant to buy a second hand EV – until the RFT… Now we’re pretty certain that we’ll pull the trigger in the next month or two.
I can’t wait! Range isn’t an issue if only using the vehicle in the metro area and the fuel money you save can pay for a rental when you need the range…
Yeah, I’m looking to get a Leaf in the next month or so. I wasn’t planning to so soon, but I gave up on the train recently and went back to driving which takes half the time. Annual fuel cost of $400 vs $2000 currently. No RUC until 2021. Plus lower maintenance costs. It’s an easy choice for people with mostly short commutes and with a spare $10k sitting around. Which is probably not most people.
So you bought an imported second hand Leaf, wait until you have to pay upwards of 9k to buy a new battery, Never buy an EV used, buy new and sell before the warranty expires. Then you’re not left with someones elses problem and with the Leaf up to 9k for a new battery. Leaf batteries degrade awfully quickly as well, 30% of the initial capacity will probably be gone within 5 years.
The carry-on by the National opposition is just getting more pathetic and embarrassing by the day. This is the same party, who in the last government, increased fuel by a total of 17c per litre in order to fund their tranche of Roads of National Significance – a collection of high cost, modest benefit and over engineered motorway projects. Coincidentally they declared $11 billion of a second tranche of RoNS to campaign in the 2017 general election and have cried foul that Labour are not committing to a majority of them, going as far as citing that they have been “cancelled”.
Something that the graphs clearly show that the price variation is predominantly caused by fluctuating importer costs. We have had a similar peaks in 2008 and 2013. It is also showing the importer margin is growing, revealing that the increase is most going to the distributors rather than the government.
It’s about time we faced facts, the days of cheap petrol are over, and our transport networks have been grossly overfunded for too long now. The coalition government have made it clear they are committed to reducing the dependency on private cars and a finite energy source and moving towards more sustainable, cost effective and environmentally friendly transport. People can start by getting used to the costs and begin reassessing their own personal transport requirements.
“and our car with a single occupant networks have been grossly overfunded for too long now” // Fixed that for you
Otherwise I totally agree with the rest of your post.
Thanks, should read underfunded.
“Reassessing their own requirements” I’m pretty sure given congestion and current fuel prices that people would be using PT if it was a realistic option already.
So true. With over a million Aucklanders having no frequent services within 500m of their homes, there is a huge untapped market for public transport in our city. That number needs to drop, and fast.
Some would, Buttwizard. But I am surrounded by whingers complaining about congestion and fuel prices and public transport, who live in a really good suburb for public transport.
And it takes a millisecond for them to become anti-socially defensive on the subject of intensification, or parking, or fuel tax or driving…
Don’t get me wrong, the time in congestion will always be the decider for me as I’m fortunate enough to probably be able to afford fuel up to $3 before I bail. But there are plenty of people out there who neither have the time or the money and the type of meaningful change required to make PT accessible to them is slow. I’d argue the Government has a moral imperative to urgently roll out fixes and expand the network if it wants the right to levy excise taxes.
Hmmm. Would there actually be any more public resistance to slashing the road expansion budget to zero and using the money to roll out substantive change to the PT and active mode networks, than there has been to adding a few cents to fuel tax in return for slow, hard-to-see progress? How much more vitriol would it actually entail?
You see, AT still say they’re working to improve public transport and active modes. There is some truth to this, but every improvement is being undermined by their road expansion work. As AT’s own figures show, Auckland’s congestion, vkt, physical inactivity and DSI are all rising. Cutting the road expansion projects down to zero would immediately have an effect on the first two of these measures. And the money it would free up to improve our networks would have an enormous effect on all four quite quickly.
Like all the people in Devonport who rive to the city everyday in their SUVs? The PT offering couldn’t be better. All the partners in my firm live very close to the city and only one takes PT – ironically the one who lives in a poor PT area.
The recent survey of Lake Road showed 80% of SOVs in the morning were headed to the city.
Your statement may be true for low income workers but many high income workers just think they “deserve” to drive everyday because of their status.
Tell that to a South Auckland factory worker on the night shift.
Which factory worker are you thinking of, Vance? One who wants safer roads, with lower traffic numbers, so his children can walk safely to school instead of having to run between fast cars? One who can’t drive or who can’t afford a car, relies on workmates to drive her, and who wishes there were more bus services?
Tell us why that is relevant Vance.
“relevant” and Vance in the same sentence? That’s an oxymoron.
