Fuel prices set to spike even further

Oil has surged to the highest level since September 2008 as Middle East turmoil threatens to spread from Libya and steep price rises show no sign of easing.
Motorists in New Zealand were hit with a 5c a litre rise in petrol and diesel prices this week, freight surcharges have jumped while the effect of the falling Kiwi dollar, weakened following the Christchurch earthquake, means prices are set to spike even further.
The Kiwi dollar plunged nearly US1c yesterday afternoon in reaction to comments by Prime Minister John Key on the outlook for interest rates.
"The market has priced in a cut from the Reserve Bank," Key said in reference to the March 10 official cash rate announcement.
"That would probably be my expectation, that the Reserve Bank would cut."
Oil has hit US$100 a barrel and a New Zealand oil company chief said there were similar factors now to those which pushed oil to US$147 a barrel in mid-2008. Greenstone Energy chief executive Mike Bennetts said Libyan light sweet crude - whose supplies had been choked off - was different to that produced by Saudi Arabia.
"They're producing the less preferred type. Prices suddenly spike on what appears to be a modest supply disruption," Bennetts said.
"My view is there is significant upward price pressure on crude oil and you put that alongside sentiment around a weakening Kiwi dollar and a Christchurch earthquake and difficult economy we've got a difficult period ahead for the short term."
Greenstone, which owns Shell stations throughout New Zealand, had held prices in Christchurch but had limited capacity to do so.
"We recognise as a New Zealand-owned company that we are able to manage some of the volatility that takes place. But our ability to do that for an extended period of time is quite limited."
Crude prices jumped 2.7 per cent yesterday as Libyan rebels braced for renewed clashes with forces loyal to leader Muammar Gaddafi. Political turmoil has spread to Saudi Arabia's neighbours, with protests erupting in Oman and Bahrain. "With the potential for negative developments in so many countries, we're starting to see the risk premium return for crude," said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky.APN News & Media