Point of Order, true, has already dealt with Prime Minister Jacinda Ardern’s bleating about New Zealanders being “fleeced“ by fuel companies. But today we revisit the issue.
Ardern turned on the companies during a post-Cabinet press conference when discussing rapidly rising (and politically awkward) petrol prices.
She aimed to assure us not to worry – her government is on the case and will be stepping up plans to give the Commerce Commission new powers to investigate the villains.
She mentioned New Zealand having one of the lowest pre-tax fuel costs in the OECD in 2008. Ten years on, we have the highest.
“You cannot tell me we do not have an issue in New Zealand when we have the highest pre-tax fuel cost in the OECD, and it’s gone up by such a significant amount,” Ms Ardern says.
“That’s incredible, and some of it you simply cannot find an explanation for. I don’t think that’s acceptable. New Zealand consumers, in my book, are being fleeced.”
Ardern is mindful her Government’s increased fuel taxes have sparked outrage among many New Zealanders, but she insists this is not the reason for the astronomical fuel prices.
She is aware, too, that the international price of crude oil has risen almost 30 per cent just this year but says this “doesn’t tell us the full picture of what is going on in New Zealand”. Furthermore she raised the curiosity of differences in fuel prices between the South Island and Wellington and the rest of the North Island.
“While there may be a slightly higher cost of transportation in the South Island, it is nowhere near equivalent to the differences in fuel prices now.”
Point of Order is surprised to learn the Government – despite its vast resource of fact-finders and policy-makers – is so mystified by what’s going on with fuel prices.
Maybe economist Donal Curtin can throw some light on what’s happening.
He popped up on the National programme’s ‘The Panel with Jim Mora‘ on Tuesday and reeled off an array of numbers to help explain what’s driven the rise in petrol prices in the past year.
Today he has posted the data on his blog
Curtin’s conclusion?
Forget about fleecing.
“Roughly two-thirds of the rise is down to the increased cost of the imported fuel, which has been hit by both a markedly higher world price in US dollars, and a markedly lower New Zealand dollar against the US dollar.
“It’s not down to a big rise in petrol companies’ margins, which is the story being used to frighten the children.
“Most of the rest is down to taxes, by the way, and even more so in Auckland.”
Curtin’s numbers come from MBIE’s weekly petrol price monitoring which (as MBIE says) assumes retail petrol price are uniform nationally.
He quotes the ministry:
“Auckland City has recently introduced a regional fuel tax that will increase fuel prices in the Auckland region. Our currently methodology does not accommodate regional prices or regional fuel taxes. We are developing a new methodology … that will include regional retail price differences”.
Therefore – Curtin explains – Aucklanders can add 11.5 cents a litre to the increase in taxes.
“Tax increases for them have been of the same order of importance as higher import costs.”
Curtin goes on:
“The MBIE data are a great resource if you’d like to keep tracking developments for yourself.
“There was also an excellent explainer on the Newsroom website from Bernard Hickey, ‘Q+A: Are petrol retailers profiteering?’ which provides a lot of useful background.”
We suggest someone in the PM’s Office benefit from Curtin’s guidance and checks out the numbers.
This mightn’t provide all the answers but it should be enough to keep Ardern up with the play adequately enough to handle a press conference while the Government prioritises the passage of the Commerce Amendment Bill when Parliament resumes next week, compelling companies to produce information to the Commerce Commission to fully understand how markets are functioning.
After its passage it will take a month for Commerce Minister Kris Faafoi to seek nominations from fellow Ministers for possible market studies.
Ardern says she will nominate the fuel market as a priority area – naturally – and then we must wait for the study to report back next year and the Government to prioritise a response to it.
Petrol prices by then will have reached…
Any guesses?
Point of Order 