I like statements such as ‘Its about time we faced facts’ because the collective ‘We’ never do. As for reducing dependency on private cars, that will never happen either. Petrol prices may go stellar but one effect will be to accelerate the numbers of electric or alternate fuelled cars. There will be a hiatus period where for those in first with these electric cars will see significantly reduces running costs. This will encourage more use of cars and likely reduce PT usage. Soon the motorways will be congested with electric vehicles.
As for the govt, whoever they are, will have lost significant tax collected on fossil fuels so that eventually there will be some new taxes invented to maintain the take from private cars. Whether it be massive tax increases in electricity costs for recharging cars (special kw/hr rates for metered charging devices) or RUCs or something else.
I can’t wait to get my electric car soon once I have expanded my home electric solar power system to provide the extra 6 to 12kwh per day to charge the car.
BTW when lower cost small electric cars are commonplace that will be the end of electric bikes
Agree, regarding electric cars, the only way to reduce car usage is to make it harder to drive. I think it is inevitable that the tax will be RUCs, a tax on electricity would be too hard to pin to vehicle charging as opposed to boiling the jug.
I’m not sure they will replace e-bikes though. Bikes will still be able to avoid congestion and will be much easier to park.
If electric cars become cheaper, then probably for the same reasons electric bikes will also become cheaper. So no I don’t think they’re going away.
“BTW when lower cost small electric cars are commonplace that will be the end of electric bikes” – I can only assume you don’t cycle and have never ridden an electric bike with that statement. They are much better than any car will ever be.
A renault Tizzy is fun to drive.
Crude oil is sold in US dollars and that currency is very strong at the moment. Our exchange rate is currently 1.00NZD=0.65USD, which is worse than it’s been for ages. Surely this is having an impact on fuel prices too, though I haven’t been following the issue too closely.
Yes the price is quoted in $US but oil and greenbacks are not fixed. If the $US goes up with respect to every other currency then the cost of oil in $US comes down. It increases a bit in other currencies because the US is also a producer.
Spot on.
The price of oil (in US dollars) has been steadily rising lately, plus US dollar itself has been rising, a double whammy.
I’m not surprised about the fact that NZ has one of the worlds highest pre-tax costs, it’s factor of geography, small market size and lack of competition in the refining market.
Personally I don’t really give a stuff; I’ve largely abandoned driving and we’re looking to get rid of one of our two cars. I e-bike my 50km round trip commute in Auckland now, it’s so financially compelling.
The politics of it are bad though, many people esp in provincial NZ really don’t have options other than cars.
Yes, probably a good thing this is happening now, not just before the next election. It will be interesting to see what National does in regards to fuel tax. They will either have to leave it where it is or announce they are cutting some projects and not announcing any new ones.
People have short (and selective) memories – National will raise fuel taxes and when the hypocrisy is highlighted, they’ll divert by pointing out how much the prices went up under the previous govt (therefore they’re “better” than the prio govt). Standard politics across the board really.
Agree, I guess my point is if National doesn’t campaign on reducing the tax then it is no longer an election issue.
TBH, I think the election will be fought on one thing – Capital Gains Tax. Tranport wont even come into it.
Yes. I hope Generation Zero and Action Station and many others get organised now to start talking about this.
Refining costs are a big part. The retail margins are pretty slim and the petrol companies will only be too happy to show you that if the Comcom looks into it. What the petrol companies will omit however is that they are partners in NZ Refining and are making most of their cash in this part of the process.
I also expect the petrol companies to tell us that the costs of transport have gone up….hence why there has been an increase in the pump prices. A vicious circle.
They really aren’t. In fact NZ Refining lost money last year
Yep, due to a big maintenance shutdown. Go back a few years and you’ll see they’re not doing too bad.
+1 their profits are up hugely. Take away the planned upgrade/shutdown and it would have been in line with other big profits. They’re price gouging.
Well it would help if people in provincial NZ stopped fighting cycling and PT projects so hard.
Not to mention some of the inhabitants of Northcote Point…
Gary – you will be please to know that Enron paid for my house on Northcote Point xxx
There seems to be plenty of people in urban and suburban NZ doing that fighting too…
I did rough numbers on the price here vs Australia a few weeks ago because someone was claiming the main part of the price difference was from the suppliers. The pre tax difference was around 10%, perhaps just slightly more than the graph above. How much of that do you think is exchange rate vs USD, freight, economy of scale etc., rather than the supplier charging more?
with so many loyalty schemes offering discounts the pump price isnt the real price anyway. They obviously inflate it so people think theyre getting a discount.
Yes, and the poor who don’t own cars are subsidizing at the supermarkets those who do. They are paying higher grocery prices so that car owners can get petrol discounts.
the real neil – I totally agree with you. I don’t own a car yet I get a petrol discount voucher at the check out at pak n save.
