Had the government not slapped retrospective duties onto the oil companies, you and I might be enjoying cheaper petrol now

Don’t you just love politicians.

The price of oil has halved in the last year, but petrol prices are only down about 10 per cent. Why hasn’t the price of petrol fallen more?

Just because the price of oil has halved does not mean the price of refined petrol has, and the New Zealand dollar is substantially weaker now than it was a year ago, offsetting some of the cheaper product price. The operating costs of the companies do not fall in line with the oil price either. On top of that, the margins charged on petrol are climbing.

But the real reason prices cannot halve, under almost any circumstance, is tax. Based on the “national price” of regular petrol, currently $1.959 a litre, about 96 cents of what we pay is tax of one form or another. Worse still, most of it is fixed, meaning as the price of refined petrol falls, it is only the GST component of petrol which also drops. Put another way, in the event that petrol companies were effectively charging nothing for the fuel, motorists would still pay about 77c a litre, mostly in excise and GST. This includes 10c a litre of GST charged on excise tax, meaning motorists are paying a tax on a tax.

That is?the taxation side of the equation then there is the retrospective Customs duties.

The fuel companies are currently locked in a dispute over unpaid Customs duty which could cost the major companies $71 million. The dispute relates to the way fuel is mixed during transport through a major pipeline dating back to 1986, but the cost of any impact is likely to be faced by motorists now. Although the petrol companies are considering taking Customs to court over its claims, one figure in the oil industry said that the fuel companies may already be seeking to recover the costs through higher retail prices. There have been some warnings that the case could add several cents

There is an outrageous amount of taxation levied via fuel taxes. But it is a falling revenue stream as cars become more fuel efficient. What this will mean though is the government will ratchet up fuel taxes.

Time for a re-think.

 

– Fairfax

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