27 Jan
The price of oil, and wider economic conditions, will impact the value for money at the fuel pump.

Are New Zealand’s fuel prices set to hit new lows?

The price of fuel can have a big impact on the life of the average fleet manager. After all, even a modestly sized collection of vehicles may soon start to rack up the bills, especially if the company is operating right across New Zealand.

So, how can fleet managers ensure that they are maximising the return on each tank of petrol? Well, while a business fuel card can certainly help, and ensuring drivers are well aware of efficiency when behind the wheel is a must, one of the best ways to stay on top of overall petrol and diesel expenses is to keep an eye on prices at the pump.

"The fuel companies should now be dropping retail prices by 2-3 cents per litre."

Changing exchange rates

Due to the global nature of the fuel market, one of the biggest indicators of price trends can actually prove to be exchange rates. To that end, the AA pointed out that a slight improvement in the Kiwi dollar should have meant lower prices at the pumps throughout October.

However, the changes in the market can only be reinforced by the fuel companies themselves, and the majority still have their own margins to worry about before they can start passing on any reductions to consumers.

"In the AA's view, when fuel companies raised prices by six cents per litre in the first half of September, they increased their margin above the norm. The fuel companies should now be dropping retail prices by 2-3 cents per litre," explained AA PetrolWatch spokesperson Mark Stockdale.

"Because commodity prices only make up about a third of the retail price of petrol, pump prices should only change by about a third of that amount," he continued. 

Hearing the calls

In good news for casual motorists and fleet managers alike, BP and Z Energy – two of the biggest fuel companies – took the advice of the AA and dropped fuel prices by around two cents per litre midway through October. While petrol remains above the $2 mark in some places, the trends certainly point to long-term savings in the foreseeable future.

Again, these could be dictated by market trends, as BP suggested to Radio New Zealand that it had made the decision to lower prices thanks to the performance of the Kiwi dollar in the global context.

Fuel prices are often dictated by wider financial conditions.Fuel prices are often dictated by wider financial conditions.

A limit on reductions

While fuel companies certainly have the power to offer car, van and truck drivers a better deal at the filling station, there is one other factor that may limit overall value for money: tax.

Naturally, the government has an array of duties and levies it applies to the sale of petrol and diesel. Stuff.co.nz explained that around half of a $2 litre is essentially taxation.

In fact, the vast majority of tax is actually fixed in the policies laid out by the government. Consequently, even if fuel prices fell dramatically from the perspective of the fuel companies, drivers at the pumps may not feel the full effects.

Stuff.co.nz used the example that if fuel companies were charging one or two cents per litre to cover their costs, the prices at the pumps would still be around 77 cents per litre, mostly in excise and duty. That includes a portion of goods and services tax, essentially meaning that drivers are paying tax on a tax.

Prices at fuel pumps across New Zealand could continue to fall, especially if the Kiwi dollar remains strong.Prices at fuel pumps across New Zealand could continue to fall, especially if the Kiwi dollar remains strong.

Will prices drop further?

While the rules surrounding taxation are unlikely to change in the future, prices at the pumps could continue to drop over the next few weeks and months if the New Zealand dollar can remain strong. However, it may take significant changes for fleet managers to really feel the differences.

For the time being, the opportune way to unlock the most value for money when running a vast fleet of vehicles is to ensure drivers follow best practice, and equip them with a fuel card.