Yes, thanks Neil. And at malls, where the costs of providing free parking translates through to the higher prices for everyone, including those who don’t drive there.
It irritates me that i pay for somebody elses parking in my grocery prices. Cross subsidisation at its worst.
Why do you not go somewhere else to shop if you are that worried ? Suggest the supermarket / mall business model with car parking produces cheaper pricing over all due to volumes sold. If I’m wrong you will find what you want cheaper somewhere else.
Regardless whether that is actually correct vote with your feet and do not shop there.
Of course people should shop locally rather than drive elsewhere, adding to congestion. Indeed, that is the most logical way to be able to shop without being dependent on a car. Why do you suggest he should be the one inconvenienced rather than just make people pay for their own parking? Surely that is the most equitable?
Business choose how they attract people and where they are based. If they choose to have free parking as part of their business model that is their choice. If they want to charge for parking again their choice. So why should Luke be inconvenienced going somewhere else ? because he is the one who has the issue not the business.
Because there’s no free market here that we’re talking about anyway. If the businesses were having to operate in a world where people were paying for the costs they are imposing on others by driving, very few people would be driving to the businesses, and all businesses would be attracting local people who arrive by foot or bike.
Skew the whole system with externalising the costs of one mode of transport, and of course we need to step in with other measures to create some kind of equity.
“Why do you not go somewhere else to shop if you are that worried?”
Because poor people who don’t own cars can’t pick and choose where they shop. They shop within walking distance of home. Can you even comprehend that as a lifestyle, or are you really that disconnected from how others live?
Good that the government is finally doing something about this as the margins the fuel companies are charging are very excessive. They could easily cut prices by 10c per litre and still be making plenty of margin.
It seems to be almost a reflex reaction of all new governments to blame the petrol companies for rising petrol prices. I remember the last National government and the previous Labour government did the same. Tax is a major component of the petrol price – let’s not deny that. And yes this government is putting up the excise tax like every other government but that doesn’t mean I am happy about it (BTW most weeks I would drive less than 20km so not really feeling the increase).
However, after all the talk and, I am sure the Commerce Commission market investigation, will come to the conclusion that the petrol companies are not “fleecing” New Zealanders. The price of petrol is up because the price of oil which is increasing, the US dollar is strong, and general inflation. Also, for the PM to pick the low of the GFC to benchmark margins is not really a fair representation of the market. Most companies, not just oil companies, reduced their margins dramatically just to survive and we saw players leave the market.
I honestly don’t get why motorists (of which I am one of) complain so much about fuel tax. It is almost 100% paying for roads. It ins’t a tax going into the general government coffers. Do people not understand that lower fuel tax = worse roads? Or do they expect roads to be subsidised (more) by general taxation? Why?
To me it is obvious that the fuel tax will need to keep increasing at a much higher rate than inflation regardless of how much is spent on PT or other modes. This is because:
a) All the low hanging fruit has been picked. Almost all new projects require bridges / tunnels / billion dollar budgets
b) Land is very expensive to acquire
c) Price of building anything has increased significantly. Tight labour market.
d) Materials getting more scarce and expensive
e) Cars are more fuel efficient, so use less litres of fuel while still requiring the same infrastructure.
(e) is such an obvious issue that I haven’t seen anyone mention yet. Yes fuel tax has increased per litre, but I wouldn’t be surprised if it has actually decreased per km travelled over the last 10 years. I am always amazed how much more fuel efficient my ‘new’ car (10 years old) is compared to my old car (18 years old).
JimboJones – I agree with you.
“It is almost 100% paying for roads” – no, it isn’t. It almost 100% paying for motorways and highways. Local roads in Auckland are almost 100% paid for out of rates and general taxation.
This represents a massive subsidy to people in cars.
Yes. And it’s only one of the many ways we subsidise people in cars. One more big one is the public health cost resulting from physical inactivity due to the unpleasant and unsafe environment created by their driving.
Jimbo’s points are valid, though. His point is more that the fuel tax isn’t being siphoned off to other uses – it’s being used on roads. It’s just nowhere near paying for their costs. Pricing vkt and congestion and charging more fuel tax so that some could be siphoned off into environmental measures, public health, community development, placemaking, social and mental health, etc – would be better, since all these things are suffering due to the driving mode.
I think there’s some misunderstanding here: saying “100% paying for roads” is not equivalent to “covering 100% of the costs of roads”.
I think what Jimbo is saying is the majority of fuel tax is spent on roads / transport, which is true. That’s not to say fuel tax covers the costs of roads / transport, however.
Ah right. I think I read the sentence the wrong way.
