Fuel prices burn hole in pocket

Sky-high fuel prices, which include yet another 2c a litre petrol hike this week, are picked by a leading bank economist to chew through a quarter of this year's increase in household incomes.

ASB Bank chief economist Anthony Byett said yesterday that the 26 per cent increase in motor fuel prices since the end of last year translated to a rise of about $500 million in household expenditure.

He said this was about a quarter of the average annual increase in household income of $2 billion, from which other price hikes had to be met, meaning there would be less left for savings.

Most main-centre pump prices have increased this week to 139.9c for standard-grade 91-octane petrol and 144.9c for 96-octane. Diesel users have been spared similar pain for now.

The price of both petrol grades has increased by 29c this year.

Mr Byett said most households tended not to cut back on fuel consumption after a price rise, meaning less money remained available for spending on other wants and needs.

However, latest sales figures for new vehicles suggest some motorists have started planning ahead for continuing high fuel prices.

The Motor Trade Association has noted a decline in sales of some large cars last month, including a 30 per cent decline in Holden Commodores compared with July last year, 20 per cent for Ford Falcons, and 17 per cent for Ford Territory four-wheel-drives.

Sales were up for several small cars, by 69 per cent in the case of Suzuki Swifts and 59 per cent for Holden Astras.

Association chief Perry Kerr said it might be too early to pick a long-term trend and the industry was not concerned about possible consumer resistance to high fuel prices.

"But if this segmentation shift continues in following months, it may well indicate that the market is responding to the price of fuel."

Greens co-leader Jeanette Fitzsimons said she was encouraged motorists were responding to higher petrol prices by buying more fuel-efficient cars. She said consumers were taking action where the Government had failed.

"Years ago the Government should have increased the efficiency of our car fleet by implementing an average fuel efficiency standard for vehicle importers," she said.

BP spokesman Jonathan Hill defended the latest increases against criticism of high oil company profits, saying his company more than doubled its result last year to $55 million by selling more fuel despite reduced margins.

He described as "extremely reasonable" a 10 per cent return on $550 million of assets held in New Zealand and continued to blame the high costs of oil and refining for petrol price increases.

At the same time, however, he acknowledged that BP's 24 per cent investment in the Marsden Pt oil refinery helped to boost its latest annual profit.

AA spokesman George Fairbairn, who acknowledges oil companies are not retaining more than their usual margins on petrol sales, is nevertheless calling on them to open their books further to prove they are not using fluctuating spot prices to increase pump takings.