The price surge has been driven by rising demand from a stronger-than-expected US economy and specific efforts by the Saudis and Russians to cut global supply.
New Zealand petrol price tracking website Gaspy lists the average pump price in New Zealand as $2.77 for 91 octane and $2.98 for 97 octane.
Prices will vary around the country and are typically higher in Auckland, where a 10c regional fuel tax is applied.
But broadly, they have risen just 4.5 per cent in the past four weeks, suggesting there is more pain to come for local motorists, even if the global commodity price plateaus.
Compounding the local price rises is a significant fall in the Kiwi dollar, which has dipped almost 5 per cent in the past month to US60.98c.
A lower Kiwi dollar means local petrol companies are paying more in nominal terms for oil, which is traded in US dollars.
ANZ chief economist Sharon Zollner today warned there were signs that the big post-pandemic correction in global commodity prices was almost played out.
“Higher grain prices due to the end of the Russia-Ukraine agreement (and on Friday night, rumours of India abolishing its 40 per cent import tax) and weather-related disruptions to the outlook for key staples such as rice are putting some supply-driven upward pressure on global food prices,” she said.
“That, plus a recent steady increase in the price of oil (now up around 23 per cent from its June low), means it’s unclear for how much longer global goods disinflation will be a tailwind for central banks in their task of bringing CPI inflation down.”
A large part of recent falls in topline inflation numbers - both here and around the world - has been a symptom of global commodity prices returning to normal after the pandemic disruption.
In other words, the self-correcting part of the inflation battle is now largely behind us, and getting it back into the target zone (of 1-3 per cent) will rely on the effectiveness of higher interest rates suppressing economic demand.
The Reserve Bank has suggested the Official Cash Rate has peaked at 5.5 per cent and that it will be sufficient to cool domestic inflation over coming months as more fixed mortgage holders move on to higher rates.
But some economists, including those at ANZ and Westpac, believe one more hike will be needed in November to keep economic activity subdued.
The rising oil price is also causing concern in the US, where the White House is expected to exert diplomatic pressure on the Saudis to pump more oil.
The Financial Times has reported global oil demand hit a new record high of 102.8 million barrels a day in July, due to economic resilience in the US and India and stronger-than-expected oil demand from China.
“Fears around recession and China imploding have diminished tremendously in the last three to four weeks — and that has brought investor interest back into oil,” Jeff Currie, global head of commodities research at Goldman, told the Financial Times.
Energy sector consultancy Enverus last week forecast that global demand and weak supply growth would send Brent to US$100 a barrel before year-end.
Liam Dann is Business Editor-at-Large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
