Fuel prices drop after letter from minister

Energy Minister Megan Woods sent a letter to fuel companies questioning why their margins were at ‘‘historically high levels’’. Four days later, the price of fuel dropped.

Woods sent the letter on Friday. A copy provided by her office shows she was concerned about ‘‘a sharp increase’’ in importer margins recorded during the week ending Friday, July 8.

‘‘Compared to the previous week importer margins increased by 43.5% for regular petrol, 32.4% for diesel and 30.9% for premium petrol,’’ the letter read.

‘‘I understand that fuel companies are not always able to immediately adjust prices to match shifts in costs.

‘‘I expect to see the recent decrease in importer costs to be passed through to consumers at the pump in the coming weeks.’’

The price of Dubai crude oil, tracked by the Ministry of Business, Innovation and Employment (MBIE), had fallen from a high of $182.99 per barrel on June 17, to $157.74 almost a month later (during this period, there was a week when it rose from $173 to $178, before again falling).

The MBIE data also recorded the margin being taken by the fuel companies as 61 cents a litre. This was twice the margin being taken two weeks earlier, in late June.

Woods reiterated her concern at a press conference on Sunday, at which Finance Minister Grant Robertson said the Government would be extending a 25c cut on the fuel excise tax until January 2023.

The Government had provided the tax cut to reduce a rapidly rising fuel cost, which has been driven by international factors including Russia’s war in Ukraine.

The expectation from the Government has been that the fuel

companies would pass this tax cut on to the consumer.

Yesterday, the price of fuel did drop.

In Auckland, the price of 91 octane petrol was between $2.88 and $3.05 a litre across stations yesterday morning. Prices had dropped below $3 in Wellington and Christchurch.

Fuel companies have said there are multiple factors influencing price at the pump, and lower costs can’t always be passed on immediately.

Z Energy communications manager Haley Mortimer said, after declines in the Brent Crude price, the company made the decision to drop its prices for the Monday morning commute, ‘‘well before’’ the Government’s Sunday announcement.

‘‘It’s important to note that just because crude drops, it may not mean that we drop pump prices by the same amount, as we may have been absorbing some of the previous increases into our margins.’’

Mortimer said the company believed it was ‘‘unreasonable to compare current margins against a short-term, highly volatile, negative margin period in March of this year’’.

‘‘Input costs, for example, are threefold since the Ukraine war began compared to the prior three months.’’

The company’s margin had varied less than 2 cents per litre from its ‘‘baseline margin’’ since the Government cut the fuel excise tax, including the ‘‘higherthan-normal margins’’ of the past week, she said.

A BP spokesperson said there were ‘‘a number of factors that influence prices’’, and BP would continue to review its prices each day to remain competitive.

Woods has been asked for further comment.