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MEDIA RELEASE 14 December 2022

FED Reintroduction Must Be Fair for Industry

The phased end of the fuel subsidy gives Government and industry time to manage a seamless reintroduction, and ensure no service stations are out of pocket, the Motor Trade Association says.

The Government today announced the fuel excise duty (FED) subsidy will be extended until 28 February, then phased out over the next month.

MTA says the subsidy was welcome support for many households and businesses during the cost of living crisis.

Now, MTA says the last step in the process is ensuring businesses that bore a cost at the start of subsidy aren’t left out of pocket as it comes to an end.

There needs to be a consistent, fair and accurate way of checking that happens. The extension and phased approach will help.

MTA raised this issue with the Ministry of Business, Innovation and Employment (MBIE) immediately after the announcement.

MTA also received an assurance from Energy Minister Megan Woods that it was not intended that any business would be out of pocket.

As around a third of MTA fuel retail members are independent operators, often family businesses, this last point is particularly relevant.

The situation is complex, and MBIE needs to consult with the industry to ensure every business is looked after. There was no consultation or feedback from industry on the unintended consequences of removing the FED. There is an opportunity to learn from this for future programmes.

MTA is happy to facilitate or participate in any conversations between industry and Government to ensure all businesses get a fair go.

FAQs

What will happen to fuel prices when the subsidy comes off on February 28?

Obviously, motorists will notice the increase due to the reinstatement of the FED. Otherwise, it depends on international prices and external factors. The cost of fuel has come back somewhat, but at this stage it’s very hard to predict.

What’s your advice to motorists – should they try and fill up on 27 February?

That wouldn’t be a good idea. Sure, it’s a good idea to prepare for the subsidy ending, but leaving filling up to the last minute could well mean being stuck in queues, or service stations potentially running out of fuel, especially small operators in holiday hotspots. Use some common sense, we don’t want a crazy run on petrol and panic buying.

Was the subsidy a good idea – would you like it to have continued?

As far as the fuel industry goes, it’s neither here nor there. But it was a great relief for households and businesses during the high cost of living. The problem is, it felt rushed, not thought through, and industry was caught on the hop. If anything like this is done again, there needs to be a lot more planning and consultation.

What exactly are you calling on the Government to do – will service stations be out of pocket?

The most important thing is no one is left out of pocket. We’re taking about thousands of dollars. So, a mechanism needs to be found that ensures no businesses are disadvantaged.

Most people would say petrol stations can afford to lose a few thousand dollars because they make so much from petrol – what do you say to that?

That’s rubbish. A lot of service stations are small to medium businesses, owned by hard-working Kiwis. They’re not huge multi-nationals – although some are – and they operate on slim margins. They shouldn’t be paying the price for Government policy. So the Government should do the right thing and sort them out. Talking to industry to achieve this would be a good start.

How can the public be confident that service stations aren’t profiting from the subsidy ending?

It may surprise people but there are many reasons that the service station industry would prefer much lower prices. The problem is the scheme was so ad hoc, that the possibility exists that some service stations could come out ahead, while others could lose out. That’s why it’s so essential the Government has a system that’s fair, consistent and accurate.