NZ’s petrol prices still running low

Prices at the pump are set to go up after Tuesday’s tax hike but Kiwi motorists still get one of the best deals on fuel in the OECD, writes Laura Walters.

KIWIS are so used to rising petrol prices they’ve probably forgotten another hike is coming thanks to a tax increase, but motorists should not get too revved up as New Zealand’s fuel prices are still among the lowest in the OECD.

In 2012, Transport Minister Gerry Brownlee announced the Government would increase petrol excise duty by three cents a litre on July 1 in 2013, 2014 and 2015. Road user charges for people using diesel would also increase by an equivalent amount.

Major retailers Z, Mobil and BP are selling 91 octane for $2.209 a litre but motorists will be paying about $2.239 after the oil giants pass on the tax hike on Tuesday.

This will bring fuel prices close to their inflation-adjusted all-time high of $2.46 a litre, reached in 1981 in the wake of the Iran revolution oil-shock.

AA PetrolWatch spokesman Mark Stockdale said that after Tuesday Kiwis would be paying more than 56 cents a litre in tax.

However, New Zealand had the fifth lowest petrol tax in the OECD, making it the eighth cheapest country out of 25, behind the likes of the United States, Canada and Australia.

New Zealand motorists were not ‘‘cash cows’’ for the government like road users in other countries, Stockdale said.

Excise tax on petrol and road user charges went towards transport costs, including building new roads, road repairs, road safety enforcement and public transport, which everyone benefited from, he said.

On the downside, New Zealand drivers were still paying too much for fuel despite it being cheaper than most countries, Stockdale said.

New Zealand fuel prices are based on the international commodity price of oil, which has been rising due to the unrest in Iraq.

Iraq produces 3 million barrels of oil a day but the latest crisis, caused by al Qaeda splinter group, Islamic State in Iraq and Syria (Isis), has the world worried about disruption to the global supply.

Stockdale said even though commodity costs had risen during June, retailers shouldn’t have lifted prices as the rising New Zealand dollar had offset the impact of the price rise.

‘‘There’s always room for them to absorb some small increases.’’

And diesel prices should be dropping, he said.

While the big guys were hiking prices, family-owned fuel retailer Gull was keeping prices low and promoting much-needed competition in the market, Stockdale said. Gull’s 91 octane petrol was sitting at an average of $2.049 a litre last week, around 16 cents a litre less than its rivals.

‘‘There’s certainly healthy competition in the retail market at the moment and a lot of that is due to Gull.’’

Gull’s tactics have even coined

Gull general manager Dave Bodger an industry phrase: ‘‘the Gull effect’’ – which forces rival retailers to drop their prices in areas where there is a Gull station in order to stay competitive.

The effect was clear in areas like Pukekohe and Levin, with motorists in the area saving an estimated $753,000 and $409,000 a year respectively since the Gull stations opened.

Gull general manager Dave Bodger said his prices were ‘‘frighteningly lower’’ than others at the moment.

It was able to drop prices because it employed fewer staff, its sites were smaller so property costs were lower, none of its sites were more than 14 years old so the tanks were larger, meaning lower maintenance costs and fewer historical contamination issues, Bodger said

He said the company was environmentally conscious and used biofuel in the forms of Gull Force 10, a 10 per cent ethanol product, and Gull Force Pro, which was 85 per cent ethanol. Gull also sold regular 91 octane petrol with no ethanol at all its stations.

Bodger said the ethanol delivered better performance but was slightly less economical.

Gull did not plan to raise prices on Tuesday when the tax hike came into effect, Bodger said.

But if commodity prices continued to rise the retailer would have to increase prices sooner rather than later.

‘‘Unashamedly we are actually here to try and make money, we’re not the department of social welfare.’’

Overall, Bodger agreed with Stockdale that New Zealand motorists were getting ‘‘damn good value’’ when it came to petrol.