Retail Fuel politics

Written By: - Date published: 11:32 am, October 15th, 2018 - 53 comments
Categories: business, Economy, energy, jacinda ardern, labour, sustainability, transport - Tags:

Just in case anyone forgets, we are now getting truckie protests about fuel prices reminiscent of the first term of the Helen Clark government. This is no doubt the start of many protests to come from truckie and consumer alike.

Midwives are rejecting rural clients because it’s too costly in fuel to service them.

People are giving up their rural houses and moving their families into cabins in trailer parks within Whangarei because fuel makes it just not worth it.

There is simply no way this fuel price issue is going away. That’s because we are among the highest consumers of fuel in the world per capita, burning through around 672 litres of fuel on average every year.

So much for the short term. In the medium term, it is very possible this is about to get worse, due to the rapidly altering geopolitical setting. And it’s really hard to fix where oil prices are going.

On the supply side, Iran is the big unknown. Predictions for how much Iran’s 2 million bpd of exports will be lost to U.S. sanctions range from half a million bpd to 2 million bpd (that high side would mean most of its exports).

Saudi Arabia could fill the gap, at the right price. It can respond faster than the U.S. shale oil industry. Saudi Arabia’s politics however are very unsettled right now. The new King is all over the shop and putting it all on the line executing a U.S. resident who is also a key Saudi dissident journalist while in a Saudi embassy. And then there’s its’ reaction to Qatar. And then there’s its fruitless war in Yemen. Etc etc. It’s still the kingdom that had all the time and all the resource in the world to alter its economy away from oil reliance, and instead for six decades chose to just keep pumping crude and screw themselves and everyone. No one knows what will happen there next.

Washington-based Rapidan Group expects a supply surplus of more than one million bpd (barrels per day), triggered by an aggressive U.S. shale supply response to high prices and a hit on emerging market demand. Speaking to Reuters, Rapidan Group President Bob McNally said that “Barring big geopolitical disruptions, we’re hearing an echo of 2013 and 2014 when a tidal wave of prospective non-OPEC supply growth compelled OPEC and Russia to wither surrender market share with large proactive cuts or accept big price declines.” They also expect U.S. crude supply alone to grow faster that total global consumption.

At the other extreme, London-based Energy Aspects is projecting a shortfall in supply of 300,000 bpd, with demand curtailed by the impact of trade tariffs. First, though, Energy Aspects is calling for the final quarter of 2018 to have the tightest supply-demand balance in over a decade. In a note titled “Empty” the consultancy said: “a combination of any near-term spare capacity and the resurgence of Chinese teapot (refinery) buying” would cause an unusually tight balance.

That may be enough to drive prices to $100 a barrel – perhaps in turn sowing the seeds of demand destruction. So maybe a boom then a bust. The history of oil price cycles indicates that this is not impossible.

This is, of course, the kind of stuff that loses governments elections really really fast.

We haven’t even started the real public discussion about what James Shaw’s carbon legislation might do to fuel prices. Thankfully we don’t have to go there yet: this government needs to buy time to get to that particularly narrow policy window.

It will need to be smarter than Prime Minister Robert Muldoon introducing carless days.

In the longer term, building public transport infrastructure in Auckland isn’t going to deal with a short-and-medium term political problem that is getting really big.

What if it really got worse?

A 2005 consultant’s report for the Ministry of Economic Development looked at an oil crunch and how the country could cope.

Cutting discretionary trips, combined with mandatory speed limit restrictions, could provide consumption savings of 7%. Compulsory restrictions on car use such as the return of carless days, could provide another 4-5%.

The Prime Minister has sought to deflect responsibility for recent price rises onto the fuel retailers. That will only last so long. The politics of fuel is accelerating.

53 comments on “Retail Fuel politics”

  1. mango 1

    The truckies are being extremely foolish by doing this. Someone may point out that they already get a heavy subsidy from motorists fuel taxes. Oh wait….https://dogandlemon.com/media/petrol-taxes-are-subsidising-trucking-industry

    • ianmac 1.1

      Yes. Imagine if the Trucking Industry was asked to pay the true cost of Road Use/Repair.

      • mac1 1.1.1

        Does any one have that figure, ianmac? It’s a question I was asking last week.

        In other words, what percentage do road user charges compensate for, to reflect the true effect of our 60 tonne juggernauts upon roads.

