07 Sep
Fuel companies are garnering bigger margins, but is that being reflected in prices at the pumps?

Are the fuel companies profit margins being passed on to Kiwi drivers?

There's been a plethora of news recently relating to the price of fuel across New Zealand. While the costs at the pump have dropped, making purchases made with fuel cards even more valuable, the petrol companies are registering significant margins.

The rise and fall of petrol prices

In essence, there are four reasons as to why the the price of fuel rises and falls, as explained by Z Energy:

  1. The cost of crude oil across the international market
  2. Government taxes and levies
  3. Operation costs 
  4. Profit margins

Naturally, the four intertwine with one another, but for the most part, fuel companies have had it pretty good over the last few months. The cost of the raw materials, namely the aforementioned crude oil, have dropped significantly thanks to a little uncertainty in the global market, as well as local currency fluctuations.

Put simply, it's cheaper now than it was a year ago for fuel companies to produce their offering. However, are the cost savings being passed on to New Zealand's motorists?

Average margin on the up

Statistics collated by the Ministry of Business, Innovation and Employment suggested that the average margin per litre for fuel companies has risen to 38.5 cents. That figure stood at 31.4 a year ago.

"MBIE has worked with the industry to address concerns that its margin reports don't adequately reflect regional pricing and discounting practices," explained Minister of Energy and Resources Simon Bridges, as quoted by Radio New Zealand.

While the government is trying to ensure changes to margins are passed along to Kiwi consumers, the industry has been quick to point out that the fluctuations now are merely signs of recovery.

"[The] industry is making a bit more money. The amount Z makes [after all costs] has gone up from about three cents to five cents per litre. There is no doubt industry margins have recovered from where they were, but given where the industry was that's a good thing," surmised Z Energy spokesperson Jonathan Hill, as noted by stuff.co.nz.

Ultimately, while prices continue to fluctuate, there's a certain amount of give and take that has to happen between the government, consumers and the fuel companies. If all three parties can agree on satisfactory standards for both margins and the prices at the pumps, then everyone will ultimately benefit.