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Wondering why your tank of fuel costs what it does?

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Posted by Jessie Mclean on 19 Oct 2021
The price Kiwis pay for fuel is a hot topic. Z is big on transparency, so here's the lowdown from them on why your tank of fuel costs what it does.

The cost of fuel at the pump is made up of four parts:

1. What they pay
Z buys crude oil as well as refined petrol and diesel. The amount they pay is made up of:

  • the cost of petrol and diesel on the international market; and
  • the cost to ship fuel to New Zealand.

Like the rest of the world, Z buys fuel in United States dollars (USD). So, the price they pay for each barrel of oil also depends on the value of the New Zealand dollar (NZD) against the USD – sometimes it’s up, sometimes it’s down and that flows through to prices at the pump.

2. Government taxes and levies

A good chunk of the cost of each litre of fuel you buy is made up of taxes and levies. This includes GST, excise tax, ACC and emissions trading levies for petrol, and monitoring and emissions trading levies for diesel. Almost 70 cents per litre is collected by the government in fixed excise and an additional 10 cents per litre in Auckland for the Auckland Regional Fuel tax. Customers pay 15% GST on top of everything. In general, there is about $1.05 of tax for every litre of fuel.

3. Operating costs

Z's operating costs include the costs they incur to bring fuel to you, like international shipping, maintaining storage tanks, local distribution via trucks and tankers, the electricity they use to power their stores, right down to the credit card fees they pay the banks to take electronic payments. In short, all the things they need to run their business.
They also train and employ 2,500 Kiwis, to provide fast, friendly service at Z stations.

4. Their net profit
Their net profit is what they earn after they’ve paid for the crude oil, taxes and levies and accounted for our operating costs (of which they have fixed costs of $400 million per year). In their 2019 financial year they earnt about 4.4 cents per litre profit after tax. In the first half of their 2020 financial year this figure was down to around 3.6 cents per litre after tax.
You don’t just have to take their word for it – they're a publicly listed company so it’s easy to find out how much money they are making by visiting their Investor Centre.

They use some of their profit to invest in Kiwi communities through Good in the Hood, digital innovation for better on-site experiences and they invest in alternative fuels like biodiesel (they’ve spent over $30 million on their biodiesel plant in Wiri, South Auckland). They also use it to pay dividends to their shareholders. Half of their shareholders are based here in New Zealand and invest in them either through KiwiSaver funds or through the approximately 8,000 Mum and Dad shareholders throughout the country.

More Questions? Check out FAQ’s here

This article appeared on Z https://z.co.nz/motorists/fuel-pricing/ and has been published here with permission.
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