Facts about fuel pricing
We often get asked about fuel prices and what causes price in New Zealand to go up or down.
Here we've tried to answer some of the questions that we're most commonly asked about fuel pricing.
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.
From Thursday 1 July, 2010, a carbon component has been added to the price of BP fuel across the country to meet the industry’s requirements under the Emissions Trading Scheme (ETS).
The New Zealand Government implemented the ETS as one of the ways it will meet its Kyoto obligations. Under the Kyoto Protocol, the Government has agreed to limit New Zealand's carbon dioxide (CO2) emissions and the emissions of other "greenhouse gases" into the atmosphere (measured against the CO2 equivalent level).
Under the new law BP NZ, along with other obligated parties in the Liquid Fossil Fuels sector, is required to surrender emissions units (sometimes called carbon credits) to the Government to cover the CO2 equivalent emissions (often referred to as carbon emissions) from products that we import or produce at the refinery.
The level of emissions is calculated using a formula set in Regulations.
Until 31 December 2012 we are only required to surrender one unit for every two tonnes of carbon emissions. We are able to buy the emission units from parties who have them or from the Government, which is offering a fixed price option for carbon credits at NZ$25 per unit. Applying the 1 for 2 surrender obligation, this effectively means NZ$12.50 per tonne of carbon emissions until 31 December 2012.
We have used this amount to determine an initial cent per litre amount for carbon emissions from each product. These cent per litre amounts are outlined in the table below:
Going forward prices will continue to move up and down depending on changes for all the components contributing to the fuel price e.g. product, shipping, exchange rate and carbon emissions.
To calculate the volume of carbon emissions generated by a particular product, go to the calculator below
3. Where does BP buy its petrol and diesel from?About 50% of BP's petrol and 70% 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 Asia and elsewhere.
4. 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.
5. When I buy a litre of fuel at BP, where does my money go?What customers pay for fuel is made up of a number of costs as the following graphs show:
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).
This table represents the new tax breakdown as at 1 October 2010. Please note these figures are in cents per litre and do not include goods and services tax (G.S.T)
6. 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.
7. 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
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.