The New Zealander.com detailed reports on the Petrol Increase
Petrol Price increase to $1.66 a litre!! Is it related only to New Zealand? A full report and to do list
How to Survive the Fuel costs? -An Australian model to Small and Medium Enterprises
11-4-2006 12 P.M.
Increases by the main oil companies sent the price of 91-octane petrol rocketing to 161.9c a litre, and 95-octane to 166.9c at most city pumps, lifting the cost of filling up many large cars to well over $100.
Diesel, which costs more than petrol to import but which is taxed through road-user charges rather than at the pumps, rose to a record 122.9c a litre.
Petrol is also at a record, apart from a few hours last week when BP led prices up for both grades before a lower pitch by Shell knocked them back down.
There was no holding back yesterday, as the companies said they could no longer absorb relentless international cost rises.
And economists say motorists will just have to get used to rising fuel prices. He did not want to speculate on how high prices may go, but said the recent rises were unsurprising because the world price of oil was at its highest since the southern US hurricane season, from June to November last year.
On top of that, the New Zealand dollar had fallen markedly.
Institute of Economic Research director Brent Layton said price movements were very tricky to predict.
"You need a crystal ball to know, because it's not just issues of supply and demand but of politics as well, which are always hard to forecast."
ing petrol prices as their biggest
current economic concern. And
a survey of small business own-
ers by Sensis found one in three
expected rising fuel prices to detrimen-
tally influence their business results in
the coming year.
Report author Christena Singh said
business operators were right to be
worried.
Ms Singh said it was likely petrol prices
would soon have a major ongoing impact
on business costs which would then flow
into the price of goods and ultimately
impact consumer confidence effective-
ly hitting small businesses twice.
According to a separate study by PPB
Chartered Accountants, businesses in
the construction, agriculture and tourism
sectors were among the most vulnerable
to rising petrol prices.
Small transport companies were the
ones particularly in the firing line, the
study found, as their big business com-
petitors were better able to absorb the
impact of higher fuel costs.
Agricultural businesses were also heav-
ily exposed to higher petrol prices, PPB
noted, as they did not only suffer the
obvious impacts but many of their ferti-
lisers were also oil-based.
There are few signs of a dramatic
slump in the international price of oil,
meaning the cost of petrol at bowsers
across Australia will remain at near-
record levels for the foreseeable future.
The International Monetary Fund has
warned of a one in five chance that the
cost of crude could rise above $US80 a
barrel by the end of the year, a move that
would add more than 10c a litre to the
local bowser price.
Based on figures from independent
price monitors FuelTrac, the average
price of unleaded petrol has risen 37 per
cent since the start of the year with the
price of filling up a standard 60-litre tank
up about $20 to more than $70.
Experts say there are a wide range of
strategies small businesses can employ to
ensure record high petrol prices do not
have a serious long-term impact on their
bottom line.
Chief among them, according to Jodie
Shaw from business coaching company
Action International, is to consider the
introduction of airline-style fuel levies
as several local courier companies have
already done.
As business coaches, one of the first
things we do with a new client is look at
their prices and profit margins and if
they are too low to sustain the business
then the first thing we say is to put your
prices up immediately, Ms Shaw says.
If you are feeling the pinch you need to
pass on the cost to your customers, and
because rising petrol prices are a very
public issue and every Australian has felt
the impact then small business owners
shouldnot be afraid of introducing a fuel
levy.
Courier company Allied Express is one
that has introduced a fuel surcharge that
is reviewed weekly based on average
petrol prices.
Managing director Michelle McDowell
says her clients have been very suppor-
tive in paying the surcharge, which is
then passed on to the company's 1000
subcontracted drivers.
But Action Internationals Ms Shaw
acknowledges that increasing prices is
simply not an option for many SMEs.
She says, however, that there are other
less dramatic strategies all small busi-
nesses should consider to limit the impact
of rising fuel prices, most notably under-
taking a careful examination of their
transport costs.
If you have a mobile sales force you
could consider alternative ways of doing
business such as using the telephone
more instead of face-to-face sales calls,
Ms Shaw says. Businesses should also
look at alternative ways to deliver their
product, perhaps using off-peak methods
via Australia Post rather than courier-
ing.
S
S
MALL business has rated soar-
OPEC NEWS- Venezuelan President
If you thought high oil prices were just a blip think again - Venezuelan President Hugo Chavez has ruled out any return to the era of cheap oil.
Mr Chavez has spent some of the oil money on social projects
In an interview with BBC Newsnight's Greg Palast, Mr Chavez - who is due to host the Opec meeting on 1 June in Caracas - said he would ask the oil cartel to set $50 a barrel as the long term level.
