By David Chaston
As at last Friday, September 28, the average price at the pump for unleaded 91 petrol reached another record high* of $2.36/litre. After discounts which are now ubiquitous, that average was also a record high of $2.22/litre.
In Auckland, those prices were $2.50/l and $2.36/l, far and away record highs.
The reasons are all to do with the taxes we impose on ourselves.
It is a myth that a key driver is the crude oil price.
In fact, the data on crude oil prices is surprising. While we have record high pump prices, we are far, far from records on crude oil prices. As at the same day, crude oil cost US$79.42 per barrel. The record high was US$137.27/bbl on July 4, 2008. At that time, the equivalent NZ dollar price was $180.75, whereas today the local cost of crude oil is only NZ$119.40/bbl. So it is clear that crude oil prices are not behind the record high pump prices. And by implication, neither is the exchange rate. (NZ$1 = US66.51 cents on Friday, September 28, 2018 compared with NZ$1 = US75.90c on July 4, 2008).
The big mover is tax - what we impose on ourselves.
At current pump prices, we are paying more than 91c/l in volume taxes and GST. In Auckland it is $1.05/l on average. Back in 2008 when those crude oil prices spiked, the tax we paid at the pump was just 75.9c/l.
The Government coffers swell when the pump price is high due to GST. And remember, GST is also being paid on the volume taxes charged, so it's a tax on a tax.
Here is how taxes have changed over the past decade from that prior spike:
|July 2008||September 2018||change|
|Discounted price, national excl Akl||209.9||222.3||+5.9|
|Discounted price, Auckland||209.9||235.5||+12.2|
|Volume taxes, levies, made up of|
|- Land Transport Fund||42.52||59.5||+39.9|
|- ACC||9.34||6.0||- 35.8|
|- Monitoring levy||0.025||0.3||+1100|
|- Local authority tax||0.66||0.66||0|
|Total volume taxes, national||52.6||66.5||+26.5|
|- Auckland tax||0.0||10.0|
|Total Auckland volume taxes||52.6||76.5||+45.4|
|GST (a value tax), national*||23.3||29.6||+27.0|
|GST (a value tax), Auckland||23.3||31.1||+33.5|
Remember, GST has risen in the period from 12.5% to 15%.
So, nationally we are paying about 6% more now than the previous record high price, and this represents about 12.4c more per litre. But volume taxes have risen by 13.9c/L and GST is up by 6.3c/L. The rise of competitive fuel discounting squares the circle.
Interestingly, the "oil companies" now take 51.1c/L to import, refine and distribute the product we use, the smallest part of the price, where crude oil represents 75.1c/L, and taxes represent 96.1c/L. Outside of Europe, New Zealand is the heaviest taxer of fuel according to International Energy Agency monitoring. The local fascination for such a regressive tax is hard to understand (other than it is easy for governments to collect, and easy for the 'blame' to be deflected to "international oil prices").
* On an inflation-adjusted basis, 2018 prices are about 10% lower than 2008 prices, according to MBIE calculations.