Currency another petrol pumper

Economists fear petrol prices may jump by another 20c a litre when the New Zealand dollar loses some of its value.

They warned yesterday - as world oil prices surged past US$66 ($93) a barrel - that the impact would touch all aspects of life.

Although supermarkets claim to be holding out for now against raising food prices, the Road Transport Forum said freight firms were having to pass on a 40 per cent increase in diesel costs in the past year.

Diesel now costs 96.9c a litre at the pumps, after a 3c rise this week, and petrol has risen 6c in less than a fortnight to 143.9c for the standard 91-octane grade and 148.9 for 96-octane.

This represents an almost 30 per cent increase in petrol prices since December.

The extra annual cost of petrol to motorists is estimated to be between an average of $328 for cars of 1300cc or smaller and $493 for those larger than 2000cc, according to the Automobile Association.

Based on an AA estimate that the average motorist drives 14,000km a year, owners of small cars can expect to pay $1436 for petrol now, compared with $1108 in December.

Large car owners face an annual bill of $2156, against a previous estimate of $1663.

Road Transport Forum chief executive Tony Friedlander said that although some freight customers were resisting price rises from trucking operators, his members risked going out of business unless they won increases.

Their cost woes were compounded by wage rises, in some cases of more than 10 per cent, to combat shortages of drivers. 

Fuel increases fell harder on provincial New Zealand than the main centres, because of the long distances goods had to be carried to shop shelves, he said.

Taxi Federation executive director Tim Reddish said average fares had increased by up to 30c a kilometre, from about $1.95c at the end of last year to between $2.20c and $2.25c now.

But he said taxi operators were reluctant to pass on the full impact of fuel prices for fear of "triggering consumer resistance".

UBS merchant bank chief economist Robin Clements estimated that higher fuel costs would account for about one-third of annual inflation, which he predicted would reach 3.2 per cent next month.

Fuel in itself amounts to just over 3 per cent of the consumers price index, but he said that figure should be doubled when calculating its contribution to the prices of other goods.

John Bolsover, an ANZ Bank economist, expects even higher fuel prices once the value of the New Zealand dollar starts slipping. A drop in its value to 60USc would push 91-octane petrol to 164c a litre.

The currency surged to a six-week high yesterday, to 70.55USc.

Mr Bolsover acknowledged his bank was having to review a "bold call" of several months ago that the dollar would slip to 60USc by the end of this year, but said it still expected the currency to reach that level at some point.

Part of the ANZ's reasoning was its expectation of increases in fixed-term mortgage rates and a slowing of economic growth.

At the same time, he could not see an early easing of world oil prices given the combination of high international demand and supply security concerns.

ASB Bank chief economist Anthony Byett said high sheep and beef prices were cushioning farmers to some extent from spiralling fuel costs and the high dollar. He had sympathy for the forestry, fishing, horticulture and manufacturing industries.

DRIVE SMARTER TO SAVE FUEL

Maintenance and changes to driving style can cut fuel bills by as much as 20 per cent - more than two months' free fuel a year - according to the Energy Efficiency and Conservation Authority.

* Drive smoothly - accelerate smoothly and change gear early.

* Don't speed - travelling at 100km/h instead of 110km/h can cut around 13 per cent off your fuel bill.

* Look ahead - maintaining a safe following distance keeps a more constant speed, using less fuel than regular accelerating and braking.

* Love your car - tyres at the right pressure and alignment, engine timing, air filter and spark-plug maintenance save fuel.

* Watch your air conditioning - use it only when absolutely necessary as it tends to eat up 10 per cent more fuel. Rear window de-mist can also be a drain.

* Keep your load down - a heavier vehicle means more drag.

* Reduce idling time - switch off the engine if stationary for more than 30 seconds.