During the 1990s the price of oil had hovered around the $20 mark falling as low as $10 a barrel in early 1999.
"We're trying to find an equilibrium. The price of oil could remain at the low level of $50. That's a fair price it's not a high price," Mr Chavez said.
He will have added clout at this Opec meeting.
Analysis by the US Department of Energy (DoE) - seen by Newsnight - shows that at $50 a barrel Venezuela - not Saudi Arabia - will have the biggest oil reserves in Opec.
Venezuela has vast deposits of extra-heavy oil in the Orinoco. Traditionally these have not been counted because at $20 a barrel they were too expensive to exploit - but at $50 a barrel melting them into liquid petroleum becomes extremely profitable.
The DoE report shows that at today's prices Venezuela's oil reserves are bigger than those of the entire Middle East - including Saudi Arabia, the Gulf states, Iran and Iraq.
In the future Venezuela won't have any more oil - but that's in the 22nd Century
Hugo Chavez
The US agency also identifies Canada as another future oil superpower.
Venezuela's deposits alone could extend the oil age for another 100 years.
The DoE estimates that the Venezuelan government controls 1.3 trillion barrels of oil - more than the entire declared oil reserves of the rest of the planet.
Mr Chavez told Newsnight that "Venezuela has the largest oil reserves in the world. In the future Venezuela won't have any more oil - but that's in the 22nd Century."
He will ask the Opec meeting in June to formally accept that Venezuela's reserves are now bigger than Saudi Arabia's.
Social projects
Mr Chavez's increased muscle will not go down well in Washington, which is deeply opposed to his government.
Ironically, by invading Iraq, George W Bush has boosted oil prices and effectively transferred billions of dollars from American consumers to the Venezuelan government.
At $50 a barrel Venezuela will have the biggest oil reserves in Opec
Up to $200m a day - half of it from the US - is flooding into Caracas.
Mr Chavez is spending this on building infrastructure and increasing the minimum wage and improving health and education in the poor ranchos which surround the cities.
As a result even his opponents accept that Mr Chavez is extremely popular and will easily win the next presidential election in December.
Mr Chavez is also spending billions in the rest of Latin America - exchanging contracts for oil tankers and infrastructure projects and buying up debt in Argentina and Brazil.
He has made cheap oil deals with Ecuador and the Caribbean.
He has also spent some of the dollars which have come in from the US to support Fidel Castro in Cuba. In return Cuba has supplied the thousands of doctors and teachers who are transforming conditions in the barrios of Caracas.
Concern
Washington accuses Mr Chavez of buying influence in Latin America.
The Venezuelan president has repeatedly won democratic elections and the opposition operates freely although some members have been charged with accepting illegal foreign donations.
Nonetheless Bush's administration repeatedly targets Mr Chavez on human rights and finances his opponents.
Earlier this year, US Defence Secretary Donald Rumsfeld compared Mr Chavez to Hitler - because he was elected democratically.
Mr Chavez told Newsnight he was still concerned that Mr Bush had not learned the lessons of Iraq and would order an invasion to try to secure Venezuela's oil.
"I pray this will not happen because US soldiers will bite the dust and so will we, Venezuelans," he said.
He warned that any such attempt would lead to a prolonged guerrilla war and an end to oil production.
"The US people should know there will be no oil for anyone."
Mr Chavez does not accept UK Prime Minister Tony Blair's criticism of him for lining up with Mr Castro.
He told Newsnight: "If someone is sleeping together it is Bush and Blair. They share the same bed."
No quick fix to the problem of pricey petrol
The Australian explanation
It is simply not feasible or practicable to legislate lower prices, writes Craig Emerson.
As consumer confidence drops in the face of surging petrol prices, the Federal Government is under pressure from motoring organisations to act. But are these calls for intervention good policy?
Australia's record petrol prices have one cause and one cause only - high world oil prices. The OPEC oil-producing countries are not pumping oil out of the ground as fast as the world wants to use it. China is burning oil products for its industrialisation as if there is no tomorrow.
Added to the price increase from Chinese consumption is a terrorism premium on the world oil price. Remember how the invasion of Iraq was supposed to cut the oil price? Well, instead it has helped double it as the market has become nervous about instability in the Middle East.
This is where the Howard Government has failed the Australian people.
It sits back with no plan to tackle our growing import dependency while we consume oil three times faster than we are finding it.
