More than six months on from the Government's decision to slash the fuel excise duty (FED) to help New Zealanders struggling with rising petrol prices, concerns are again mounting the cost to fill up could soon skyrocket.
The decision this week by a group of oil-producing nations to cut oil barrel production targets, upcoming sanctions against Russia, and the scheduled end of the FED cut in January has some, like the AA, worried prices at the pump could return to more than $3 per litre early next year.
That'd be a substantial increase on current prices.
The Ministry of Business, Innovation and Employment's (MBIE) most recent provisional price data shows the main port price - the weekly average of retail prices across Auckland, Hamilton, Wellington and Christchurch - last week for regular petrol was $2.67 per litre, while the average discounted price was $2.50 per litre.
There's a number of components to fuel prices, including the price fuel companies charge to make a profit - which can change depending on global oil markets - and a number of duties, taxes and levies, some of which are flat rates and others that move around.
The petrol excise duty (PED) is a fixed duty that goes towards the National Land Transport Fund, which is then used on operating and maintaining the country's land transport network.
The last jump in PED was in July 2020, when the Government increased it by 3.5 cents per litre to 70.024 cents per litre. Ministers did consider deferring or cancelling the increase at the time due to the economic impact of the pandemic, but decided against it to ensure there was enough money to fund transport projects. Cabinet did decide to rule out any further increases for three years.
However, after the Government's 25 cent cut in March, which was then extended in May and again in July until January 31, 2023, the temporary rate of PED is now 45.02 cents per litre. Road user charges were also cut by an equivalent amount for those who drive diesel vehicles, but these aren't paid within fuel prices.
There are also other smaller flat rate taxes, like an ACC levy of 6 cents and, for Aucklanders, the 10 cent regional fuel tax.
The 15 percent Goods and Services Tax (GST) is calculated on the price fuel companies charge for petrol and the amount of other tax being paid. MBIE's price series last week showed GST to be on average 32.6 cents per litre for regular.
The Emissions Trading Scheme (ETS) levy can move around depending on the price of carbon. As of last week, the ETS levy was about 18 cents per litre for regular petrol.
In the week prior to the Government cutting the excise duty, the average discounted price was $3.05 per litre. Overall tax was $1.20 per litre, compared to 88 cents per litre now. That drop reflects the 25 cent reduction in PED as well as a roughly 7 cent fall in GST. The ETS has risen slightly, however, from 16.7 cents to 18 cents.
The price of oil has also dropped since March, which has led retail fuel prices to fall. Crude oil got up to about $123.70 in March, but has since dropped to about $89 on Friday.
Where to from here?
The volatile global oil market could be about to get even more shaky after OPEC+, a group of the world's largest oil producing nations, including Russia and Saudi Arabia, decided this week to cut daily oil barrel production targets, which will likely result in higher prices.
The group's been accused of siding with Russia as higher oil barrel prices means more money for Moscow to fund its war in Ukraine. Rising fuel prices also cause domestic trouble for Western leaders like US President Joe Biden, whose Administration said it was "disappointed by the short-sighted decision".
Terry Collins, the principal policy advisor for New Zealand's Automobile Association, told AM on Friday prices are also likely to rise due to new sanctions against Russia coming into effect in December.
"I'm really concerned when I look at one event that's going to occur in early December… What's happening is sanctions are being applied to the reinsurance of Russian oil that is in tankers on the water," he said.
"You put on that insurance problem on there, then at the end of January, you put on the 25c… then in March the Europeans start sanctioning refined product coming out of Russia. I do see a slow, upward pressure on oil prices and the only thing that would perhaps stop that is the threatening recession."
The Government previously said the 25 cent excise duty reduction will end on January 31, 2023, nearly a year after it was introduced.
However, Transport Minister Michael Wood said the Government would keep an eye on fuel prices next year.
"As we discussed last week… we have put $1 billion of support in over the last year to have a reduction in fuel excise duty and road user charges - that does come off in January and, at this stage, that comes off.
"Obviously, if we get into next year and there are new circumstances we need to consider, we consider those as they arise - we can't cast ahead and predict exactly what's going to happen in February/March next year."