This issue alone highlights the fact that the majority of ‘hard working New Zealanders’ are just plain ignorant when it comes to the understanding of political topics. The sad fact is, it’s the perfect opportunity to draw your political party battle lines regardless of the facts in front of you. Hell, I’d rather our Party battle lines be drawn around Fuel or Capital Gains than what they have going on in America right now but that’s irrelevant…anyway.
The sad thing to come out of this discussion is that even with a Greens supported Government we are still so very very weak on Environmental issues, lots of talk on what we could do but no action. Especially fearful after reading the reports about global warming coming out in the news yesterday.
This topic could easily be a catalyst to both launch some initiatives around Electric Vehicles, Hybrid vehicles, Vehicle emissions, renewable energy, use the ‘crisis’ to promote more Public Transport etc. Instead its just shovelling the blame and ignoring the problem.
Whilst Europe is banning the sale of Petrol Vehicles by 2030, we can’t even manage to have a blanket ban on plastics bags in place as I write this.
Yes. I suspect we’ve failed because there’s been a socially restrained avoidance of public education campaigns on environmental issues, as if ‘beliefs’ around resource use are almost a religious right that shouldn’t be commented on. The only people who have been receiving information have been school kids “because you get to the parents through the kids” so our children are weighed down with the information, the responsibility to try to change their families’ habits, and the depression that comes when they see their family is too cynical or misinformed to change.
I think as adults, we need to step up, and move the conversations along.
Very disappointed with labour trying to demagogue petroleum prices considering the weakness of the NZ dollar, rising crude oil prices and shipping costs. This is an opportunity to encourage better transport options and pt
Well now we see the true colours of this govt. Watching the PM on tv this morning pretending she is upset with petrol prices while refusing to do anything about the massive tax component of those prices, was revealing. All she offered was some changes to ability of the commerce commission to look at how prices are made up.in other words she will do nothing.
Her attempt to divert all blame to the petrol companies fails while her govt continues to quietly collect the increased tax component of these ripoff fuel prices.
I really don’t understand that argument. Most of that ‘increased tax’ goes towards building and maintaining roads. Are you suggesting they should put a halt to building and maintaining for a while? Or should they subsidise roads out of general tax? How do you suggest they build roads without collecting any money?
I was not aware there was an immediate need to spend more on building and maintaining roads, I must be wrong since the PM obviously won’t reduce the tax take on increasing fuel prices.
I suspect the additional tax collected is just considered a windfall by the govt. Despite the fact they know those with least income who depend on petrol powered vehicles will suffer.
Bet it won’t be long before prices of just about every other goods and service increase to reflect increased fuel costs, another windfall as gst collected will increase too.
Good points.
The next thing this woman will be blaming is supermarkets for passing on increased freight costs.
Another working group to look at food costs no doubt.
Vance – “this woman”? Her name is Jacinda Adern and she happens to be the Prime Minister of our fine country. Have some respect you boring old white male self-entitled dinosaur.
err, isn’t it Ardern? This boring old white fart always thought getting someone’s name right was respectful.
Ho hum. I’m sure those of you whinging about how I address this woman were equally offended by the nasty attacks on John Key when he was PM.
I blame autocorrect….
I don’t agree with Vance’s comment and think he should have been more respectful sure but I absolutely think that average humans comment is disgusting.
It is ageist, racist, sexist and downright rude.
But doesn’t the real power in NZ reside in the deputy PM, old Winston says jump and Taxinda says how high. Winston holds all the cards and Labour can’t do a thing about it.
She wasn’t voted for by the vast majority of Kiwis, quite ironic that she shares that same statistic as the ‘Make American Great Again’ Trump!!
Master Chief
Of course she wasn’t. That’s because under our parliamentary system we elect parties not presidents.
Her party wasn’t elected either, Winston gifted Labour the win.
Get over it mate
I don’t think Winston holds as much power as people think. He has the most to loose from this coalition failing as it will be the end of his political career. History has suggested that the major party is not badly impacted by one of the smaller partners imploding, Clark survived the demise of both the Alliance and United Future.
There is if you add if you plan to increase spending on road safety and public transport, without significantly reducing the highway spend. Also two of the roads commissioned by National are PPPs, which means they will continue to require funding for years to come.
Bogle – I suggest you travel on State Highway 1N through the central North Island and see also feel how poorly maintained it is, despite the previous government approval to allow heavier axle weight trucks to use it, without the appropriate upgrading it.
The purpose of the national increase of fuel tax is to upgrade and knock out the kinks in the the existing national State Highway and regional networks.