There is no comprehensive alternative fuels policy for biofuels or natural gas. Yet Australia has 150 trillion cubic feet of largely stranded gas reserves that offer one of the few sources of revenue growth for the Commonwealth. These reserves could be transformed into clean transport fuels using technology that is commercial at oil prices of around $US30 ($A39) a barrel. The present price is more than $US60 a barrel. Developing gas-based transport fuels would do for nation building what the LNG industry has done for Australia over the past quarter of a century.
But isn't the Government reaping a revenue windfall from soaring oil prices that it could hand back to motorists? It used to, but not any more.
Remember how the invasion of Iraq was supposed to cut the oil price?
When petrol prices passed $1 a litre in early 2001, the Howard Government was in trouble. After promising the GST would not increase the price of petrol, the Government did a fiddle, reducing petrol excise by less than the full impact of the GST. While the GST fiddle contributed only 1.5 cents of the 10 cents a litre petrol price rise, the public blamed the Government for the lot.
That's what politicians get when they try to pull a swifty on the voting public. Under intense pressure, the Government backflipped, reversed the GST fiddle, world oil prices coincidentally fell and the public's anger subsided.
What's different this time? There is no tax fiddle. In fact, as part of the Government's 2001 exercise in damage control it abandoned the practice of automatically increasing petrol excise in line with inflation. So petrol excise remains fixed at a flat 38 cents a litre. There's no revenue windfall from petrol excise when world oil prices go up.
The states get a bit of a windfall from the GST on petrol - about $32 million a month if the bowser price goes up from $1 to $1.20 a litre. But if the states gave all that back, the petrol price would fall by just 2 cents a litre.
Producers of Australian crude oil pay company tax and a resource rent tax on their local production, so the Government picks up some windfall there. But before we get too excited about the Government handing this windfall on to the motoring public we need to consider another truth. As petrol price rises feed into inflation, all the government benefits that are automatically increased in line with inflation will go up. These include pensions, family payments and unemployment benefits. The extra cost to the federal budget from these automatic spending increases is bigger than the windfall revenue gains.
So sadly, there is no windfall to hand back.
Nor is it true that an oil cartel is artificially spiking petrol prices. With the introduction of shopper dockets the petrol retail market is highly competitive. Sure, petrol prices have a habit of going up late in the week but they have a habit of going down after that.
Service stations usually make enough on petrol only to cover the costs of staying open. Their profit comes from the shop inside. Who says the corner store is finished?
That leaves the most bizarre suggestion of all - abandoning import parity pricing. One problem with this proposal is that the Hawke government abandoned import parity pricing in 1988.
Now producers of Australian oil are free to sell it locally or overseas. If local refiners refused to pay the going world price, our oil producers would simply export it to refineries in Asia.
Maybe those who want to abandon import parity pricing really mean they want to stop producers of Australian oil from getting world prices for their production. That would be a disaster. They would simply leave Australia to develop oilfields overseas where they could readily get the going rate.
Australia's oil self-sufficiency would plummet and we would have to buy imported oil at the world price anyway.
So no, there are no magic solutions to high petrol prices. It might seem clever to pretend there are, but the Australian people are smarter than that.
Craig Emerson is chairman of the federal Labor caucus economic committee.
4. When I buy a litre of fuel at BP, where does my money go?
As you can see, most of the price of petrol goes to pay for taxes, crude oil and refining costs. The rest goes to BP and our privately-run service stations to pay for operating costs (shipping within New Zealand, storage, road transport, the costs of running BP service stations, business expenses and income tax).
7. How does the price of petrol in New Zealand compare to other countries?
The graph below compares the price of regular petrol in New Zealand to a number of other countries around the world
Prices are an average of the pump price in the respective countries over the period stated and include all local taxes. Each currency has been coverted to NZ dollars using the average exchange rate over the same period.
This document is a simple set of facts to assist the community, commentators and other interested parties in developing an understanding about the key market and other factors influencing petrol prices in Australia.
Well, rather than lamenting, criticising or taking your anger to the street , here is myadvice regarding the petrol price hike.
1.For those of lower income, start adjusting to the snowball effect of higher inflation. Here are some examples of measures you can consider:
Eat less outside. Be self-sufficient. Plant your own vegetables.
Use less electricity. Power, share it with other usaers
Practice family planning. A small family will be easier to sustain.
Car pool.
Stay more at home during weekends or talk to friends or neighbours for a joint trip
Know more of your neighbours visit them and create a community feeling
Work extra hard. Nobody owes us a living.