      • shadrach 1.1.2

        Or cyclists? Seriously though, the transport market is riddled with cross subsidy. Cyclists are being given an increasing share of roading infrastructure, yet pay nothing directly in the way of fuel tax or RUC. Owners of above ‘trailer sized’ boats are paying petrol tax, and yet only rarely use roading infrastructure. Drivers of electric/hybrid cars are not a proportionate contribution to roading infrastructure. The list goes on. I wonder what would happen if the true cost of transport infrastructure (private and public) was passed on via a truly user pays basis?

        • Antoine 1.1.2.1

          > I wonder what would happen if the true cost of transport infrastructure (private and public) was passed on via a truly user pays basis?

          Impossible

          A.

          • KJT 1.1.2.1.1

            The present bleating from trucking firms would look like the calm before the storm. Trucking pays less than 40% of their road costs.

            Then there are the other costs. A truck emits 32 times more green house gas than a, diesel, train per container mile. A ship emits even less than a train. Current coastal ships, what is left of them, carry around 800 containers each.
            Without even going into the cost of road congestion, duplication and inefficiency.

            Subsidies to trucks makes shipping and rail appear uneconomic.

            That the Government collects more in petrol taxes, than RUC’s, despite trucks total road costs being an order of magnitude more than cars, tells it all.
            The trucking lobby also hopes we will ignore the, additional, considerable costs to rate payers, of maintaining urban roads.

        • Gabby 1.1.2.2

          A lot of cyclists also drive motor vehicles shadders.

          • shadrach 1.1.2.2.1

            Not on the cycle lanes we are paying for.

            • Gabby 1.1.2.2.1.1

              And them shadders, they’re paying too.

              • shadrach

                They are paying for the roads they drive on. When they cycle they are contributing nothing. If cyclists paid a RUC, like diesel users…

                • Tricledrown

                  Shadrach RUC’s on diesel don’t cover all costs either rates and taxes pay for a good percentage.
                  Trucks do 10to 15,000 times more damage to the roads.
                  A 55tonne truck will do 10,000 times more damage than a car an 85 tonne truck 15,000 times more damage.
                  So a cycle at around 20kg does swfa.

                  • shadrach

                    Yes, I agree, but I would say that the cost of cycle lanes has been significant, and often carry a very small number of cyclists. Why shouldn’t cyclists contribute to that cost directly?

                • Gabby

                  When you’re sitting on your arse in front of the telly you’re not paying anything ether shadders. What’s your point?

        • KJT 1.1.2.3

          Cyclists. Unlike trucking firms, pay rates.

          Rates pay for urban roads and cycle-ways.

      • Chuck 1.1.3

        They would pass it back onto the consumer. Freight costs would increase.

        So either a subsidy or price increase…take your pick.

  2. Tiger Mountain 2

    employer/owner organised and or sanctioned, “truck strikes” have been a concern since the reactionary role they played in the the lead up to the 1973 Chile coup, and people should realise these road hogs already get substantial taxpayer subsidies

    oil use, price and supply is the problem, but politically the National Party needs to be tackled head on–they are the champions of endless roads and the road transport lobby–so apart from petrol being a convenient attack line, what would they do different to actually lower consumer prices? answer–not much

    in my view the govt. should threaten the Marsden Point Consortium with re-nationalisation of the refinery, and strict regulation of petrol pricing–of course that would need some hardened battlers in cabinet to carry off, which are a rare breed at the moment

    also–facilitate and reward car pooling, and intensively reinstate rail across the provinces

  3. Bill 3

    In some dim and distant future (if humanity experiences such a thing), maybe people will puzzle as to why governments (especially those of island states) didn’t purchase fossil from general taxation, subject it to a hard sinking cap, and distribute it for free.

    All that private money freed up to install or convert to zero carbon that didn’t happen!

    That period of some years to gradually adapt to a predictable but changing environment (new possibilities and limitations) that didn’t happen!

    Instead, that option for the kids rhyme that runs – 1 potato, 2 potato, 3 potato…. except in °C alongside economic chaos, poor people getting hammered and nothing changing until…. the winds came and blew it all away, the droughts sucked it dry, and the rains washed it all down to the rising sea where it was finally drowned.

    I really shouldn’t give in to such realism. James will surely ride on out from the sunrise on a sparkly pony with a miracle or three 🙂

  4. Antoine 4

    If theres one thing the populace hates, it’s increases in the price of basic commodities (like petrol)

    A.

    • Tiger Mountain 4.1

      well, the problem with around half the NZ ‘populace’ is they are generally compliant and complacent, when it comes to political analysis and direct action, but expert whingers and Nat voters!

