Hot-headed and Cooler-headed Fuel Price Arguments : What are the Real Issues at Stake?

 "Of the 40 cents a litre increase in petrol prices over recent weeks, about 30 cents of that has been due to a combination of rising crude oil prices internationally and a weaker exchange rate (which makes imports dearer). The remainder has been adjustments in retailer margins, changes in discounts and an increase in taxes of about 9 cents." -- Eaqub.
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pn129

Jacinda Adern said petrol prices had increased by 38c in the year ending 28th September, of which 6.8c was for the Emissions Trading Levy and GST. These figures were provided by the Ministry of Business, Innovation and Employment (MBIE) and were also used by the Automobile Association to show that tax was not the major factor in the increased petrol tax. (See my posting pn121).


Government opponents, including "hot head"  Cameron Slater, immediately  attacked these figures because they did not include the 3.5c excise tax and the 10c Auckland Regional Fuel Tax that came in two days later, on September 30th. Mike Hosking said the increase was mainly due to taxes — which it wasn't. (Use "Search the blog" for "pn127".) 

We look at these views and then at those with "cooler" heads.


National Party leader  Simon Bridges said the PM got her figures “badly wrong,” and has made a “staggering mistake.” I doubt the AA made the same "mistake!"

Today he is saying National would not have increased the fuel tax "at this time" because of rising crude prices and our falling dollar, National would also scrap the Auckland Regional Fuel Tax if it were government. I doubt further procrastination will solve our transport problems.

Cameron Slater

Cameron Slater in his Whale Oil Beef Hooked blog  wrote, "Jacinda’s incompetence shows again" and then of  her "inexperience," "silly mistakes" and  her "no head for numbers" before wondering:

 "This is so seriously incompetent that you cannot help wondering if it was deliberate. With a fawning media (sic!) , they may have thought they would get away with it. ... Nah. I don’t believe that theory. Too clever for this mob by far. They are just plain incompetent. quote. She has misled and misinformed the public and by and large, she has got away with it. Whichever way you look at it, she had either lied deliberately (how can you lie accidentally?-- ed.)  or has no clue what she is talking about. I choose the latter.  She simply has no clue."

David Farrar on his Kiwiblog  offered no evidence  but claimed

David Farrar

\Government  was "slashing spending of roads"  and spending it on stuff such as cycle ways that maybe eight people a day use." 

Others, incredibly,  have protested that they should not pay tax for  buses and trains they do not use.  I prefer:

"No man is an island, entire of itself; every man is a piece of the continent." -- John Donne (1572-1631). Each one of us is a "piece" of New Zealand.

My reply to Farrar: Government is concerned with building a transport network which includes roads, trains, buses, walkways. Dealing with only one element - roads - will not fix our transport problems. 

We should also be  building high rise residential flats in the CBDs of our bigger cities to reduce urban commuting,  and promote employment and housing decentralisation to Hamilton, Tauranga, Palmerston North  and other provincial towns and cities.

Cooler Heads

Fortunately, we also have more rational and less passionate views from

Brian Fallow

Brian Fallow in the NZ Herald and Shamubeel Eaqub in Stuff.

Brian Fallow. Under the heading "The Real Problem with Petrol Prices? They're Too Low" Brian Fallow, former economics editor of The New Zealand Herald, wrote:

"As prices at the pump hit record highs, the blame game is in full swing. The Government points the finger at a rapacious rent-seeking cartel of oil companies and plans to sic the Commerce Commission onto them. The Opposition blames the Government's unquenchable thirst for tax.

"But official figures — helpfully updated weekly by the Ministry of Business, Innovation and Employment — show that of the 42c a litre increase in retail petrol prices over the past year, 30c is down to the landed price, the cost of importing the fuel into New Zealand.

"The big driver there is a resurgence in global crude oil prices.  The Dubai benchmark price, the relevant one for us, has climbed from US$54 a barrel a year ago to over US$80 now. In addition, over the same period the New Zealand dollar has depreciated by more than 8 per cent against the US dollar.

"Global crude prices have swung around a lot in recent years. Dubai peaked at over US$120 a barrel in 2012 but dropped below US$30 for a while in early 2016.

"In the year ended August, New Zealand spent $6.8 billion importing crude oil and petroleum products, Statistic NZ reports, entirely explaining the overall $4.8b trade deficit and then some.

 "Funding that deficit through borrowing from, or selling assets to, the rest of the world inevitably reduces national income in the future.

"It is another reason to wean ourselves off the stuff."

Shamubeel Eaqub, former Principal Economist at the NZ Institute of Economic Research (NZIER) with  over ten years experience in Wellington, Melbourne and Auckland in leading international banks and consultancy, expresses a similar view under the heading  "Petrol Prices are Better for Us in the Long Run" by Shamubeel Eaqub,    

 He writes:

"The price of fuel is dominating headlines. Prices have increased sharply in a short time, Prime Minister Jacinda Ardern has accused petrol retailers of gouging, and global experts have warned we only have a decade to curb fossil fuel use to avert catastrophic climate change.

"Increases in government taxes have been a small part of the price hikes. Changing market conditions —which we can't control— have been the dominant driver. But we need the taxes to improve our infrastructure and we need higher prices to avert calamitous climate change.

"So there is a silver lining to higher petrol prices, but by golly it won't feel like it when paying at the pump.

 "Of the 40 cents a litre increase in petrol prices over recent weeks, about 30 cents of that has been due to a combination of rising crude oil prices internationally and a weaker exchange rate (which makes imports dearer).

"The remainder has been adjustments in retailer margins, changes in discounts and an increase in taxes of about 9 cents."

What Now?

So there you have it: a choice between the passionate and political or the calm, rational but not likely to be popular alternative. 

Unfortunately, too many of us are swayed by the former and our pockets, as many protesting the Government component in  the fuel increase, demonstrate. 

Two things are now needed, one from Government; the other from the Opposition.

• From Government  we need action to lessen the impact on those with no access to public transport, most especially the poor.
• From the Opposition we need recognition that  current and future fuel taxes increases are needed if we are to resolve our transport problems and meet our commitments on environmental pollution.  

The media also has a part to play in fairly reporting the issues.

-- ACW