KEY POINTS:
Motorists will soon be paying $2 a litre for the most widely used grade of petrol, economists have warned, and the price could reach $2.50.
The rises are inevitable as increasing international oil prices affect the New Zealand market.
And they could get worse, Westpac economists forecast.
US light crude oil reached a record US$130 a barrel on Tuesday and was just above US$129 last night.
New Zealand buys Dubai crude oil, which generally costs several dollars a barrel less than the US light crude.
But the Westpac economists say that if Dubai crude oil were to hit US$150 a barrel and the Kiwi dollar fell to US70c, the local price for a litre of 91-octane petrol would be $2.48.
Billionaire investor T. Boone Pickens said this week he expected oil's price to reach US$150 a barrel this year, and Goldman Sachs predicted two weeks ago that a barrel could fetch US$200 by 2010.
The price for 95-octane fuel in New Zealand topped $2 a litre for the first time on Monday when all four main oil companies put their prices up by 3c a litre for petrol and diesel.
The increase followed last week's price rises, which lifted petrol and diesel 5c a litre.
The latest rise is the sixth since the beginning of last month.
And UBS Investment Bank senior economist Robin Clements says motorists should not be counting on Finance Minister Michael Cullen's ninth Budget today to take the pressure off their wallets.
"Cullen has already said that there won't be any change to the taxes on fuel so there won't be relief through that channel.
"But they have said there will be some tax relief so that'll put some more in the pocket but it's only going to be a small way towards compensating the extra costs for food and fuel over the last year or so."
Mr Clements said he another fuel price explosion was inevitable.
"Anything could happen - there could be an attack on a fuel line ... a hurricane or something like that could cause it. "
He said people were buying smaller or more fuel-efficient cars, more were using public transport and the amount of fuel being bought was low.
Meanwhile, the rising oil prices are stoking a campaign by biofuel producers for Parliament to pass the Biofuels Bill next month to lessen New Zealand's reliance on fossil fuels.
Biofuel Manufacturers Association spokesman Dickon Posnett said in Auckland yesterday that New Zealand had a valuable opportunity to "steal a march" on the rest of the world by building an industry from environmentally sustainable natural resources.
- additional reporting: Mathew Dearnaley, NZPA