  5. Draco T Bastard 5

    It’s still the kingdom that had all the time and all the resource in the world to alter its economy away from oil reliance, and instead for six decades chose to just keep pumping crude and screw themselves and everyone.

    Agriculture in Saudi Arabia

    Agriculture in Saudi Arabia is focused on the export of dates, dairy products, eggs, fish, poultry, fruits, vegetables, and flowers to markets around the world.[1] The government of Saudi Arabia is heavily involved in the agriculture industry, and the ministry of agriculture (part of the Ministry of Environment, Water and Agriculture[2]) is primarily responsible for the agricultural policies in the nation. The private sector also plays a role in the nation’s agriculture, as the government offers long-term interest-free loans and low-cost water, fuel, electricity, and duty-free imports of raw materials and machinery. Still, Saudi Arabia is dependent on imports to meet 70% of its food requirements.

    The problem is that Saudi Arabia isn’t what one would call a viable place to live except for a very small population. That’s pretty much true of all deserts.

    It’s only attraction is the oil.

    No one knows what will happen there next.

    Once the oil is gone all the people will leave – if they can.

    The Prime Minister has sought to deflect responsibility for recent price rises onto the fuel retailers. That will only last so long.

    Fuel is provided via the free-market. The price at the pump is what’s needed to support burning it – the building of new road and the maintenance on old roads.

    There is one, and only one, way to remove taxes from the fuel at the pump and that’s road user charges. I’m actually in favour of this and so should every person who believes in user pays. I’m also aware of why the government doesn’t like such complexity. Under such a system it becomes far more expensive to collect those taxes (people will cheat and lie so as to avoid paying them) and the present subsidy to trucks will become obvious resulting in demands for the damage caused by trucks to be properly priced and placed upon the people who cause that damage.

    The politics of fuel is accelerating.

    Yes it is as we all try to ignore reality.

  6. Ad 6

    It’s always a problem with governments – often leftie ones that believe they have a greater good than the right somewhere in their ideological makeup – that mere citizens should be able to cope with short term pain in order to achieve longer term gain.

    That the truckies are annoyed along with many other sectors of society is a political problem already greater than the relative value of RUC verses petrol excise.

    • KJT 6.1

      It is a problem with “Righties” like trucking firms, that they expect to bribe a Government, into giving them subsidies to support their business.

      Then cry a river if the are reduced, slightly.

  7. AB 7

    I think I would favour vehicle taxes rather than fuel taxes as a way of raising revenue.
    A “Transport Infrastructure Tax” levied at vehicle registration renewal and calculated as a fixed percentage of the market value of the car. Hybrid vehicles levied at a lower rate and fully electric vehicles exempt. Because poor people have older cars it might partially overcome the regressive nature of fuel taxes. It also discourages the purchase of non-hybrid or non-EV cars – and in fact slightly discourages vehicle ownership altogether.
    And it is divorced from fuel price changes due to external factors, so its political viability wouldn’t be so readily undermined.

    There are some bad things about it:
    – it doesn’t directly discourage actual journeys in the way a fuel tax does. So not so good in reducing either emissions or congestion.
    – it incentivises hanging on to older cars which may have lower emissions standards
    – I imagine it’s administratively more complex

    • Durf 7.1

      EV and hybrid sales have gone from zero, to tens of thousands within about a decade. Without any kind of thought policing from the government required.

      People don’t need labour party royalty telling them how to think or behave with punitive taxes for wrongthink.

  8. rod 8

    It’s just another right wing stunt cooked up by the Natz and their beloved media.

  9. Phil 9

    Compulsory restrictions on car use such as the return of carless days…
    … is so wildly untenable in today’s political environment that it’s a guaranteed re-election killer.

    • mac1 9.1

      Those with money just bought another car to cover the lost day. No problem.

      Locally, a band called itself “Carlos Diaz” in tribute to Muldoon’s carless days idea.

  10. Tricledrown 10

    When looking at our imports continually exceed our exports reducing our dependency on oil will make us a wealthier country

  11. georgecom 11

    loved some of the ignorance expressed by the man who “organised” the “protest”. They are being “ripped off”, if the petrol taxes stay they should all be “spent on roads” and not on rail as “no one wants rail”, just build “more roads”.

