5 Nov 2012

Govt considers raising levy on fuel

6:49 am on 5 November 2012

The Government is considering raising a levy on fuel to meet the cost of ensuring that New Zealand has a secure supply of oil.

This proposal is part of a discussion paper released by the Ministry of Business, Innovation & Employment.

As a member of the International Energy Agency, New Zealand is required to hold oil stocks equivalent to at least 90 days of net oil imports to protect against disruption to international energy supplies.

It does this partly through contracts with offshore companies - called 'ticket contracts' - which would allow New Zealand to buy quantities of oil at market price in the event of an IEA-declared oil emergency.

The Government says ticket contracts are the preferred option because they cost around a tenth of the expense of domestic stockpiling.

But it's forecasting the cost of these contracts to double from $5.2 million in the 2014 financial year to $10.6 million by 2017.

The Crown currently pays for the ticket contracts, but the Government says the budget allocation of $3 million to cover the cost is insufficient in the face of the rising expense.

It's looking at a number of options to manage this cost, including withdrawing from the arrangement altogether, placing a mandate on industry to hold stock, or its preferred option of a user-pays system.

Under such a system, the levy on fuel would increase to about 0.1 cents per litre - around 4.4 cents more for a 40 litre tank.

The Government argues this is a fairer system as fuel users are the principal beneficiaries of the oil security arrangement.

Submissions on the discussion paper close at the end of November.