Fuel tax cut may roll on

The government says it will “consider” extending the fuel excise tax cut beyond January 2023 if a number of global factors change and prices at the pumps begin to soar.

Michael Wood, Minister of Transport, said earlier this month the tax relief would be reintroduced at the start of next year but he is now taking a softer stance on those plans.

The average cost of 91 petrol in New Zealand is currently about $2.50 a litre, but it is expected to soar past the $3-mark next year when the tax is reintroduced and if sanctions on Russia continue.

Wood notes the reduction in fuel excise duties by 25 cents a litre and a similar cut in road user charges, which was first introduced by the government in March this year, can’t continue indefinitely.

“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,” he told the AM show.

“Obviously, if we get into next year and there are new circumstances we need to consider, we consider those as they arise.”

Regardless of any fuel excise changes in New Zealand, a recent agreement by the Organisation of the Petroleum Exporting Countries to cut their output is expected to force prices up.

Terry Collins, principal adviser for motoring policy at the AA, adds European sanctions due to be applied from December against companies insuring the transport of Russian oil will also have an impact.

“I do see a slow, upward pressure on oil prices and the only thing that would perhaps stop that is the threatening recession,” he says.

Collins warns prices at the pumps for petrol could rise to “well over” $3 per litre early in 2023 and move closer to $4 for higher octane fuels.