High cost fails to hit thirst for petrol

Record high oil prices have barely made a dent in New Zealanders' growing petrol consumption.

In late August the price for a litre of fuel at many pumps hit $1.50, prompting an uncommon decline in petrol sold, but since then prices have fallen to about $1.40 a litre and consumption is back to normal.

"In August and September, when prices hit their peak, there was a two-week period when demand did drop off a couple of per cent. But it appears in October that as the price has come down, behaviours have gone back to normal," said Peter Griffiths, managing director of BP New Zealand.

"My sense is that when the number got that high and people filled their cars, they got a surprise - what do you mean it costs $100 to fill my car? My God! Or 'I always put $20 - now I get less for it and I have to come back more'."

One of BP's rivals, Shell, reports a similar experience, with volumes falling when prices went to their most recent peak in September.

Steven Bartholemusz said Shell NZ had not experienced a "significant decline in fuel demand" due to the recent high prices.

"We have seen steady growth throughout the year. In July and August the industry as a whole did see a slight decrease in industry volumes and this dropped further in September. We are beginning to see a pick up in volumes."

Griffiths said BP's profits this year would probably be down, but not dramatically. More than a third of BP's income in New Zealand came from sources other than fuel sales. This included its Wild Bean cafes and other retailing at its petrol stations.

Griffiths accepted that BP's parent company was reaping the rewards of the high oil prices.

"If you own an oil well today, you're doing well," he said. "And BP produces a couple of million barrels of oil a day from around the world. They are selling that oil at something like the numbers we hear quoted."

These profits do not come trickling down from head office though, as BP locally last year made a $53 million after-tax profit. This was a 12 per cent return on its $500 million of capital invested - including its stake in the Marsden Pt oil refinery.

Around half of this profit, $26 million, was re-invested into the New Zealand business.

"The downstream oil business in New Zealand, its a tough business, you can't sit on your hands. We turned over nearly $2 billion - and we made $54 million," he said.

"We've got $550 million invested, so it's okay, it's better than some businesses, not as good as others."

Recent high prices meant business as usual, he said.

"When the price is high it's usually because we have to pay more for our input material - more for our crude, more for refining and more for shipping."

Westpac chief economist Brendan O'Donovan last month said the doubling of oil prices since 2002 was likely to have significant effects on economic activity in New Zealand.

Westpac said the price rises had reduced economic growth by 0.3 percentage points or $420 million in the past year.