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Read moreEveryone likes it when fuel prices fall and no one likes it when they go up. You've told us you'd like to know more about what really goes on with the price of petrol and diesel, so here’s the deal, in plain English.
Petrol and diesel prices are driven by three things:
But what does that actually mean?
A significant portion of the price of every tank of fuel is made up of Government taxes and levies. At the moment, 59.129 cents per litre is collected by the government as fuel excise (excluding GST), which is made up of:
In addition, GST is collected on the overall price of fuel including excise. The GST on excise amounts to a 7.7 cents per litre "tax on taxes".
There are no taxes on diesel other than GST. Instead, diesel vehicles pay Road User Charges. All fuels also pay an Emissions Trading Scheme charge (approximately 3 cents per litre).
New Zealand imports nearly all its fuel. About 70 per cent arrives as crude oil and gets processed at the Marsden Point refinery. The rest arrives ‘ready to use’. Crude oil and refined products are internationally traded commodities, where demand and supply are closely matched. Any shocks, either increased demand, or supply interruptions or even the threat of supply interruptions, can have a significant impact on the price we pay when we buy shipments of crude oil and products.
Also, as we only sell “refined product” e.g. petrol and diesel, not crude oil, the availability of refineries and level of stocks also cause fluctuations in prices from time to time
Like the rest of the world, we buy oil and fuel in United States dollars. When the New Zealand dollar is strong against the United States dollar we can buy more oil and fuel for every dollar and the ‘price at the pump’ is lower. When our dollar is weaker, we can't buy as much oil and fuel for every dollar so the petrol prices at the pump rise.
The other big question many people have is, “How much money do oil companies make?” That’s a good question. Z does not produce crude oil so we do not benefit from the increase the price of oil. We make a margin on the difference between the cost of the product we purchase and what we sell it for, this is called the “importer margin”. Additionally we receive income from our share in the refinery.
These graphs shows what importer margins have been over time. The margin is the amount that fuel companies – like us – make before all operating costs like wages, office costs, transport, electricity, income taxand so on. Whatever is left after these costs is the company’s profit margin. Last year this was less than three cents per litre
If you have any questions about fuel pricing that we haven’t answered here, drop us a line and we’ll do our best to answer them.