    I guess he and others like him love sitting all day in Auckland traffic. Better still, I guess he would like the petrol taxes to be scrapped and NO new spending on roads and have them slowly deteriorate under his wheels . Ignorance is such a pleasant place to exist

    • greywarshark 11.1

      georgecom
      Yes I wish I was ignorant. It hurts to think, like walking on a prickly lawn in your bare feet. Ouch every half-minute.

  12. Ed 12

    RNZ showed its true blue colours again by Checkpoint’s patsy story about the plucky truckies.

    • Gabby 12.1

      Never fear, the kiwibuggers will be pitching into those nasty truckers and their disruptive protests. Kiwibuggers don’t care for disruption.

    • greywarshark 12.2

      Truckies do have a hard job which they try to do well. They are just caught up in the confabulation that passes for political management in this country. Don’t tilt at the workers.

  13. Craig H 13

    https://www.aa.co.nz/cars/owning-a-car/fuel-prices-and-types/petrol/

    63c/L is the transport portion of the excise tax, 6c for ACC and 0.96c for some levies.

    https://www.aa.co.nz/cars/owning-a-car/fuel-prices-and-types/how-petrol-prices-are-calculated/

    AA says “NZ has the sixth lowest fuel tax in the world; in many OECD countries, taxes account for around two-thirds of the price.”

    Maybe it’s not the disaster National are proclaiming…

  14. RedLogix 14

    Many things are feeding into this; but the underlying one that I suspect is driving this most is that the fuel suppliers (as distinct from the oil producers) can see the writing on the wall for their business model.

    Electric cars are within a decade of being dominant; the existing petrol/diesel based supply chain assets (the refineries, the tankers, the tank farm and service stations) are close to becoming stranded assets.

    With that in mind the companies that own them will do two things; one is to maximise returns while the window of opportunity lasts, the other is to stop investing and maintaining them. At some point the marginal costs are going to exceed that of their electric equivalents and it will very rapidly become game over.

    As many others have noted; NZ is at the very tail end of an extremely long global supply chain and extremely vulnerable to it’s tectonic shifts. Time NZ got smart about this and the govt needs to get it’s message together on a plan.

    • Craig H 14.1

      I normally avoid +1 comments, but this is spot on – oil-based fuel supply has become the DVD/VHS rental store in the early days of Netflix.

  15. Brutus Iscariot 15

    The sad truth is that the cost of fossil fuel needs to rise, if we’re to use less of it. The fact that the lower end are becoming priced out of the transport market, needs to be dealt with by the welfare system and urban infrastructure development.

  16. cleangreen 16

    We ten years ago had a ‘road pricing policy’ inside the old labour Government RTA called ‘Transfund’ and it was responsible for overseeing the true cost of roading and the cost of those effects to our environment and health and well being. .

    We used to ring this agency and talk to them as they were extremely helpful to us all then.

    This was a unit of transit NZ formerly but now since Steven Joyce Incorporated the RTA now known as NZTA the transfund unit has been largely culled or ignored now.

    https://www.beehive.govt.nz/release/appointment-transfund-new-zealand-board

    Transfund used such environmental effects of road activities that were financially measured as “”negative impacts affects” of road freight activities, but during the changeto the John Key government transfund largely has been made obsolete now.

    The transfund manual for road costing then included a section on road pricing and cost of environmental effects called ‘ Appendix 8 “Intangible effects”.

    Usually globally now most road controlling agencies use the terms “Intangible effects” as a pricing regimen as transfund used to do also in the early 2000’s.

    We need to restore the credibility of the Transfund model again and also make The ministry of transport the principal overseer of the whole transportation industry again as they used to have back then as NZTA is simply now a road industry advocate and will not encourage use of rail.

  17. jcuknz 17

    As one who has a handicap park ticket and my ‘Support worker’ who just got herself, husband helped, an electric car … we are both completely pissed off with the free loaders who use my parks and park on her recharging station because they are too damm lazy to walk a few extra metres.
    Not the subject matter of this thread but another motoring problem to be solved.
    Then there is the matter of folk who sit in cars even when they have the handicap sticker*.
    If you read the bumf which came with the ticket that is against the purpose of the ticket.
    Since ‘owner drivers’ of trucks often have very slim margins I doubt if they should be expected to folk out more to cover the true cost of damage to roads of their vehicles.
    *When I go shopping with my wife but don’t want anything I park in a regular park to sit and wait for her.

    • cleangreen 17.1

      Yes jcuknz

      I see others using our disabled parking that walk o/k but me with my disabled leg and them walking swiftly make me feel very disappointed.

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