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AA calls for an inquiry into fuel prices

Media Release: 2 May 2008

PetrolWatch – April 2008

AA calls for an inquiry into fuel prices

It’s been a rough month for motorists, with fuel prices increasing on a weekly basis throughout April. Petrol rose 11 cents in total, to end the month on $1.89 per litre in the main centres. But the increase in diesel was greater – up 27 cents to $1.57 per litre at most service stations, except Gull.

“There’s just been no let up in prices, with petrol edging ever closer to the psychological $2 per litre barrier. 98 octane is already selling for $2.03 a litre,” says Mike Noon, AA Motoring Affairs General Manager.

“Diesel users have been the worst hit – prices increased 26 per cent (32 cents per litre) since the start of the year, compared to 10 per cent for petrol prices (18 cents per litre).”

According to AA PetrolWatch, diesel prices have more than doubled in the last twelve months, rising 59 cents, compared to a 25 per cent increase in petrol prices (up 37 cents).

Mr Noon says “the increase in the cost of fuel reflects the continuing trend of rising international oil and refined fuel prices – the reasons for these rises are unclear. There has been no reduction in refining capacity, as happened as a result of Hurricane Katrina, nor any major geo-political crisis to explain the rising prices. Commentators are now saying the increases are mostly due to speculators investing in commodity markets, and a softening US dollar.”

“Motorists have been hit hard by the record fuel prices and are increasingly distrustful of oil companies which continue to announce international record profits at levels beyond comprehension. For that reason the AA has called on the Government to establish an independent inquiry into fuel pricing in the New Zealand market. We want to be sure that motorists aren’t being overcharged and that price decreases are being passed on at the pump quickly and whenever there is the opportunity. We think the oil companies have done a pretty poor job of explaining their price changes and the Ministry of Economic Development could improve the frequency and quality of its monitoring,”says Mr Noon.

“An inquiry into the pricing structure of the New Zealand fuels market should identify whether the oil company margins are fair and reasonable, and provide a comparison with similar markets like Australia. New Zealand motorists have a suspicion that Australians are getting a better deal on prices, let’s find out if this is true.”

The AA also recently called for the GST component on petrol excise to be removed, a move that would reduce prices by 5.6 cents per litre.

Mr Noon says “it’s a tax on a tax, and with the Government collecting more GST every time there is a price increase we believe it should remove this inequity as a gesture to New Zealand motorists. It is the fair thing to do.”

According to AA PetrolWatch, the GST take on all fuel sales was over 1 billon dollars in 2007.

ENDS

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