2. For medium-income earners, they are moving slowly but surely into lower income group by this Petrol price increase. Here are some adjustments:
Do not burden yourself with debts eg, car and house mortgages or credit card bills. At least delay it till the right time.
If you think you are capable and feel there is a better opportunity elsewhere, follow your instinct. The climate is for better change.
Work extra hard. Nobody owes us a living.
If you do not wish to leave, then maybe once a while go to other Third World countries and you will feel we are still better off than many.
If you dare to take risk, buy some good shares, low cost properties for a saving.
There is a saying, If you can't beat 'em, join 'em'. Utilise the working for families to your advantage and in the meanwhile raise your incomes.. Start to socialise and make more 'valuable' friends.
3. For investors and businessmen, it will depend on how they look at it. On one side of the coin, well, its time to look elsewhere but the other side. Why run away when you can become instant millionaire here in New Zealand. Anything is possible.
4. For upper income earner, kudos to their nationalism
Georgia Gives up Revenue 'Windfall,' Suspends State Gasoline Taxes Grassroot Perspective - Dec. 1, 2005
This article, published in the Heartland Institute's Budget and Tax News raises and interesting question. The government in Georgia is implementing a tax moratorium on gasoline and other energy products because the increased prices have led to greater than expected revenues. Since the tax collection system in Hawaii, while somewhat different, is similar, which leads one to wonder how much extra revenue has been collected here since this state has the second highest gas taxes in the nation. What would happen to the price of gas if there was a moratorium implemented here. Not that we can expect our elected officials to ever forgo any source of tax revenue. (dn)
Georgia motorists recently won temporary tax relief as they struggled to cope with soaring fuel costs.
With already-tight gasoline supplies exacerbated by damage from Hurricanes Katrina and Rita, sending prices to record highs of more than $3 a gallon, motorists frightened by rumors of government-ordered gas station shutdowns began lining up at the pumps. At some stations gasoline sold for as much as $6 per gallon.
Gasoline prices in the Atlanta area were already high because of the smog-season gasoline blend the U.S. Environmental Protection Agency requires to be sold during the summer in metropolitan areas most affected by air pollution.
Governor Orders Tax Halt
Gov. Sonny Perdue (R) stepped in on September 2, issuing an executive order to halt collection of the state sales and use tax and state excise tax on motor fuels during September. The state legislature promptly ratified the order in special session.
The order applied to aviation fuel, gasoline, dyed fuel oils (diesel), liquid propane gas, and other gas including gasohol, ethanol, liquefied natural gas, and compressed natural gas.
"I believe it is absolutely wrong for the state to reap a tax windfall in this time of urgency and tragedy," Perdue said at a news conference announcing the moratorium.
The state collects 7.5 cents per gallon of gasoline in excise tax, and a 4 percent state sales tax. Perdue predicted the moratorium could save motorists more than 15 cents a gallon--$75 million in all. Local government sales taxes add up to 3 cents per dollar to fuel prices.
Savings to Consumers
Despite concerns that gas producers or retailers would "pocket" the tax cut, the savings were in fact passed on to motorists, according to E. Frank Stephenson, chairman of the Department of Economics at Berry College in Mount Berry, Georgia.
Stephenson performed a comparative analysis of regional fuel prices and found "the tax moratorium period saw a shift of 12 cents per gallon in favor of Georgia drivers relative to drivers in neighboring states," he reported in an October 18 op-ed in the Atlanta Journal-Constitution. "Georgia drivers went from paying 4 cents more per gallon to 8 cents less per gallon."
Money Won't Be Missed
Perdue and lawmakers said the state could afford to give up the projected $75 million without having to make major budget cuts because higher fuel prices earlier in the year brought in more tax revenue than expected.
Jim Tudor, president of the Georgia Association of Convenience Stores, warned that temporary relief notwithstanding, rising gas prices make it necessary for policymakers to re-examine Georgia's motor fuel tax system. Applying the sales tax to motor fuels, which most other states don't do, increases the tax effects of rising fuel prices.
"With gasoline retailing at the $3 per gallon level, Georgia's total taxes on motor fuel are now among the highest in the Southeast, moving up seven places since June," Tudor wrote in a September commentary for the Georgia Public Policy Foundation.
"Much has been made about Georgia's low excise tax on motor fuel, but little is said about Georgia being one of the few states in the nation and the only one in the Southeast to charge state and local taxes on the retail price of motor fuel," Tudor wrote, citing a windfall exceeding $100 million in fiscal 2005. "This means that while other states are looking at providing gas tax relief, Georgia continues to benefit from the run-up in prices."