” Or should they subsidise roads out of general tax” – Local roads in Auckland already are. The fuel tax barely manages to pay for maintaining motorways.
Yes I should have said ‘further subsidise roads out of general tax’
“Massive tax component”. You mean as a result of the numerous excise tax hikes National imposed over their 9yrs in power?
You are now having to pay the true cost of your transport choice. That includes lower susidies for roads up to this point.
Should have read *higher* subsidies.
Exactly. The dollar has nosedived since the CoL came to power. This adds to the pain.
The buck firmly stops at the door of the CoL for this mess.
A bit of person responsibility wouldn’t go astray Jacinda.
‘The dollar has nosedived since the CoL came to power’.
Correlation does not mean causation. The economy continues to grow despite the drop in net migration, I’d suggest the drop against the US has more to do with the booming US economy than anything else.
Overseas have pulled money out of NZ. This has also contributed to the falling dollar.
The GST component of the fuel price has also increased proportionately.
‘The GST component of the fuel price has also increased proportionately.’
How has it increase proportionately? It has been 15 % of the fuel price since 2009.
Keep grasping at those straws, Simon. I mean, Vance…
15% on $2.50 is a lot higher than $2.
The government are creaming it on the increased tax take with GST.
Vance – sorry you are correct, that was me misreading your comment and thinking you meant the proportion had gone up!
Vance – It is nothing to do with the COL that the NZ$ has ‘nose dived’. Its to do with the strengthening US$ as a result of the Federal Reserve increasing interest rates and the economic growth that was initiated by the Obama administration.
As you know, the NZ$ is a holding currency and is subject to the whims of the major trading currencies meaning goes up and down like a yoyo.
Whilst the strengthening USD has had some effect, falling business confidence as a result of company collapses, uncertainties around employment law, wages, taxes and environmental laws has scared off international investors – thus affecting the exchange rate.
Contrasted by higher than expected GDP growth and an increased budget surplus.
I believe the term is “swings and roundabouts”.
Quit politicizing it.
Tell that to families the next time they go to the supermarket and find significant increases in food prices as freight costs are passed on.
I don’t need to do anything. I’m not whipping up a frenzy on a lack of facts, just because I am still sore I lost the last election.
I just need to tell them not to listen to political scaremongers.
Vance – With reagrds to your comment – ‘Whilst the strengthening USD has had some effect, falling business confidence as a result of company collapses, uncertainties around employment law, wages, taxes and environmental laws has scared off international investors – thus affecting the exchange rate.’ what a load of rubbish.
The so call lack of business confidence is all about business lobby groups are scare mongering, as their members and/or supporters are upset they are not getting their own way. I do agree, their scare mongering is being heard by international investors.
Low wages was has been created by neo-liberal economic policies, despite it can work in theory but in reality it hasn’t due to corporate greed.
With regards to taxes, that is a reality, as it pays for health, education, social services, etc. I think you will be the first person to moan when you have to pay for for any heath, social, etc service/s.
With climate change now staring us in the face, so you think NZ businesses shouldn’t operate in environmentally friendly environment?
‘ripoff fuel prices’. They are indeed prices that are ripping us off – particularly future generations. The fuel prices we’ve seen during our lifetime are not normal; they are prices that have encouraged people to use fossil fuels – a capital asset of the earth – as if it is an annual income.
Climate change is a direct result of ripoff fuel prices; that is, prices that have been way too low for the cost imposed on the earth of using that fuel.
I don’t disagree with your opinions on the real costs, especially environmental, of using fossil fuels. However, increasing the tax take from fossil fuels is not ripping off future generations, it’s making life more unbearable right now for those who depend on car transport while having negligible effect on those, likely the majority (eg Buttwizz who can afford up to $3) who have the income to absorb fuel cost increases.
If this govt was seriously concerned about the environmental impact of fossil fuels then they should set dates when private vehicle diesel engined vehicles will not be allowed on roads, ban fossil fuelled vehicles now from city centres, get some serious subsidy to purchase electric vehicles, get recharge stations installed at more then the current dribble rate and get the Kiwirail looney tune scheme to decommission the electric EF locomotives and electric NIMT shut down all reversed.
Also stop purchasing the disasterous diesel polluting and u reliable Chinese made DL freight locomotives.
Bogle – I agree with you
If our government was seriously concerned about the environmental impact of fossil fuels, they would do all you’ve suggested, but the biggest emphasis they’d have would be on trying to reduce our vkt.
And that requires stopping the road expansion so they can spend the money instead on road capacity reduction, PT and active modes. The opportunity we have for traffic evaporation is massive, and is compatible with transformational improvements in access, safety, healthy populations, less reliance on imports, and carbon emission reductions.
