Govt likely to help ease petrol price

Press, 19 April 1986, Page 1

Govt likely to help ease petrol price

By

MARTIN FREETH

in Wellington The Government is expected to take over the $2.3 billion debt on the Marsden Point refinery expansion as the first step in freeing up the oil distribution industry. The move would enable the Government to reduce the levy built into the retail price of petrol to pay off the debt, and to open New Zealand to imports of refined oil in competition with that processed at Marsden Point. The Government sees liberalising imports as the only basis on which to free up the now tightly controlled wholesale and retail industries.

Ultimately, the motorist should benefit from prices which reflect greater competition between a reduced number of retailers and fluctuations in the world price of oil. The slump in oil prices since late last year has added urgency to the Government review of oil distribution. Existing arrangements for repaying the refinery

debt through the variable' levy in the retail price substantially limit the prospect of tumbling world oil prices being passed on to motorists. That is in marked contrast to the slashed prices enjoyed by their counterparts in the United States and Britain now that oil is down to SUSIO a barrel. The levy on New Zealand motorists is now 12.4 c a litre, and will rise to a peak of between 16c and 20c over the next two years in line with the repayment schedule for the loans raised in 1980 with a consortium of foreign banks. Government sources say that the debt is already the Government’s responsibility, by virtue of the guarantees given as part of the original loan agreements. Taking over the debt from the New Zealand Refining Company would simply give the Government flexibility in how the repayment costs were recovered.

The loans are now due to be repaid fully in 1992 and 1993. Sources suggest the Government need not renegotiate the loans with the consortium if it decided to alter arrangements for funding interest and principal commitments. The existing

schedule of payments could be retained and covered from the Government’s general debt servicing expenditure. Flexibility could be used to reduce the levy immediately and extend it over a longer period or to meet the debt costs from some new tax. The Government may see extending the levy over the 16-year life of the refinery expansion as

an equitable option, ensuring that the motorists who benefit from the project are those who foot the bill. It is believed the Cabinet has had proposals on all aspects of oil distribution deregulation since February. The Government told the four oil companies a month ago it would talk to them about import liberalisation very soon.

The Minister of Finance, Mr Douglas, told Parliament this week that a Ministerial sub-commit-tee would complete its work on the industry review in two or three months.

He indicated that a renegotiation of agreements guaranteeing profit rates to the private sector participants in the refinery expansion project and the synthetic fuel plant at Motunui was also being considered.

Oil company spokesmen said yesterday that they were waiting keenly to hear from the Government on all aspects of industry deregulation. They suggested the companies would be ready to take advantage of import liberalisation by buying refined product to by-pass Marsden Point if the price was right. Details of Government plans for deregulation are also anxiously awaited by petrol retailers.