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Drivers are paying 30c a litre more for petrol than they were the last time crude oil prices were at yesterday's level - and economists say our fuel prices should come down substantially and soon.
Oil prices closed at a new 14-month low beneath US$70 a barrel overnight, bringing its price to less than half its July record high after the government reported massive increases in US crude and petrol stockpiles.
ANZ chief economist Cameron Bagrie said petrol prices had plenty of room to come down. "I'm surprised they're holding up at the moment and would expect them to be a lot lower in the coming weeks."
The weak New Zealand dollar has blunted the effects of falls in the price of oil.
The strength of the kiwi shielded New Zealand from the worst of the price rises this year; now its relative weakness is stopping us from enjoying the full effects of the falls.
But the dollar rallied enough yesterday - above US62c - that further reductions in petrol prices are likely.
When crude oil prices were last at yesterday's levels, 13 months ago, 91-octane petrol was $1.59 a litre.
Yesterday, it was 30c a litre above that at $1.89.
Some of that difference can be attributed to higher prices for refined fuel, but most is down to the exchange rate, said AA policy analyst Mark Stockdale.
Mr Stockdale said crude oil was only one component of refined fuel.
A storm threat near a refining plant on the US Gulf Coast could send refined-fuel prices soaring, even if crude oil was coming down in price.
The last time refined fuel cost the same as it did yesterday, the pump price was $1.69 a litre.
Economists said that despite recent falls in the New Zealand dollar's value and rises in the cost of refining crude, there was room for petrol and diesel to drop in price.
UBS senior economist Robin Clements said refined fuel had "displayed some different behaviour" by rising as the cost of crude went down.
But despite that, there was "margin for a reduction" in the price of petrol and diesel.
Shell dropped the price of diesel 6c a litre on Wednesday - followed by Gull and Caltex - but held off reducing petrol prices.
Mr Stockdale said the high kiwi dollar had protected New Zealand from the worst of soaring petrol prices earlier in the year. If the dollar had not been strong, he said, petrol would have risen to $2.50 a litre.
But the fall in our dollar relative to the US had left us with less buying power.
In some places, the lower crude prices are filtering through.
Qantas yesterday dropped its fuel surcharges for air travellers in Australia because of falling oil and jet fuel prices.
And the international investment bank Goldman Sachs this week slashed its forecast for the price of US-traded oil from US$115 a barrel at the end of the year to US$70.
It said it had "seriously underestimated" the effects of the global financial turmoil on commodity demand, suggesting more good news could be on the way for motorists.
Crude is now more than 50 per cent down on its July peak, when it went above US$147, and analysts have reduced their world demand growth estimates after recent gloomy financial data.
"The market is just very worried about a severe international economic downturn," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "They're thinking that oil consumption will be weaker than expected."
- ADDITIONAL REPORTING: AGENCIES
