Higher petrol prices here to stay, say analysts

Photo / Peter Meecham

Skyrocketing petrol prices hitting New Zealand motorists are unlikely to settle back to lower levels in the long term, analysts say.

Petrol prices jumped a total of 16 cents per litre to $2.19 per litre for 91 octane last month - the highest since it also reached $2.19 per litre in July 2008.

The price rise came as Brent crude oil prices continued to climb, reaching 30-month highs yesterday at more US$108 a barrel.

Diesel at most stations rose 27 cents per litre during March to $1.70 a litre, but still short of the $1.92 per litre record of July 2008.

UBS senior economist Robin Clements said the price rises were part of a decade-long worldwide trend toward higher oil prices.

With the growth of fuel use in places such as India, the only long term solution was to change consumer behaviour, he said.

"It looks like prices are not going to go down any time soon.

"We as consumers either need to learn to live with it or other spending has to go down. Or we have to adapt to new technology."

It was impossible to tell whether current high prices would go down again in the short term, Mr Clements said.

AA PetrolWatch spokesperson Mark Stockdale said the higher fuel prices reflect the 14 per cent increase in oil in February.

"In New Zealand dollars this equated to a 16 cent per litre rise in the imported cost of petrol, or an 8 per cent increase in the retail price," he said.

"While oil prices settled during the month, a drop in the value of the New Zealand dollar saw another retail price increase in late March, although the bigger rise in diesel pump prices is difficult to justify.

"The AA calculates that the imported cost of diesel has risen about 20 cents per litre since late February. With the exchange rate recovering there is now room to drop diesel prices further than the 3 cent per litre reduction on 1 April."

Mr Stockdale said while motorists naturally get concerned about their vehicle's running costs when petrol prices rise, people should keep their vehicle's fuel efficiency in perspective.

"While there are some models with impressive fuel economy, they aren't necessarily the cheapest in their category to own, and the AA's analysis shows it may end up costing owners several thousand dollars in order to save a few hundred dollars in fuel. Even with higher prices, fuel only represents about 25 per cent of the overall annual cost of running a new petrol car, and less for diesels."

Meanwhile if Iranian President Mahmoud Ahmadinejad gets his way, motorists would find themselves paying even more.

Mr Ahmadinejad yesterday said current oil prices were too low and predicted oil would jump to $150 a barrel soon, although did not explain the basis for his prediction.

The country is Opec's second largest exporter with an output of 4.2 million barrels per day but it is also one of the most dependent on oil exports, with around 80 per cent of its foreign revenue coming from oil sales.