Do you mean VKT by fossil fuelled cars?
vkt is of concern for more than direct carbon emissions reasons. Pedestrian safety, water quality, space wastage to roads to accommodate the vkt, congestion, the energy required to power the ev’s…
That’s why reducing vkt needs to be top priority. It improves so many issues at once, and doesn’t rely on fickle NZer uptake of ev’s.
Why stop building roads, electric vehicles will have to use them. Even Norway is planning on more than doubling it’s motorway network in the next 10 years. Last year they opening 90km of new 4 lane highway, this year it’s only 10km, next year it’s over 100km. There are multiple massive brigde and tunnel projects under consruction and more planned.
The car in all its forms is here to stay. What the Norwegians have done is make living in the provinces viable, they haven’t had urban drift on the scale of most other developed countries, Norwegian cities aren’t gridlocked, they are still smallish and livable. Providing transport for people, material in and finished goods out is the key to this, roads are important.
Even Norway? Would that be the oil-producer that is pushing ahead with exploration for oil in the parts of the Arctic that climate change has made accessible? Why are we comparing with them?
You do know that fuel tax it is a fixed amount per litre, not a percentage? So no extra fuel tax is received by high fuel prices.
However GST take is increased by high fuel prices – just like it would be with high power prices, food prices, etc. It is also decreased during times of low fuel prices, food prices, power prices, etc. Do you want the government to adjust the GST percentage continually depending on the price of stuff?
The government has increased fuel tax by about 4c/litre. Not really worth complaining about. They also imposed an Auckland 11.5c/l tax, but there was a corresponding rates decrease from the council as the transport levy was removed.
Economy growing faster than expected but current govt blamed for a strengthening USD?
The thing is there are options. It’s the good old anti tax brigade when it’s bloody obvious that is but a part of the latest oil company greedfest.
Use PT, it’s never ever been better value.
Buy a car that is economical. They are relatively cheap and practical and because of the illogical obsession with SUV’s, plentiful.
Do NOT buy or attempt to run an SUV or commercial vehicle such as a Ute, or a 6 or 8 cylinder car. I don’t care what fictitious economy stats state, they are always incredibly conservative and grade A bullshit. People movers fall into the same hungry category.
Avoid BP, Z and Caltex, always first to up prices, last to drop and always the market stragglers.
Use 91 if that is suited but only if it is.
Walk
Bike, but be safe.
Back in the 1990s NZ’s top selling car was Toyota Corolla with around 1.5 litre engine. Since then engines have become significantly more fuel efficient, however average fuel consumption has stayed much the same cause we just bought bigger vehicles. Today’s top seller is a Ford Ranger four-door pickup truck, 3.2 litre engine.
Surely now is the time to embrace the Vienna solution of cheap public transport. Take the feebate scheme that James Shaw is talking of and apply the fees derived to reducing the costs of public transport. If say a 5% fee was paid on the costs of all non ev vehicles brought to NZ then Auckland’s share could be applied to give an immediate reduction of $1 per trip on all trips of 2 zones or more.
Instead of the proposed scheme where money is transferred from the poor to the rich here is something that will provide a real option for those struggling with increased petrol prices.
I’d say it is more time to put any extra money into expanding the frequency and reach of the network. A fare reduction in the current environment could put some real strain on the existing network.
Off-peak fares should be reduced though.
There isn’t 10% spare capacity – 5 more people on every bus? There’s also 37 services that have been cancelled on the Shore for a start.
I know that you have a penchant for reducing off peak fares, but, by definition, that is not where the problem lies. It is with most people (the peak) suffering from higher petrol costs.
I’d say on many frequent routes there wouldn’t be a spare 10 % capacity on many services, there would be a real risk of overcrowding.
I’m all for reducing prices but it shouldn’t be done without capacity improvements.
And both are possible with funding reallocation from roading.
So AT adds capacity as required. That’s what they do. Currently there is growth at about 6%. On some routes that will mean new services and so that is what happens.
I think with PT we need to start thinking about what can be achieved rather than what can’t. The latter thinking is why Auckland is in the mess that it is in now.
Agree, where possible increase the capacity, although I’d be a bit nervous about the rail network. It has a reasonable amount of capacity at the moment but there is absolutely no scope for increasing peak services until 2024, in fact there will likely be a reduction on the Western line while CRL works are happening at Mt Eden.
I’d rather see as much money being put into improving the system as possible while the tide is in favour of PT anyway, with petrol prices going up. Next time petrol prices drop is when we really need to be ready with a quality network so we can drop prices and remain competitive with driving.
