Fuel boss says price drop 'a game-changer'

A major fuel company says it has dropped fuel prices by 29 cents a litre overnight, as motorists enjoy an extra four cents GST removal on top of the Government's 25c-a-litre tax cut.

The cuts have been labelled a "game-changer" by Gull boss Dave Bodger, who says motorists may face even further drops in price.

Prime Minister Jacinda Ardern finally budged yesterday on the cost of living crisis, addressing Kiwis' pain at the pump, while also cutting road user charges and halving public transport fares.

The about-face came as the prime minister admitted there was a cost of living crisis in New Zealand - something she had been reluctant to do last week, although she maintained the drivers of rising costs were from offshore, and not the fault of her Government.

The changes are for three months at this stage, although Ardern and Finance Minister Grant Robertson suggest the Budget, due in May, could make lower public transport fares permanent.

The fuel excise changes took effect as of midnight last night (the public transport changes will come on April 1), but at least one fuel retailer, Mobil, took the opportunity to drop its prices almost immediately. When GST is included, the cut totals 29 cents a litre.

Ardern said the changes would mean savings of "$11 a tank to $17 a tank."

Prime Minister Jacinda Ardern says she plans to use lockdowns less frequently because of the...
Prime Minister Jacinda Ardern. Photo: RNZ
She added she hoped the public transport fare cut would give people the opportunity to leave the car at home.

"We are also making it cheaper for those who catch a bus or a train. In the long term we need to build greater resilience into our transport system so we are less vulnerable to spikes in the price of petrol, but for now halving the cost of public transport will provide some families with an alternative to filling up the tank," Ardern said.

She said the crisis in Ukraine had brought about a "global energy crisis".

Ardern said that while the crisis was not the responsibility of the Government, it would try to alleviate some of its most immediate costs.

"We cannot control the war in Ukraine nor the continued volatility of fuel prices, but we can take steps to reduce the impact on New Zealand families," Ardern said.

Fuel tax cut 'huge for the public'

Gull NZ General Manager Dave Bodger told Newstalk ZB's Mike Hosking the 29 cent reduction on fuel prices was a "game changer".

The 25 cent reduction, plus GST, totalled a 29 cent reduction on petrol, which was "huge for the public", Bodger said.

As a general rule he said a dollar a barrel amounted to a cent per litre, with a cent on the freight exchange amounting to a cent per litre.

Asked for his predictions on how prices would pan out, he said they had been "zig-zagging all over the place".

He said things would get better if there was peace in the Ukraine, whereas escalation would be bad news for fuel prices.

"For those of us old enough to remember the Gulf War, it went through the roof and then it recovered afterwards," he said.

"Lets hope it's the same this time."

Bodger told RNZ after hearing the announcement yesterday, Gull pre-loaded the price to reduce the cost of petrol by 29c a litre from midnight.

The price cut had been passed on at its approximately 80 sites where it controlled the retail price, and it was also speaking with its independent sites who had already paid a higher price for fuel to see how it could provide a rebate.

Prior to the announcement, one of its sites was charging $3.03 a litre for 91, so the reduction of 25 cents plus GST lowered the price to $2.73.

Gull didn't increase prices on Friday because they could see the refined price out of Singapore going on a zig zag trend of "up, up, down, up, down".

"Hopefully if that continues on a downward trend we can pass more onto the motorist."

Bodger said Gull would be looking to do whatever it could following Energy Minister Megan Woods' request to provide a seven day rolling average of its margins, but he wasn't sure it could do it in the specific way they had asked for it.

Fuel prices at a petrol station in Auckland last week. Photo: RNZ
Fuel prices at a petrol station in Auckland last week. Photo: RNZ
In his 30 years in the oil industry, these were the highest prices he had seen, Bodger said.

Grey Power president Jan Pentecost said reducing the cost of petrol would help its members "a little".

"Everything helps I'm sure".

Speaking to RNZ, she said the halving the cost of public transport probably wouldn't make a difference because for people living in urban areas they could often get free travel at certain times using their Gold Cards anyway.

Pentecost said she would have rather have seen a further increase in superannuation payments to give some of the more vulnerable older people a little bit more discretionary money so they had a little bit more in their pockets.

PM's difficult week

Ardern's announcement capped off one of the most difficult weeks in this Government's history, which began with leader Christopher Luxon promising a $1.7 billion tax cut package, progressed to National pulling ahead in a poll for the first time in two years, and ended in the unedifying spectacle of Ardern denying there was a cost-of-living crisis.

On Monday, Ardern was even forced to answer, whether, on the back of that poll, she planned to stick around for the next election - a question usually directed at struggling National leaders (she said she would contest the election, shrugging off the poll result).

National had been calling on the Government to permanently axe Auckland's regional fuel tax of 10 cents a litre plus GST - although last week National deputy leader Nicola Willis refused to go as far as calling for fuel excise, which applies nationally, to go as well.

National stuck to its guns on Monday, leader Christopher Luxon saying the "petrol tax tweaks will provide some relief but don't address the wider cost-of-living crisis that Kiwis across the country are facing".

He reiterated his call for the Auckland regional fuel tax to go, as well as a raft of other Labour taxes.

National leader Christopher Luxon. Photo: Getty Images
National leader Christopher Luxon. Photo: Getty Images
"It's good that the Government has finally accepted there is a cost-of-living crisis in New Zealand. But now they need to address it," Luxon said.

Auckland Mayor Phil Goff said he still backed the tax.

"Suspending the regional fuel tax in current circumstances would worsen the crisis Auckland Transport faces with the loss of hundreds of millions of dollars in public transport fares because of Covid, while construction costs for new infrastructure and operating costs are rising rapidly," Goff said.

"Any reduction in revenue in these circumstances would result in suspension of projects like the Eastern Busway and would not only delay their delivery, but also result in ultimately much higher costs," he said.

He also warned the loss of revenue would mean "less ability to borrow within debt to revenue constraints".

But one of the candidates vying to replace him, Viv Beck said she would get rid of the tax within 12 months of becoming mayor, saying the tax was "hurting Aucklanders at a time when families across the city are already feeling the pinch."

Act Leader David Seymour called for the Government to go even further, saying the $4.5 billion expected to be raised in Emissions Trading Scheme receipts over the years to 2025/26 should be recycled back to consumers as a climate dividend.

"The Carbon Tax Refund would take each year's revenue from ETS auctions and divide it by the population. Every adult would receive a reduction in their tax bill by that amount, plus their dependent children's share," Seymour said.

Not every party backed the cuts.

The Greens cautioned against cutting the fuel taxes, with co-leader James Shaw saying he would have preferred "direct payments to people through the welfare system or via a tax credit".

Woods said she'd be keeping an eye on fuel retailers to make sure they pass the cut on to consumers.

She said she is now "seeking daily information disclosure from fuel companies of their rolling seven-day average fuel margins, to monitor industry profits".

Woods said she would like the fuel companies to give up that information voluntarily, but she suggested that if they did not, she might use new fuel pricing legislation to force it from them.

The move would reduce fuel excise duty, the main tax on petrol to lower than when the Government took office. The current Government raised it by 10.5c.

Fuel taxes and road user charges are paid directly to Waka Kotahi - NZ Transport Agency, which spends the money on maintaining the road network, building new roads, and subsidising public transport.

The Government would make up for the revenue lost as a result of the cuts to fuel taxes and road user charges by giving Waka Kotahi a grant from the Covid fund of about $350m.

Robertson said this cost would be met through "savings and reprioritisation".

"This means we can continue the Government's record investment into transport infrastructure without having to cut projects," he said.