KEY POINTS:
Petrol in New Zealand is among the cheapest in the developed world according to a Government report out today.
The study released by Commerce Minister Lianne Dalziel said New Zealand had the fifth lowest petrol prices including taxes in the OECD.
It is also a myth that petrol prices are fast to rise and slow to fall, according to the report.
Commerce Minister Lianne Dalziel said the report by independent consultants confirmed that petrol prices in New Zealand were set according to international prices.
Ms Dalziel said 85 per cent of price increases between January 2007 and June 2008 were due to offshore increases in crude oil prices.
Key findings of the review:
* The New Zealand petrol market is fundamentally competitive;
* Price rises are mainly due to increases in crude oil price overseas;
* Retail petrol prices are not fast to rise and slow to fall;
* A Fuelwatch scheme like that in Australia (where petrol prices are published and fixed for a certain time) would not work in New Zealand as the market is different
* There was a need for more transparency on importer margins and reporting them would be useful for consumers.
Meanwhile, petrol prices could be headed back under $2 a litre after oil hit a three-month low.
Motorists have already had four price cuts in the past three weeks, dropping the price by a total of about 16c a litre.
Petrol is now 202.9c a litre for 91 octane, and diesel is 179.9c a litre.
The falls are the first sign of some relief after a series of price increases.
Crude oil traded in Singapore fell under US$118 a barrel overnight - the lowest level since May 2 - as concerns about declining petrol demand in the United States, Europe and China took hold.
New Zealand oil companies base their prices on Singapore refined product, but rises and falls in the price of crude oil ultimately affect the cost of our petrol.
Fuel prices passed the $2 mark when 95-octane petrol topped it on May 19.
Three days later, the most commonly used petrol, 91-octane, followed suit.
Economists say the weakening New Zealand dollar could slightly blunt the effect of any major falls overseas, but the news for motorists is generally good.
UBS senior economist Robin Clements said the last time the world oil price was at the level it is now, 91-octane fuel in New Zealand was costing $2 a litre or slightly less.
"It's certainly good for New Zealanders and will take some of the pressure off," Mr Clements said.
"It's interesting how a lot of the discussion and commentary in the global market has gone from prices inevitably going up to something of the reverse."
The focus was now on slower world economic growth, which would reduce demand for fuel.
Petrol consumption has fallen in the United States, the world's biggest oil consumer, since prices began rising. And as demand has fallen, the price has followed.
AA motoring affairs general manager Mike Noon said all the indicators were good, but the strength of the US dollar made further falls hard to predict.
Westpac senior economist Doug Steel said the crude price and the value of the New Zealand dollar meant petrol prices were about where they should be yesterday.
"But commodity prices generally are seeing strong downward momentum and there seems to be more downside to come," he said. "I'd put it this way; petrol prices are more likely to go down than up."
Prices are expected to rise slightly in the US in the next day or two because of a fall in oil inventories, but the longer-term outlook for motorists is good.
Internationally, analysts expect at least one increase in US interest rates by the end of the year, which would strengthen the US dollar and lead to further falls in the price of oil and other commodities.
But most still agree that cheap petrol has gone forever.
