'Get used to it': Petrol prices will rise higher

Editorial: Is sweat on your brow as you wait your turn at the service station? Is your mouth dry as you pull the trigger to pump petrol into your car? Is your heart racing as the numbers on the bowser flick over faster than you can read them?

Get used to it.

Even if the Government can do something about the oil companies' pricing regimes - and their alleged intention to extract as much money as possible from Kiwi motorists - the price of petrol is ultimately on a one-way trip upwards.

There have been warnings for years that the world is past peak oil. Whether you believe that point has been reached or not - and there is considerable debate about it - as the clock continues to tick, we are only going to get closer to peak oil, or further past it.

The question is already being asked: ''Would you pay $3 for a litre of petrol?'' Anybody who defiantly says ''no'', who is planning on not standing for such an outrage, is facing a losing battle.

That level is unlikely to be reached this year and, with some intervention and more than a little luck, possibly not next year either. But even with likely fluctuations, that price is inevitable, and not all that far away.

There are in fact already isolated parts of the country where motorists are paying more than $3 for a litre of 91-octane petrol. Stewart Island drivers have been stumping up $3.06 per litre this week from the only petrol vendor on the island. At the other end of the country, consumers on Great Barrier Island have reportedly had to pay $3.10.

Prime Minister Jacinda Ardern has been strongly on the side of the motorist, despite her Government overseeing the introduction of new regional fuel taxes. However, the amount these add to the total cost of fuel is just cents compared with the tens of cents increases due to exchange-rate fluctuations and increased crude oil prices.

Ms Ardern has claimed the oil companies are fleecing consumers and this week promised rapid changes to the Commerce Act which will give power to the Commerce Commission to investigate fuel margins.

Those changes are to be welcomed. Of course it is easy, and populist, for the Prime Minister to talk tough about petrol. When Judith Collins was part of the last National government she did the same, and got nowhere.

So just what proportion of the pump price is going to the companies?

Trying to pin down who gets what has always been a fraught exercise. But, according to the Automobile Association, out of a litre of petrol at $2.29, about 35% is the cost of the refined fuel, 18% is the importers' margin and 2% is the cost of shipping.

On the government side of the ledger, about 30% of that $2.29 is fuel excise, 13% GST and 2% of that goes into the emissions trading scheme.

That prices go up when something is in short supply, or reserves are constrained for some reason, is among the most basic of economic rules. The world still has considerable amounts of oil, but as the resource becomes more difficult to access, the cost of extraction will continue rising.

Those complaining about petrol prices now need to see this as a very necessary wake-up call to cut back on petrol use and contemplate alternative energy sources, especially with the latest international climate change report this week urging there are only 12 years left of action if we want to keep global temperature rise to 1.5deg or less.

Why would anyone choose a second-hand, gas-guzzling four-wheel-drive vehicle to cruise around city streets? It is simply foolish. It is not for nothing that city dwellers in Europe - where petrol prices have been higher than New Zealand for many years - have opted for smaller cars and electric vehicles.

Ask yourself these questions: Do we need more than one car? Why not bike or walk instead? And what's wrong with using public transport?

Add a Comment