Government could lose $250 million in taxes as fuel sales plummet

Garth Bray
Source: 1News

A drop in fuel sales during the Alert Level 4 lockdown could translate to a $250 million fall in revenue for the Government from fuel taxes.

Z Energy reports sales are down 80 per cent and about a dollar of every litre of regular petrol it sells is handed on to the Government in excise and GST.

“The shortfall from our company alone - it would be around 80 to 100 mil a month,” Z Energy chief executive Mike Bennetts told 1 NEWS.

“I would estimate that the overall market impact would be $200-$250 million less being collected on taxes right now.”

Z is a shareholder in Refining NZ, which operates the country’s only oil refinery at Marsden Point.

The plant has been running at half production since March 25 as demand for jet fuel has collapsed and regular petrol and diesel has fallen dramatically.

NZ Refining recently announced plans to operate at reduced capacity until the end of August in response to the significant drop in demand for fuel.

Mike Bennetts says Z Energy moved early to dial down supply and sell some back into the world market.

BP is facing “an unprecedented situation” regarding fuel storage.

“Our team is working hard to effectively manage stock around the country,” a BP spokesperson told 1 NEWS.

ExxonMobil has not yet responded to a request for comment.

Gull Petroleum says it has plenty of stock but little demand and that’s a global story.

“Traffic is down to 10 percent in some parts of the States. We are not at that level in New Zealand. We will get to some form of normality in our business in some stage in the next two or three months,” Gull Petroleum general manager Dave Bodger told 1 NEWS.

The pressure on fuel storage comes as traders are taking a bath in the US with May contracts for West Texas Intermediate closing at a negative price for the first time, meaning producers have to pay someone to take the oil off their hands.

“If we can buy it for nothing, we’re going to take all we can get,” US President Trump declared as he announced 75 million barrels would be added to top off the US Strategic Petroleum Reserve.

Federated Farmers Canterbury rep David Clark offers a grim assessment.

“The New Zealand economy has ended up shattered out of all of this. The low price of oil is a symptom of the problem,” he said.

He isn’t expecting a windfall of cheaper diesel prices from the oil glut, but he is watching for any sign the downturn could push food commodity prices lower at a time New Zealand agriculture is one of the only bright hopes.