Why is fuel cheaper in Australia than NZ?
Fuel prices are a common concern for many drivers, especially when they vary significantly across different regions. So, what are the factors affecting fuel prices?
In this blog post, we will explore why fuel is cheaper in Australia than in New Zealand, and what factors influence the cost of petrol and diesel in both countries.
According to the latest data from GlobalPetrolPrices.com1, the average price of gasoline (octane-95) in New Zealand was 2.74 NZD per litre on July 10, 2023, while in Australia it was 1.62 AUD per litre (1.75 NZD) on July 16, 20232. That means that fuel was about 36% cheaper in Australia than in New Zealand at that time. But why is that the case?
What are the main factors that affect fuel prices in Australia vs NZ?
1. The main reasons why fuel is cheaper in Australia than in New Zealand is the difference in taxes.
According to the Australian Institute of Petroleum (AIP)2, the total tax component (including GST) for petrol and diesel in Australia was 57.6 cents per litre and 46.9 cents per litre respectively as of July 16, 2023.
In contrast, according to the Ministry of Business, Innovation and Employment (MBIE), the total tax component (including GST) for petrol and diesel in New Zealand was 96.5 cents per litre and 77.7 cents per litre respectively as of July 10, 2023.
That means that taxes accounted for about 33% of the fuel price in Australia, but about 44% of the fuel price in New Zealand.
2. Another factor affecting fuel prices is the exchange rate between the Australian dollar and the New Zealand dollar.
Since both countries import most of their crude oil and refined products from overseas markets, they have to pay for them in US dollars.
Therefore, a stronger Australian dollar means lower fuel prices for Australian consumers, while a weaker New Zealand dollar means higher fuel prices for New Zealand consumers. According to the Reserve Bank of Australia (RBA), the average exchange rate between the Australian dollar and the US dollar was 0.76 USD/AUD on July 16, 2023, while according to the Reserve Bank of New Zealand (RBNZ), the average exchange rate between the New Zealand dollar and the US dollar was 0.69 USD/NZD on July 10, 2023. That means that one Australian dollar could buy more US dollars than one New Zealand dollar, making fuel imports cheaper for Australia than for New Zealand.
3. A third factor that affects fuel prices is the cost of crude oil and refined products in the international market.
Since both countries depend on imports to meet their domestic demand, they have to follow the global price movements of oil and its derivatives. According to the AIP2, the international benchmark prices for petrol (MOGAS95) and diesel (Gasoil 10ppm sulfur) were 97.9 AUD per barrel and 98 AUD per barrel respectively as of July 16, 2023. According to the MBIE, the international benchmark prices for petrol (Singapore Mogas 95 Unleaded) and diesel (Singapore Gasoil) were 106 NZD per barrel and 105 NZD per barrel respectively as of July 10, 2023. That means that crude oil and refined products were slightly more expensive in New Zealand than in Australia at that time.
4. A fourth factor that influences fuel prices is the cost of refining crude oil into petrol and diesel.
Both countries have local refineries that produce some of their domestic supply. But they also import refined products from other countries, mainly from Asia.
According to the AIP2, the refining cost for petrol and diesel in Australia was 4 cents per litre and 5 cents per litre respectively as of July 16, 2023. According to the MBIE, the refining cost for petrol and diesel in New Zealand was 8 cents per litre and 9 cents per litre respectively as of July 10, 2023. That means that refining costs were higher in New Zealand than in Australia at that time.
5. A fifth factor that impacts fuel prices is the retail margin that service stations charge to cover their operating costs and profits.
The retail margin can vary depending on the location, competition, and demand of each market. According to the AIP2, the average retail margin for petrol and diesel in Australia was 16.1 cents per litre and 18.3 cents per litre respectively as of July 16, 2023. According to the MBIE, the average retail margin for petrol and diesel in New Zealand was 19.5 cents per litre and 20.5 cents per litre respectively as of July 10, 2023. That means that retail margins were higher in New Zealand than in Australia at that time.
6. A sixth factor that affects fuel prices is the level of competition among service stations and fuel suppliers in each country.
Competition can help lower fuel prices by encouraging efficiency, innovation, and customer service. According to the Australian Competition and Consumer Commission (ACCC), the Australian fuel market is relatively competitive, with a number of major and independent players operating across different regions and segments. According to the Commerce Commission (ComCom), the New Zealand fuel market is less competitive, with a high level of concentration and coordination among a few dominant players.
In conclusion, fuel is cheaper in Australia than in New Zealand because of a combination of factors, such as:
- lower taxes,
- stronger exchange rate,
- lower international prices,
- lower refining costs,
- lower retail margins,
- and higher competition.
These factors can change over time and affect fuel prices differently in each country.
Therefore, consumers should be aware of the factors affecting fuel prices and monitor them regularly to find the best deals and save money. Policymakers should also consider ways to promote fair competition, reduce emissions, and encourage alternative fuels and transport modes to improve the sustainability and affordability of the fuel sector.
Resources:
petrol prices in Australia and New Zealand – 0
Why is fuel cheaper in Australia than NZ? fuel prices Australia NZ – 0
“factors affecting fuel prices” – 3980 2023-07-29
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