Heidi, if the Chinese build Penlink there will be another $400 million sloshing around. And if they are keen they can build Mill Road as well.
Jezza, while the tide is in, I would sooner the government increase demand by lowering fares. Once more people use PT that will in turn create the demand for more services which any government is going to find it hard to deny. In three years time I can’t imagine any government saying, “we are happy to increase emissions, congestion, roading costs etc by forcing people back into cars.”
Penlink is easy to toll. Mill rd not so much. And i wouldn’t count ppp transport chickens before they’ve hatched!
Stu, the comment was partly facetious. It was more frustration that as a central Aucklander I am paying significant amounts of money to allow outlying Aucklanders to drive as far as they want at a significant cost to the environment.
Isn’t it fascinating that retail prices has followed importer cost almost step for step …. But no, it’s definitely anything and everything that the government does…..
Just feel sorry for anyone (most of the country) that has no other feasible alternative to driving and getting slugged for petrol.
And for the more than a million Bangladeshi who have already had to migrate inland due to anthropogenic climate change.
Heidi
I was thinking of Little Shoal Bay (https://www.newsroom.co.nz/2018/09/24/251446/watery-limbo-for-flood-prone-bay) but yes it has been more dramatic for the Banglaadeshi.
Govt has $6bn excess raised from taxes, well above the projected $2.4bn.
They could easily do something right now about petrol prices but choose not to
Instead we are paying increased taxes apparently for a rainy day fund. Not for transport projects
That so-called ‘rainy day’ (a well rehearsed Cullen line) will be around November 2020.
Took me a few minutes to understand this. Do you mean for a big spend just before next election, a voter bribe?
Surely not, they wouldn’t do that, voters are not that stupid/shallow, are they?
Bogle and Vance – I agree with the government should keep any surplus for a ‘rainy’ day. With a GFC looming on the horizon and current uncertainty in global political and economic issues, the government has made the right decision.
I say regional rail and or electrification of rail lines would be good “rainy day” spend & have change left over. This would kill so many birds with one stone all while fuel prices are rising.
+1, excellent suggestion
Grant – I agree with you
One thing that hasn’t been mentioned thus far. It’s clear there’s some gouging (or at least transferring of costs/profit) as the price differs markedly between regions.
Go south of Levin (or is it Otaki – I can’t remember) and it goes up 10-20 cents/l. Palmy north prices pretty similar to other North Island prices – not as low as Rotorua though, but close.
Why? Competition from Gull, Waitomo etc.
As soon as that competition is gone, prices go up. By the looks the south island and Wellington prices have gone up at least as much as Auckland’s has but they don’t have the regional fuel tax. It’s just more margin for the petrol companies. Simple reason – no real competition.
(Which is a bit weird – my guess is margins are quite low and costs creep higher the further south you go – or perhaps setup costs are too high for Gull et. al. to establish further south?)
Just goes to show the regional fuel tax is hardly a significant factor. The GST intake will be welcome though.
With the latest IPCC report saying climate change is happening quicker than originally thought and we need to make major changes in our daily lives, I am getting a tired of all the moaning about the rise of petrol.
NZ is a country that is car obsessed especially in the urban centres, has high car ownership, our national car fleet is old with most of the cars having a vehicle safety rating of 3 or less, under invested public transport systems and badly maintained national State Highway and regional road networks.
I no longer own a car, so I use public transport where possible, yet as a public transport user, I have to put with non user friendly, cheaply funded, shambolic local, regional, inter-regional and long distance public transport networks.
Climate change is affecting us now and it will get worst, yet we are fixated on petrol increases and not planning for the future like getting our under funded, under utilized national rail network from a ‘cost recovery’ business model to national strategic asset like roads, get urban and regional and inter-regional public transport networks probably funded, more frequent and user friendly and upgrading and future proofing our State Highway and regional road networks for climate change.
Yes. Thanks, Kris. Despite the talk, the lion’s share of investment is still going to the one type of infrastructure that’s going to exacerbate our contribution to climate change. I’m tired of the whingeing about fuel taxes. And I’m tired of the “can’t do” attitude about actually cutting the spending on increasing road capacity.
All the money involved in the Transport Growth Networks (submissions due tomorrow for the South networks) would be so much better spent on PT, active modes and enabling intensification.
What makes me cringe is all this bollocks about how NZ is “clean & green” and “100% pure”.
No it’s not. It’s merely underpopulated. Per capita; NZ is one of the worst polluters and NZ society has completely embraced US-styled consumerism and automobile dependency, with an economy that only allows cheap trinkets for the warehouse and second-hand imports from Japan.
