Cost of living to rise as fuel price hikes hit

Soaring oil prices are set to increase the cost of living with the impact felt across the whole economy.

The Consumers' Institute said rising fuel costs, which have seen the price of petrol jump by 6 cents a litre over the past week, would hit every consumer.

"Virtually every element of the economy is reliant, to a greater or lesser extent, on the use of petrol or diesel," said institute chief executive David Russell.

"It flows through the economy as a whole and the consumer is going to suffer."

Air travellers could be among those to feel the pinch.

Flyers were hit with higher ticket prices in April, when Air New Zealand fares rose by between $5 and $22 as the airline imposed a surcharge to recover from the impact of aviation fuel prices almost doubling in the space of a year.

JBWere aviation analyst Peter Sigley said: "The fact that fuel has spiked back through US$70 ($98) [a barrel] will mean that Air NZ starts to feel the pressure in an earnings sense."

He added: "If prices hold up at these sort of levels, airlines are going to have to look at the fuel surcharge again." Ross Tucker, the airline's assistant manager of jet fuel, said prices were still hot and Singapore jet fuel was fetching about US$72 a barrel, against US$30 to US$40 a year ago.

Air NZ spokeswoman Rosie Paul said the airline could not "go raising our fuel surcharge every time fuel prices go up".

She added: "We continue to keep a close watch on the situation."

But Forsyth Barr analyst David Price said fuel, which represented about 20 per cent of Air NZ's operating costs, was a big factor in determining profits.

"If [fuel] stays this stubbornly high, it will hit people's bottom line."

Refined and crude oil prices have peaked in the last few days, bringing pump price rises.

Road Transport Forum chief executive Tony Friedlander said freight businesses, an important component of production, would have to pass on extra costs.

He said businesses ran on low profit margins so "they have no option but to pass those costs on ... absolutely, inevitably at some stage".

"The speed at which they pass that on will depend on their contracts, but it will impact on everything that people use in their day-to-day lives."

People in the provinces would feel this the most, he said.

"For groceries in Invercargill, for example, the freight component is six times greater than in Auckland, and four times greater than in Tauranga."

Cameron Pitches, convener of a campaign group for better transport, expected the cost of public transport to rise.

"If the cost of petrol continues to rise, they're going to have to pass that on to everyone."

The big four fuel companies - BP, Mobil, Shell and Caltex - raised prices for all fuel grades on Tuesday. The price of standard-grade 91-octane petrol has risen to 131.9c a litre, and diesel to 93.9c.

Pump pressure

* Petrol prices have jumped 6c a litre in the past week as oil firms pass on higher world crude costs.
* Diesel prices are up $14 a barrel since the start of the month, and the transport industry is warning that it cannot absorb the costs.
* The Consumers Institute says sooner or later the impact of higher fuel prices will hit every part of the economy.