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Biofuel could raise petrol prices

Published: 10:44PM Thursday March 06, 2008 Source: ONE News

BP New Zealand has warned that the government's current biofuel obligation could result in a price increase on petrol and diesel of at least seven cents per litre at the pump.

The petrol provider is predicting a 70 cent rise for unleaded 91 by late 2009.

It's blaming Labour's proposed biofuel blending bill for some of the expected increase.
And the Reserve Bank claims the government's emissions trading scheme will contribute an additional seven cents to the predicted rise. 

"Best case scenario is more like $2.05 and that's with those impositions and with the current oil price," says Mark Stockdale of the AA.

Adding to motoring misery are expected increases in ACC levies and regional fuel taxes in both Wellington and Auckland.  

Depending on what happens with international fuel prices and the exchange rate one scenario has petrol at $2.40 at the pump. BP blames some of the predicted increase on a proposed government bill forcing oil companies to blend biofuels into petrol.

The expected price hike is made up of:

- The mandatory biofuel component

- The cost of the government's emission trading scheme

- ACC is raising its levy to cover road crashes

- Both Wellington and Auckland motorists could be forced to pay a regional fuel tax.

All of that should start hitting motorists mid-year.

But according to one economist the price of oil will regulate itself.

"For $2.40, it's 70 cents more of what we are paying for now. That's so much it seems like major scaremongering," says Robin Clements, UBS Senior Economist.

But either way, petrol is costing more now than it ever has with New Zealand prices at near record highs as ,oil hit an all-time high above $104 a barrel in New York.

The Automobile Association says 91 octane reached $1.75 a litre in Auckland, Wellington, Christchurch and Dunedin by the end of February.

AA motoring affairs general manager Mike Noon says New Zealand is just a couple of cents away from our highest ever fuel prices.

He says the high New Zealand dollar helped stop petrol prices from sky rocketing even further.