Remote customers shouldn’t pay more for fuel: AA

Remote customers shouldn’t pay more for fuel: AA

Despite the continuing fall in fuel prices, motorists in remote locations are yet to enjoy the savings.

According to the AA, fuel company margins are the highest they’ve been since the 1980s, and the fuel companies can still afford to cut pump prices by 5 cents per litre (5cpl) or more, even though nationwide prices dropped another 7cpl this week.

Z dropped prices 4cpl on Tuesday (and diesel 2cpl), and BP cut petrol and diesel prices 3cpl on Wednesday (with Z initially dropping 2cpl).

In the first fortnight of 2015 prices have now dropped more than 7 times, with petrol down 49cpl since October, and diesel down 45cpl.

However, transport operators and motorists in some remote and rural locations such as the South Island Alpine region and Waiheke Island in the Hauraki Gulf can still be paying a premium price for their fuel (more than $2 a litre for 91 Octane) because of supply issues.

AA senior policy analyst Mark Stockdale told NZME that people in remote locations should not be paying 30 cents a litre more than their urban counterparts.

“What a lot of people forget is the price we pay is a function of volume,” says Stockdale. “So the more fuel you sell the lower the price can be, because your overheads are spread over a larger volume.

He says the best prices were usually at busy stations close to major transport routes, where the cost of bringing in the fuel is lowest.

“When you go to remote locations not only do you have higher transport costs to get fuel to these remote locations, they also tend to have small populations,” he says.

The AA says that commodity price (refined petrol) now makes up just 25% of the retail price of petrol, with taxes 52% and most of the remainder being fuel company margins (for diesel, which incurs no excise tax, the commodity price makes up half of the pump price).

It says this shows just how small the ‘product cost’ component of the retail price is – which is true for most goods and services (before commodity prices fell by 45%, they made up nearly half the petrol retail price).

Even if the commodity price fell to US$1/barrel says the AA, motorists would still be paying about $1.30 for a litre of petrol, thanks to taxes and margins – which are so high that it believes fuel companies can still afford to cut pump prices by 5cpl or more.

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