Petrol prices expected to fall as road user charges set to replace fuel tax, officials say
Prices at the pump are expected to fall eventually - but not necessarily for the reason you might think.
The Government is working on a plan to transition the country’s 3.5 million light vehicles to paying for our roading network through electronic Road User Charges, rather than petrol tax.
An April briefing to Transport Minister Chris Bishop, obtained by Newstalk ZB under the Official Information Act, shows officials expect petrol prices to go down as that transition takes shape.
The briefing was presented by the Ministry of Transport, which has since been merged into newly-created agency MCERT - the Ministry for Cities, Environment, Regions and Transport.
It stated that to fully address the disparity between the fuel excise duty and road user charges, the fuel tax “would need to increase by 26 percent to 91 cents per litre” - which is not taking place.
Petrol cars pay the fuel tax of 70 cents per litre, while all other vehicles pay Road User Charges, at $76 per 1000km travelled.
Bishop was told the average car now consumes 8.1 litres for 100 kilometres, and the crossover point where RUC and petrol taxes are the same were for a petrol car that uses 9.4 litres for 100 kilometres - meaning “on average, drivers of petrol light vehicles pay less than RUC users“.
“Moving everyone to RUC would address the disparity between FED [fuel excise duty] and RUC,” the agency noted.
Officials told Bishop because various cars have different fuel efficiency and drive on different terrain, some petrol cars pay more per kilometre in tax than others - but RUCs would be fairer as it would ensure all road users contribute, based on usage.
The tax would therefore be phased out - reducing petrol prices - as road users switch to paying for the roading network through RUCs.
The aide memoire prepared for Bishop also said the minister was working through how future projects would be funded if the planned fuel tax and road user charges increases do not go through.
In a statement, MCERT said a review of pricing would be undertaken before changes go ahead.
Last month, Bishop reiterated in Parliament it was “unlikely” fuel taxes would rise in January, but said the petrol tax declined by 20% in real terms since 2020 - and described the National Land Transport Fund as “massively oversubscribed”.
A Bill shifting RUCs to a digital system has recently had its second reading in Parliament, and a modernised system is expected to be ready for use in 2027, MCERT said.
Petrol prices have spiked as a result of conflict in the Middle East and the closure of the Strait of Hormuz.
Azaria Howell is a multimedia reporter working from Parliament’s press gallery. She joined NZME in 2022 and became a Newstalk ZB political reporter in late 2024, with a keen interest in public service agency reform and government spending.
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