Petrol could go lower says AA

Oil companies have won "a big tick" from the Automobile Association for cutting prices by 7c in less than a week, but the organisation believes they should drop even further.

Spokesman George Fairbairn dismissed the attack on a United States consulate in Saudi Arabia and an occupation of Nigerian oil wells as minor hiccups that should not negate the beneficial effect of the high New Zealand dollar on fuel prices.

"There is still sufficient room to go down at least another 2c or 3c," he said yesterday.

But Mr Fairbairn warned that motorists should top up their tanks through the holiday season because of continuing volatility on the global oil market.

The latest cuts, sparked by Shell and independent minnow Gull, followed a 14 per cent slide last week in world crude oil prices.

Prices have since risen slightly in anticipation of Friday's meeting of the Organisation of Petroleum Exporting Countries (Opec), which may decide to limit production to shore up returns.

The price of US crude now stands at almost US$43 a barrel. But this is well below a peak in October of US$55.67 and Mr Fairbairn said with the kiwi dollar at just over US72c, oil companies had a bit more "fat" in their margins.

Gull spokesman Ulrik Olsen, whose company has been quick to cut prices in recent weeks, said it would feel the pinch from the latest drop, in which Shell led the local market down 5c on Monday.

It would take another fortnight for low world prices to alleviate Gull's costs, said Mr Olsen.

Petrol at most main-centre pumps is now selling for $1.139 a litre of 91-octane and $1.189c for 96-octane, except at Caltex stations, where the higher grade is traditionally 1c dearer.

These are the lowest prices for five months, although they are still markedly higher than last Christmas, when 91-octane was discounted to 98.9c and 96-octane to $1.039.

Diesel is now selling for 74.5c or 74.9c at most outlets, compared with 52.9c last Christmas.