7 Jan 2015

Fuel price drop good news - Treasury

4:17 pm on 7 January 2015

With global oil prices plummeting, two major fuel suppliers, Z and BP, have dropped their prices by another two cents.

petrol pump generic

Photo: AFP

That's the third drop in a week - and Gull had also cut its prices.

91 octane was now at $1.859 at most petrol stations and even as low as a $1.71 in some places where local competition was higher.

The Treasury's director of macro-economic policy Tim Ng said the falling prices would likely have a positive impact on the Government's revenue.

Mr Ng said lower petrol prices would reduce the GST received on each litre sold but the money saved on petrol would most likely be spent on other things, bringing in the same amount of GST.

"Overall, it's probably positive - if you've got a lower oil price, that's an input into production that's imported, so you're reducing the cost structure of the economy when oil prices fall."

The AA said companies could afford to drop the price even more - by up to 10 cents - but BP disagreed.

Spokesperson Jonty Mills said it has had 17 price drops totalling 40 cents since October.

"I think the AA are talking about importer margins, then you have a host of local operating costs requirement to continue to invest in this market, in infrastructure and assets and of course a return to the shareholder."

"There's a very fierce and competitive market out there with lots of transparency and I think the activity recently has displayed that."

The price of benchmark Brent crude oil fell by more than half since mid-2014, and was now at its lowest in five and a half years.

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