Soaring Petrol Prices

March 2022

Oil affects almost everything we do through its impact on transport and production, and other things will become more expensive even if they seem unrelated at first.

One question is how to reimburse staff or volunteers using their own vehicle for the organisation’s business. Many organisations are using the maximum rate allowed by Inland Revenue for deduction from Income Tax (around 70-80c/kilometre, depending on year), and you may be wondering if that is enough if petrol prices are at $3 per litre or more.

A reasonably economical car uses around 0.06 – 0.08 litres of petrol per kilometre, meaning a litre lasts for about 12-16 kilometres. At $3 per litre, the cost of petrol per kilometre is between 19-25 cents, or about 7 cents more than if petrol was $2 per litre.

The biggest part of mileage rates is not petrol, but estimates about depreciation and vehicle running costs such as insurance, repairs or service, which can vary wildly between cars and people’s preferences.

It is not recommended to reimburse people directly for petrol, mostly because it is very hard to say whether that full tank really was all organisation business, and because it does not reimburse for the other costs of running a vehicle.