Refinery levy impedes petrol price reduction

Press, 8 February 1986, Page 8

Refinery levy impedes petrol price reduction

By

SIMON LOUISSON

in Wellington New Zealand, because of its refinery levy and the distance from world markets was unlikely to feel any immediate big benefit from the downward slide in world oil prices, said the Minister of Energy, Mr Tizard, yesterday. Reacting to news media requests for comment, Mr Tizard said oil companies, not the Ministry, bought New Zealand’s oil. New Zealand was unlikely to feel any immediate impact of falling “spot” oil prices because it was about a month’s sailing time away from leading oil markets, he said. Europe could readily

capitalise on falling prices by obtaining oil from the “spot” market and unloading it within days. Another constraint likely to stop New Zealand benefiting was that the oil prices which had fallen most were those for products mainly sold on “spot” markets, Mr Tizard said. “The oils we buy are generally not in that category.” Oil industry spokesmen said, however, that New Zealand now bought a high proportion of its oil on the spot market. BP had bought all its oil in the last six months on the spot market. New Zealand, they said, had formerly bought on long-term contracts for

pricing and security but had since moved to the spot market with the encouragement and blessing of the Ministry. North Sea Brent oil is the most heavily traded spot market oil and is where the most dramatic price collapse has occured, from SUS 27 to SUSIS a barrel. New Zealand buys mostly Indonesian and. Saudi Arabian heavy oil partly because of the cheaper transport costs and partly because with the refinery expansion New Zealand has the capacity to refine the cheaper heavy oils. The oil price slump has eroded the advantage of the cheaper heavies. Much of the price cutting occurred among the North Sea and Saudi light oils. No-one at the Ministry was able to provide a figure of how much crude oil makes up in the price of petrol but an oil industry spokesman said that a SUSIO a barrel cut in price should be represented by an 11c a litre cut in New Zealand petrol prices. The Minister of Finance, Mr Douglas, said that New Zealand would be one of the only nations that would not make big cuts in retail petrol prices during the next few months. He blamed the “mad” agreement entered into by the previous National Government with the New Zealand Refining Company. New Zealand business would be less competitive because other consumers elsewhere would get greater petrol price cuts. The refinery levy, now

12.5 c a litre, was expected to rise between 3.5 and 7.5 c a litre by 1987, he said.

The commitments were built into the agreement which the former Government had made with the company for refinery expansion at Marsden Point. Motorists would pay both the interest and the capital repayments for the refinery expansion through a per-litre tax on petrol. National had also given assurances about restricting imports of products produced by the refinery, said Mr Douglas.