Ask an expert
If oil prices have reduced by well over 50% why are pump prices still higher even when you take into account the NZ$ being down.
I would have thought the cost of petrol to be around $1.20 by now. Costs offshore for production should have dropped with the oil price dropping.
If diesel incurs no tax then why isn't it at the price of petrol less the tax eg 40% less?
We haven't seen freight and courier charges drop either. Someone's getting rich off us!
Craig
From the "Ask Jack" archives - 14 December, 2009
I have asked Mark Stockdale from our Wellington office to reply as he is consistently monitoring the global fuel and oil prices on behalf of NZ motorists.
The international price for refined petrol has dropped by about 56% since the record high in early July, but the cost of the product only represents about 43% of the final pump price. The rest is made up of taxes (42%), freight, and oil company margin. So if international prices are down 56%, at best we could expect the pump price to drop about 24% (56% of 43% product cost). In fact prices have fallen 21%, or 46c since then. But then you have the impact of the exchange rate. In July the NZ$ was worth 76 US cents, now its worth 58c; that's a 23% drop. If the exchange rate had remained at US$0.76c, then 91 petrol would be retailing for about $1.48/litre now, and diesel $1.04/litre.
So, taking these variables into account, we can see that the current prices are about right. How we know that is by comparing the oil company 'importer' margin - the difference between the pump price less the import cost (adjusted for the exchange rate), less taxes and freight etc. The margin is within the normal range - and within a couple of cents of the margin the last time crude prices were this low (back in February 2007). In actual fact, if the Kiwi$ recovers another cent or two, then we think there will be enough room in the importer margin for another (5c?) drop at the pump.
To answer your question about diesel, the international price moves independently of petrol. In fact a barrel of diesel currently costs 21% more, in part because it costs more to refine and has a higher energy content. At today's prices, if you added the same taxes as petrol, the retail price would be about $1.99/litre compared to $1.73 for petrol.