And most Kiwis baulk at the thought of making any meaningful sacrifices for the environment and conservation, they’re more interested in cheap token gestures.
Daniel Eyre – You have summed it nicely. Since the 1970’s, NZ has lapsed in short term bad urban, transport and infrastructure planning.
Spot on.
Spot on, Kris.
One of the things you hear often with petrol tax increases is how it will sting us all with the impact on food prices. An example from above: “Tell that to families the next time they go to the supermarket and find significant increases in food prices as freight costs are passed on.” Here is Ken Shirley from the Road Transport Forum arguing the same point this morning: https://www.newstalkzb.co.nz/on-air/early-edition/audio/ken-shirley-expect-the-price-of-everything-to-rise-as-effect-of-petrol-tax-hits/#ath
I’ve never seen any workings backing up these claims so did a bit of googling.
RUC is estimated to comprise 10% of Road transport costs in NZ according to the MOT. This year’s tax increase is applied as an increase of between 0 and 10% RUC, however for most heavy vehicles the increase is 0% as they are reallocating the costs to lighter vehicles. If we take the midpoint of 5% (although I’d imagine groceries do often go by heavy vehicles) then this would be equivalent to a 0.5% increase in road costs.
When it comes to groceries, Progressive’s average gross margin was 24% according to a 2017 news article. Take out GST for consumers, and that leaves approx. 60% of the retail price going to the cost of products they sell.
I couldn’t find any stats on how this 60% was allocated to raw materials / production / marketing / storage / transport / etc., and this would vary significantly by the type of grocery (how processed and marketed it is), where it is sourced from and where the consumer is. My guess – and this is nothing more than a guess – is that transport would make up between 10 and 50% of the cost price for the supermarket, depending on all of those factors. If that is correct, and the transport was all by truck, then we can estimate the grocery cost increase you’d expect as a consumer from the current petrol tax increase is between 0.03% and 0.15%. This would work out in the vicinity of 9 cents +/- 5 cents extra at the checkout if you spend $100 weekly on groceries.
Sources:
https://www.transport.govt.nz/land/road-user-charges-ruc-and-petrol-excise-duty-ped/increases-to-petrol-excise-duty-and-road-user-charges/questions-and-answers/
https://i.stuff.co.nz/business/money/98703137/whats-behind-big-markups-what-were-prepared-to-pay
Lets be honest here – The Labour led, Winston Peters controlled Government has increased the cost of fuel to NZ motorists. The regional fuel tax is a real cost increase, but more importantly, the fall of the NZ dollar has a direct relationship to the rise of fuel cost.
Almost all oil is priced in USD – the exceptions are Iran (we are too pussy to buy from them) and some Russian exports, where they are priced in Euros.
Cindy’s comments that it’s the oil companies is as factually incorrect as is her claim that we have the highest cost of the OECD. That said – now that Labour have put a regional fuel tax on, no subsequent Govt will remove it.
Also – in fairness to Cindy – much of the increase at the pump is from global forces and nothing to with any action taken in NZ.
Crude supply – with Iran out – is tighter than it has been. That added at least US$15/bbl and while current demand is met with increased exports from Russia, Saudi Arabia and Iraq, this ‘tightness’ will create a lot more market volatility in the coming months. Global stocks are at lows and any disruption will push the price to $100/bbl without too much effort.
HIgher crude costs are bad for refiners and they are cutting runs. That means less road fuels are being produced in the months ahead and again – stocks are not high.
Worse is to come. In Jan 2020, marine fuel changes to 0.5% sulfur as a global specification change. This is going to put the price of road fuels in NZ up dramatically. Firstly because to make the new marine fuel, components that are usually used in gasoline (petrol) and diesel production, will be used for the marine fuel. Secondly, the cost of marine fuels will increase quite a lot and shipping companies are going to pass those costs on. That means all the oil that NZ imports is going to cost more to freight here – I reckon around 7% freight increase. Of course the same higher freights will effect everything we import and export.
As fuel is a large part of how we measure inflation – NZ is going to be experiencing high inflation at the same time we also get higher interest rates.
This may well prove to be a very good time for National to be in opposition, because the public backlash against rising fuel, rising inflation, rising interest rates is all going to be aimed at Labour/NZ First. In a couple of years – things may be so bad that even Simon Bridges is electable.
Some of the people reading this will be happy – thinking rising fuel costs will be good for public transport and alternative fuels. I believe it will be a mixed bag. PT should see some growth, but about the same time as unemployment rises. Alternative fuels always do well with higher oil prices (something I think is a good thing), but so too does fracking and shale oil.
Of course there is the EV revolution – except the high cost of transportation will kill those economics.