Economists fret as petrol price soars

Petrol has soared to its highest price ever, with most city outlets selling 91-octane fuel last night for 222.9c a litre.

The rise has made most petrol 1c a litre more expensive than at the previous high watermark in May last year, although industry minnow Gull Petroleum is holding out at prices ranging from 8c to 13c less than those of the big four of BP, Mobil, Chevron and Z.

It has left economists such as UBS New Zealand's Robin Clements fretting about the effect on household spending through the fragile financial recovery.

"Petrol is such a pervasive product - it is like a tax - it will crowd out other spending," he said.

Oil companies are blaming the increase on greater economic confidence overseas - in both the United States and Europe - as well as perennial tensions in the Middle East.

AA spokesman Mark Stockdale said after a succession of cuts in May and June, petrol had risen by 26c a litre in the past six weeks because of rises in international commodity prices, fuel tax and oil company profit margins.

The price includes a 2c rise in the Government's fuel excise at the beginning of the month, and extra GST which is contributing to a tax take of 90.2c a litre.

Diesel was up last night to 156.9c at Caltex, Z and Mobil and 1c higher at BP outlets, although still well below a record high of 191.9c.

However, Mr Stockdale said import costs for fuel had not risen since the last increase at the pump - 3c last week on a litre - and believed fuel companies could have held the price.

Gull general manager Dave Bodger said his company had managed to keep its prices down through efficiency measures, the benefits of which it was choosing to pass back to motorists rather than "swallowing the profit".

Z spokeswoman Sheena Thomas said the cost of imported fuel had increased by about 30c a litre since July 5, compared with the 26c of retail price rises including higher tax.