Little to Learn at the Pumps

Poll findings published this week showed a formidable 81 per cent of respondents think tax on petrol should be lowered. The Government should be bothered by this finding and its political implications, because it’s election year and voters are feeling a severe financial squeeze from soaring food and fuel prices. But it is unlikely to cut GST on petrol (about 6c a litre). Finance Minister Michael Cullen insists the Government does not collect more revenue overall when petrol prices are hoisted, because people reduce petrol use and spend less on other items. National wouldn’t cut the tax either. Its leader, John Key, told Radio NZ the party would prefer to give money back to taxpayers through personal tax cuts rather than temporary changes in excise.

The best we can expect, therefore, is whatever emerges from the review of petrol pricing announced by Commerce Minister Lianne Dalziel. It won’t be much. Petrol prices are rising for reasons beyond the control of anything her Government can do: trading in oil futures, a growing demand for fuel in fast-growing economies like India and China, a static supply and the exchange rate.

Ms Dalziel has conceded the Government’s impotence. The Ministry of Economic Development had hired independent consultants to review and analyse petrol pricing in line with the Australian Competition and Consumer Commission report, she explained. The commission found prices are largely driven by crude oil prices, the US exchange rate, and the international market for the refining of petrol. “There will be no difference from that here in New Zealand,” she said.

The commission’s report did result in the introduction of the Fuel Watch price monitoring system, enabling consumers to check out the best prices around Perth. But it has yet to be rolled out in the rest of the country and Ms Dalziel warns it might not suit the smaller and less complex New Zealand market. It is also highly contentious, even within the Rudd Government. Resources Minister Martin Ferguson, in a letter to colleagues, calls the scheme an anti- competitive waste of money which won’t bring prices down.

So why bother with a review? Because it will give us “transparency”. The commission said consumers were entitled to know more about how petrol prices are set, and believed there were some marginal gains to be made by improving the competitive dynamic of the market. “That is what the New Zealand review will assess in the New Zealand context,” Ms Dalziel assures us. She agrees in the importance of “total transparency” around petrol prices, and that myths are identified and dispelled. The companies, accordingly, will be called on to show why pump prices rise quickly after international oil prices are raised, but, at least in public perceptions, come down much more slowly. This knowledge, if we mirror the Australian experience, will show the companies are not unduly screwing us, no matter what we might think of their huge profits. Paradoxically, it will do little to improve Labour’s re- election chances. If we can’t grumble about being gouged by the oil companies, we will focus more intensely on the Government’s cut from the cost of filling our tanks.

(c) 2008 Waikato Times. Provided by ProQuest Information and Learning. All rights Reserved.