How fuel prices are set in New Zealand
The price on the pump sign is built from several parts. Some change every day, some change once a year, and knowing which is which explains why prices move the way they do.
The cost of the fuel itself
New Zealand imports all of its refined fuel. The starting point for the price is what refined petrol and diesel cost on Asian fuel markets, which is quoted in US dollars. When those market prices rise, pump prices usually follow a week or two later.
The exchange rate
Because fuel is bought in US dollars, a weaker New Zealand dollar makes the same fuel more expensive here. A small move in the exchange rate can shift pump prices even when world fuel prices stay flat.
Shipping, storage and distribution
Fuel has to be shipped to New Zealand, stored at terminals and trucked to service stations. These costs change slowly and make up a smaller part of the price.
Taxes and levies
Petrol carries fuel excise duty, which funds roads, along with other levies and GST. Diesel is taxed differently: most diesel vehicles pay road user charges instead of excise at the pump, which is one reason diesel is usually cheaper per litre. Tax rates are set by the government and rarely change week to week.
The retail margin
What's left is the margin kept by fuel companies and retailers. It covers running the stations and profit, and it varies by region and by how much local competition there is. It is also the part that absorbs a cost change first, which is why the pump can sit still for a week after world prices have already moved.
What our forecast watches
Our forecast reads several streams of data every day. The main ones are published New Zealand pump price and importer margin figures, international crude oil prices, the refined petrol and diesel benchmarks traded on the Singapore market, which is where New Zealand's fuel is physically bought, and the New Zealand dollar exchange rate.
Watching them is the easy half. Each one is weighted by how much it has actually moved the pump price in the past, across more than a decade of history, and those weights are then checked against years of data the forecast was never allowed to learn from. That is the part that decides whether a forecast is worth anything. Knowing that crude oil rose last week is simple. Knowing how much of that rise has already reached the pump, and how much is still on its way, is the whole problem.
What we do not forecast
Tax and levy changes are set by the government, not by markets, so they are not part of the forecast. If a change to excise or to road user charges has been announced, check that separately. We also work in national averages, so one station or one region can move differently from the country.
What this means for your fill
Taxes and costs are fairly fixed, so most short-term movement comes from world fuel prices and the exchange rate. Those changes take time to reach the pump, which is what makes a one to two week forecast possible.