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As pricing changes, AA warns price spreading will be 'fatal' for regional fuel tax

A spokeswoman for Z Energy said "by and large" the increases in prices imposed on Auckland after the regional fuel tax was introduced had been maintained.

The AA is warning the regional fuel tax will be "fatally flawed" if price spreading occurs, as the price difference between Auckland and less competitive fuel markets appears to be narrowing.

In July 1, fuel companies were required to pay an additional 11.5 cents per litre of fuel sold in Auckland in tax, to help pay for transport projects in New Zealand's largest city.

Officials warned the Government that the impact of the fuel tax could spread, in particular to regions where there is less competition.

Six weeks after the tax was introduced, pricing behaviour at some stations in Auckland has changed.

At the time the tax was introduced, a number of fuel stations in Auckland went from charging what is often dubbed the "national" fuel price, to charging that price, plus 11.5c.

However there are now no stations in Auckland charging more than 9c a litre more than the "national" price, which is used by many stations in Wellington and much of the South Island.

Z Energy's station at Auckland Airport is a visible sign of the change. 

Previously that station charged exactly the same price as the Z Energy at Wellington Airport, and when the regional fuel tax was introduced, it was charging 11.5c a litre more.

BP said in a statement that it had not sought to spread the cost of the regional fuel tax into other areas at all.

A spokeswoman for Z Energy confirmed that the airport site "had a discount applied to compete more effectively locally". Us Nz Dollar Graph

The statement went on to say the gap between Auckland and elsewhere may have narrowed since the tax was introduced.

"To date, by and large, Us Nz Dollar Graph ," Z Energy said.

"There may be some exceptions, but on average, Z's Auckland prices are sitting around 10 [cents per litre] higher than they used to. Bear in mind this is a snapshot in time and things could change in either direction."

BP meanwhile, denied any spreading was taking place. "We implemented the 11.5cpl Auckland Regional Fuel Tax within the boundaries of the region and will continue to do this," a spokeswoman said.

AA spokesman Mark Stockdale said motorists were already querying whether the higher prices they were paying outside Auckland were covering part of the cost of the regional fuel tax.

A 5c a litre increase in the last 10 days was "unwarranted" Stockdale said.

Prices in central Wellington and much of the South Island are now equal to the all time high, with regular petrol costing $2.299 a litre. 

While stations in Auckland uniformly increased prices by 11.5c on July 1, Stockdale said this appeared to be changing, based on information on Gaspy, a mobile app which crowd sources petrol prices at stations across New Zealand.

"Looking at the data on Gaspy, you have a whole lot of stations where the prices are lower than Wellington, or only a few cents more than Wellington."

A recent drop in the New Zealand dollar has meant petrol prices are now at or near all time highs.

In its submission on the regional fuel tax warning that the impact of the price could spread, the AA requested that the Government collect price data and volumes to assess whether the cost of the tax was only being paid by motorists.

Figures are expected to be provided to the Government on a quarterly basis.

"At the moment you can't say whether prices are spreading. It's very difficult to say," Stockdale said.

"That is the challenge of introducing a regional fuel tax in a market which does not have uniform pricing, where prices move up and down, not because of changes in commodity prices or exchange rates, but because of price competition between service stations in some areas."

If clear evidence emerged of spreading, Stockdale said the tax would be "fatally flawed".

"That would go against the intent of the regional fuel tax, which was that only Auckland road users would pay this tax to contribute to improving Auckland transport."

Economists and data experts are reluctant to say whether price spreading is occurring now.

Sam Warburton, an economist at the New Zealand Initiative who has argued against the regional fuel tax, largely because of its impact on people on lower incomes, has been publishing graphs showing that the difference in price between petrol stations in Auckland and areas where there is little competition, has changed significantly.

Canterbury petrol prices back above Auckland's, Us Nz Dollar Graph

However Warburton said he was not in a position to say spreading was occurring.

Peter Ellis, although much less than the full impact of the fuel tax. Us Nz Dollar Graph , wrote on his blog that said fuel prices between Auckland and the rest of the country were converging, although much less than the full impact of the fuel tax.

"Plausibly this is because of companies' price adjustments down in Auckland and up elsewhere to spread the cost of the tax over a broader base."

David Hood, who also writes on data, said any price spreading related to the Auckland regional fuel tax was likely to be lost compared to the differences in competition in areas where fuel discounter Gull operated, and where it does not. 

"There is not a lot of evidence for price spreading from Auckland to other Gull areas, and for non-Gull areas the questionable price rises are so extreme that any fuel tax spreading is minor compared to what is generally going."

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