AA's Terry Collins talks to Tom Raynel about the international factors causing petrol prices to rise. Video / NZ Herald
Petrol prices across the country are set to rise off the back of US-Russia tensions and a weaker New Zealand dollar.
Oil prices reached their highest level in five months following fresh US sanctions against Russia’s energy industry, with Brent crude trading up towards US$81.50 per barrel.
According to online fuel price database Gaspy, unleaded 91 is currently on average $2.68 a litre, unleaded 95 is $2.86, unleaded 98 is $3.04 and diesel is $1.95.
Compared to four weeks ago, unleaded 91 was up by less than 1% but unleaded 98 was up more than 3.7% and diesel was up 1.69%.
AA principal policy adviser Terry Collins said that since December 16, the price of oil increased by US$10 a barrel, and believes Kiwis should get ready to see prices rise here by almost 10-20 cents a litre.
“What happened on Friday [January 10] is the US Government put sanctions on the Russian shipping fleet and the insurance associated with it,” Collins said.
“When the Ukrainian-Russian war started, a lot of their fuel was sold by pipelines, and so they started buying up old ships that probably should have been scrapped.”
With roughly 183 vessels to shift around, the fleet allowed Russia to enter markets including China and India.
But with the US preventing these boats from being insured, international ports won’t accept them due to the risk associated with a spillage or an accident and the lack of liability.
The AA's Terry Collins says it's hard to tell what will happen with petrol prices as sanctions impact global oil prices.
Collins said there was also uncertainty around the incoming US administration under Donald Trump and what its policies would look like regarding energy and geopolitics.
“At the same time, it looks like there could be a decrease in supply because if the Indians and the Chinese can’t get the Russian oil, they’ll have to go to the market to look for Middle Eastern oil,” Collins added.
“So you’ve got an existing supply, but you’ve got a greater demand for it, and usually that comes out in prices.”
That demand has been exacerbated over recent months in Europe, which has faced an unusually cold winter season. Demand for liquefied natural gas (LNG) was high which led to inflated prices.
Paired with those geopolitical pressures, the New Zealand dollar fell to US55.5 US cents, a rate not seen since October 2022.
A weaker New Zealand dollar meant higher prices for imports (including fuel), but also meant exporters should get a boost from decreased production costs.
While petrol prices will have little effect on businesses that don’t rely on petrol or diesel, Collins said harvesting season for many crops was about to start, and that activity relied heavily on diesel.
“It’s a double-edged sword. Although we’re going to get more for our products because our dollar rate is low, we’re gonna have to pay more for the fuel to harvest it.”
Collins believed Kiwis potentially need to get used to higher prices.
“A number of years ago the Iraqi oil ministers, who were part of Opec [the Organisation of Petroleum Exporting Countries] said: ‘We think a fair price for both the producer and the consumer is US$80 per barrel.’ It’s US$81 now.”
“If they sit around that window, I think that’s where they seek to get price stability. As much as we need to move to renewables and other sources of energy, our global energy demands are growing at the same time every year.”
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
