Biofuel Bill will hit prices at the pump

6 March 2008

Biofuel Bill will hit prices at the pump

BP New Zealand today warned the Local Government and Environment Select Committee that the current Biofuel Bill could result in a price increase on petrol and diesel of at least seven cents per litre at the pump.

In addition the mandate is too high, too fast and fails to deliver any of the three main aims of the Bill: sustainability, security of supply and carbon reduction,” Managing Director Peter Griffiths told the committee in his submission on the Bill.

“While BP supports the introduction of biofuels into New Zealand, and has been trialling them here for a number of years, we have serious concerns about the impact of the Bill as currently proposed.”

“The infrastructure required, additional raw bio material product costs, implementation and compliance costs will see our overall costs sky-rocket. We will have no choice but to pass these on to our customers.”

The Biofuel Bill requires oil companies to sell a minimum percentage of biofuels (calculated on energy content) from 1 July this year. The mandate increases from 0.53% in 2008 to 3.4% in 2012.

“While on the face of it 3.4% does not sound like a very high target, the way in which it is calculated and must be implemented means that over 90% of petrol and 30% of diesel will need to contain a bio content in order to meet the mandate. This will dramatically reduce customer choice” Mr Griffiths said.

The average age of a vehicle in the New Zealand fleet is 12 years. Older vehicles are less likely to be compatible with biofuels. The Bill makes it clear that the Government will not take responsibility for any vehicle issues. BP believes this is unwise given the Bill significantly reduces customer choice.

Japan’s Ministry of Economy, Trade and Industry (METI) has said that blends above 3% ethanol are not recommended in pre-2004 Japanese domestic cars. In order to meet the mandate, BP believes a 10% ethanol blend will be required in most of New Zealand’s petrol.

“This is one of the highest biofuels targets in the world and cannot physically be delivered at the moment.”

Specifically BP is concerned about:

- The expected increase in pump price of at least seven cents per litre.
- The need to import all ethanol from overseas as not enough is available in New Zealand. This is counter-productive to carbon reduction.
- The significant cost of infrastructure required to implement the Bill.

“We want to see biofuels in New Zealand but not when the cost to customers is so high and the environmental benefits are negligible.”

BP has proposed an alternative implementation plan which is still a challenging target but provides a steady increase in the delivery of biofuels.

“Our alternative implementation path reduces compliance costs, allows time for more biofuel compatible vehicles to enter the fleet and time for local biofuels production to develop,” Mr Griffiths said.

“We will continue to work with Government and officials to ensure the best biofuels plan is implemented.”

For more information see BP’s submission at www.bp.co.nz

ENDS

© Scoop Media