Volatile times for motorists as fuel prices climb

Volatile petrol prices are prompting warnings that the cost of filling up will soar to an all-time high once the Government takes a bigger tax bite.

The Automobile Association, representing more than a million motorists, predicts the price of 91-octane petrol will quickly rise above 130c a litre - at least 4c higher than its October peak.

The 96-octane petrol is normally 5c more expensive than 91-octane.

Customs Minister Rick Barker said on Monday the Government would not delay increasing its excise on petrol by 5c a litre on April 1, excluding goods and services tax, as prices were "stabilising somewhat".

The increase is to pay for more than $2 billion extra investment in transport infrastructure over 10 years, pushing total Government spending on moving people and goods to $18.9 billion.

Government levies and taxes will go to about 61c a litre from just under 55c now, including a rise in GST of at least 1c on higher pump prices.

The AA challenges the accuracy of the minister's claim that the price of 91-octane petrol dropped from 127c in October to 117c in mid-February.

It also pointed yesterday to bids by two oil companies - BP last week and Mobil on Tuesday - to push the price to 125.5c, from 119.5c now.

Although each pulled back after their rivals refused to do likewise, industry officials indicated yesterday that more increases remained likely amid international oil prices of up to US$52 ($71.61) a barrel.

AA spokesman George Fairbairn said main-centre prices had never been above 125.9c apart from a few hours in May when BP hit 127.9c.

They would have been close to their highest level, even before the Government excise rise, had BP and Mobil succeeded in pushing up the market in recent days.

BP spokesman Jonathan Hill could not explain why the company did not follow Mobil on Tuesday, but said the true cost of a litre of petrol was not being recovered at the pumps.

Although Shell had resisted price pressures in recent days, spokesman Simon King said its margins were "very, very tight".

Mr Fairbairn, although sceptical about oil industry claims about thin margins, said price pressures justified a call by the AA for the Government to halve its proposed excise increase.

"It's all very well Helen Clark saying women should get back to work, but if they have to use their cars to do so they are going to be hit by higher prices."

He accepted the principle of some level of increase, to be "ring-fenced" for better roads and other badly needed transport infrastructure, but said pump prices had risen by about 17c a litre from 103c since the Government first announced the excise rise in December 2003.

He therefore believed the Government should pay half the cost of extra infrastructure from its general account, into which about $616 million flows each year from petrol sales, as opposed to a land transport fund which gains less than half of the proceeds of fuel taxes.

But a spokesman for Transport Minister Pete Hodgson said motorists' contributions to the general account were eclipsed by more than $1 billion a year paid from it to treat casualties of road smashes or those made ill by fuel emissions.

He said the Auckland region, as well as being eligible for $715.8 million over 10 years from the extra excise, would receive $900 million from the general account to fix its transport woes and Wellington would gain $225 million.

The spokesman added that the Government was spending $1.42 billion on land transport this year, 51 per cent more than its predecessor allocated to the sector in 1999.