Fuel price crisis: What can Government do to try to push prices down?

Business groups are calling on the Government to “do something now” on the skyrocketing price of fuel and a general cost-of-living crisis.

Prime Minister Jacinda Ardern is expected to announce some form of temporary relief from fuel taxes this afternoon.

While the fuel prices have already surpassed the $3 mark the Automobile Association (AA) says the fuel price would soon exceed $4 per litre.

Most of the fuel tax goes directly into the Government’s coffers to fund a number of projects such as social, environmental and safety impacts, according to NZTA.

Auckland Business Chamber chief executive Michael Barnett said the Government should not be benefiting from the fuel price rise, as they take a huge chunk of fuel sales, and this is not fair.

“The reality is that Government takes about 47 per cent of the price of fuel price.

“In fairness, they should set a total revenue expectation and not benefit from the fluctuations due to world events and the impact they have on prices and people.

“Doing something now to mitigate the pressure on families would be easy for them and would send a signal of understanding,” he said.

“Cost of living. Of course, there is a crisis – have any family look at their food bill and you have the proof. The only problem is most families don’t have the ability to lift their incomes so have to start making decisions on what or who becomes the sacrifice.

“They should not have to wait until there is a problem – we have seen this coming for months,” Barnett said.

Today Ardern admitted the country has a cost-of-living “crisis” and indicated the Cabinet will today announce immediate tax relief at the petrol pump.

The Automobile Association’s (AA) principal policy adviser Terry Collins said it welcomed any move that reduces the cost of motoring for its members but declined to comment further on what changes he’d like to hear from the Government on today’s post-Cabinet announcement.

The New Zealand Trucking Association chief executive David Boyce said although almost every long-distance truck in the country are diesel-powered any reduction in the price of fuel would be highly appreciated by the industry.

“We are hoping that they will scrap the Auckland regional fuel tax and also cut the cost of diesel to the New Zealand transport industry,” Boyce said.

In Auckland, the regional fuel tax is 10 cents in addition to 15 per cent GST and further excise tax for petrol.

Most of the tax by the Government is on petrol and not on diesel, he said.

He told the Herald, the Government was benefiting from the higher taxes on fuel, which needed to be stopped.

The higher the fuel price the more the Government earns from taxes, he said.

“Our industry has been highly affected, diesel has basically doubled in price in the last six months in New Zealand,” Boyce said.

As the fuel price increases the excess cost will be passed on to the customers, hence increasing the price of goods and services.

“We would certainly support any moves from the Government to reduce the cost of fuel,” he said.

Canterbury Employers’ Chamber of Commerce chief executive Leeann Watson said while the entire country is experiencing a period of extraordinary costs rise in the fuel price has an immediate impact on the unsustainable cost of living.

“Trucks still need to stock our supermarkets, tankers to transport our milk, forklifts to shift product.

“Businesses will struggle to absorb additional costs at a time where the cost of doing business is already at breaking point, and an increase in fuel cost will invariably be passed onto consumers,” she said.

“We expect that the Government will attempt to provide relief at the pump, likely by temporarily reducing the fuel excise as the energy market is disrupted by overseas activities.

Watson told the Herald: “the fuel prices are only one part of the equation and businesses need more than an attempted quick fix to one issue. They need a comprehensive economic recovery plan and certainty from a government that needs to do more to support business.”

Hospitality NZ chief executive Julie White said she is hoping the Government will today reduce the excise duty on petrol and this is a timely reminder to the Government on how it collects taxes because fuel is an essential commodity whose price affects every part of the economy.

“Everyone needs urgent relief at this time of a cost-of-living crisis so reducing the
excise is essential,” she said.

“The price of petrol affects the price of everything the hospitality sector uses,
particularly food and beverage.

“After being devastated by Covid, our businesses simply cannot absorb the costs of
the increasing price of goods so we will have to put our prices up, and that will hurt
consumers and keep more of them away.

“Businesses are already really struggling with low demand during the red traffic light
setting and doing nothing will make this situation even worse.

“Higher petrol prices are putting a further damper on people going out for a coffee or
a meal or travelling domestically, and that will hurt both hospitality and
accommodation,” White said.

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