Governor Requests Schools Close
Three weeks after his executive order, the governor created controversy nationwide when he announced energy-saving measures--including a request that state public schools close for two days to conserve diesel fuel. (See "Georgia Schools Cut Travel in Response to Katrina," School Reform News, November 2005.) He was accused of pandering to industry lobbyists supporting agriculture's needs at the expense of education.
Gary Black, president of the Georgia Agribusiness Council, said his council made no concerted effort to close schools, but he added, "It is important to recognize that the need was real, as the window for harvest is short and timing is critical. The governor made a prudent decision based on available facts. The benefits to agriculture were ancillary, yet appreciated."
Offshoots
DEPENDENCY ON GOVERNMENT
Daily Policy Digest
FEDERAL SPENDING & BUDGET ISSUES
Top of Form
Bottom of Form
According to Marvin Olasky's book, "The Tragedy of American Compassion," one of the results of a growing dependency on government is the charitable equivalent of Gresham's Law -- bad charities drive out good charities.
Consider two options for a homeless family:
A church or some other non-governmental entity might offer a homeless family shelter in return for the family performing chores such as cleaning the kitchen, mowing the lawn, and washing windows. A shelter financed by the government might provide that family shelter with no such obligation.
The natural tendency for many homeless families would be to opt for the shelter where they have no obligation to give back. The Gresham's Law feature is the displacement of charity from the local and private level to the state, where the state is unwilling or unable to distinguish between deserving and undeserving need.
But there are other devastating features of a growing dependency on government, says Olaskly:
Prior to the 1960s, marriage was a more vital institution than it is today; the support for marriage was so strong that an unmarried woman who became pregnant would usually get married. Nearly 85 percent of teenage mothers in the 1950s were married by the time their babies were born.
It has also reduced economic mobility among the poor. Easy access to welfare has made many individuals believe they were better off so far as income, leisure time and family time than they would have been by accepting a low-paying job.
Source: Walter Williams, "Dependency on Government," Fraser Forum, September 2005; based upon: Marvin Olasky, The Tragedy of American Compassion, Regnery Publishing, Inc., 199
The Facts about Fuel Pricing- BP Version
Fuel prices have increased a lot recently. Sometimes they can go up and down in the same week. There are many influences that affect the price that you pay for fuel at the retail pump. One of these is the cost of crude oil and refined products.
1. What causes fuel prices to rise and fall?
There are two main reasons - the cost of crude oil and the cost of refined petrol and diesel on the world market.
Crude oil makes up a significant portion of the cost of fuel. Crude oil is traded in US$ as a commodity on the international market. The market is influenced by a number of factors including global demand, supply, political events and manufacturing capability.
Refineries purchase crude oil on the international market to make it into petrol and diesel. Refined product is also traded on the international market and has its own pricing.
Normally, this market for refined fuel has the biggest influence on what BP pays for fuel. As with crude oil the market moves according to global supply and demand. When the price of refined fuel rises, BP pays more. And when it drops, we pay less.
In summary, a combination of the cost of crude oil and refined products are a significant factor in determining what it costs you to fill your car.
The next most influential factor on the price at the pump is the US/NZ exchange rate, as oil and refined products are sold in US Dollars.
As we have to import almost all of our crude oil, the cost of international shipping also has an effect on the price at the pump.
2. Where does BP buy its petrol and diesel from?
About 50% of BP's petrol and 80% of our diesel comes from Marsden Point refinery in Whangarei using crude oil we bought on the world market. We import the balance from refineries in Australia and occasionally from Singapore and elsewhere.
3. Why does oil from Taranaki, refined at Marsden Point, cost the same as imported fuel?
BP purchases about 5% of our crude oil from Taranaki. Taranaki oil prices are set according to what the world is prepared to pay, so if oil prices go up globally, Taranaki prices also rise.
What customers pay for fuel is made up of a number of costs as the left graphs show:
5. Why do oil companies follow each other's price increases so quickly? Do you talk to each other?
No. BP never discusses petrol pricing with our competitors. Not only is it illegal and unethical, we have no desire to give away commercially sensitive information to our rivals.
The reason that price increases are usually quickly followed by competitors is that oil companies in New Zealand sell similar products and have similar costs.
6. Why is fuel more expensive in some places than in others?
Competition in a particular market and transport costs are the two main factors that cause prices to sometimes vary from place to place.
When BP brings fuel into New Zealand, it is delivered by ship and then taken to service stations by road tanker. The further the road tanker has to travel, the more expensive it is to deliver the fuel.
In the future Venezuela won't have any more oil - but that's in the 22nd Century
