Govt ‘playing Santa Claus' over petrol

Press, 28 November 1979, Page 1

Govt ‘playing Santa Claus ' over petrol

Energy reporter The Government has been criticised for "playing Santa Claus” by holding off a bigger increase in the price of petrol until after the Christmas holidays. According to an oil company spokesman, the petrol price rise was half of what the industry sought, while the diesel price rise was about 80 per cent of what was asked for. The rise did not take _ account of selling margins, according to wholesalers and retailers. Another price rise appears likely after the Christmas holidavs, when premium grade petrol will probably cost more than 44c a litre ($2 a gallon and possibly as much as 48c a litre ($2.20 a gallon). The delay would allow the Government to reduce the effect of big price rises on the consumers price index, which, as an indicator of the inflation rate, already threatens to be more than 17 per cent this year. It would also allow the Government to .take account of next month’s Ministerial meeting of the Organisation of Petroleum Exporting Countries. The O.P.E.C. meeting, at Caracas, Venezuela, is expected to tie the price of “marker” crude oil more closely to the spot market prices to try to patch the split in O.P.E.C. which became apparent last October.

Spot market prices are now more than $4O a barrel, and the maximum price of Arabian Light “marker” oil is expected to rise from $23.50 a barrel to about $3O a barrel. This would fulfil the prediction made by the Prime Minister (Mr Muldoon) in June that oil prices would treble in 1979. New Zealand paid $l2 a barrel at the end of March. Price rises are expected to continue at a high rate next year. Mr Muldoon last week predicted that the price Of a barrel of oil could double in the next 12 months. The latest price rise meant that oil companies would not be able to recover their costs, said another spokesman yesterday. “It is a disappointing move, because it barely meets the prices we have to pay for supplies. It is less than necessary to meet our existing costs,” he said. The oil companies believed their application for a price rise would have set “a fairly realistic level” to recover costs and to anticipate the O.P.E.C meeting next month. The increase that was granted would keep the petrol poo! account (the buffer between the consumer and the price demanded by suppliers) at "rock bottom” level to the end of the year. “In theory that sounds great, but in practice it is courting disaster. Someone has got to pay for it in

the New Year,” said a spokesman. The Government was "playing politic*," as the Labour Government had done in delaying price rises at the end of 1973, he said. Wholesalers and retailers maintain that the latest rise does not take into account their selling margins, and they will press the Government for increases to meet their costs and the need for ready cash in an industry which can no longer live on credit. The wholesalers’ margin last rose at the end of 1977, and the retailers’ margin has since gone up four times. Wholesalers say they now have to borrow to pay for distribution and supply. Another retail price increase in the New Year would also include some measure to discourage petrol use. The International Energy Agency’s meeting next year has been brought forward a month to discus* international conservation measures. It is known that the agency regards New Zealand petrol as underpriced (it advocated a price of 66c- a litre, or $3 a gallon, early this year), and New Zealand is likely to be under pressure to curtail petrol use even further. A price rise is the most likely immediate move. The Minister of Energy (Mr Birch) has said that price increases are effective as conservation measures for only a short time, but the oil industry says that the Government has not tried a big enough increase. “They are just pecking away at the consumer,” said a spokesman.