World's troubles prime pump for fuel price rise

Motorists may face another shock at fuel pumps within days, after world oil prices surged at the weekend amid unrest in Nigeria and concern about Iran's nuclear future.

Although oil companies rarely predict price moves, BP warned yesterday that another year of terrorism threats and political instability in the Middle East will fall harder on New Zealand if the dollar continues to weaken as predicted by economists.

"Terrorism was the story of last year, but to a certain extent the New Zealand dollar stayed strong enough to help us offset that," said company spokesman Neil Green.

But he said the industry's expectation that the dollar would have rallied last week from a weakening against United States and other currencies was not borne out.

The dollar was buying US68.4c last night, after dipping to US67.8c at the weekend. This follows slides from US71.6c in early December, and economists believe it will drop further this year.

Merchant bank UBS's chief economist, Robin Clements, said his team believed a weakening of the US economy would allow the dollar to hold at about US67c this year, compared with a likely longer-term trend to around US60c.

But Westpac has pronounced the Kiwi "our least-favoured currency for 2006", and bank currency strategist Johnathan Bayley feared it would "underperform" even a weaker US dollar.

US crude oil prices have jumped more than 8 per cent this year, to over US$68 a barrel, within striking distance of the record reached at the end of August after Hurricane Katrina disrupted Gulf of Mexico production rigs.

The latest increase was fuelled by rising tension over the nuclear ambitions of Iran, which despite being the world's fourth-largest oil producer may face sanctions, and a drop in supplies from Nigeria under threats by militants to production infrastructure.

Petrol prices peaked in New Zealand in September at about $1.56c a litre for 91-octane fuel. It is now selling for $1.42c at most main centre pumps after rising 6c this month.

Gull Petroleum regional manager Geoff Gillott said the latest surge in crude oil markets had yet to raise prices of refined fuel from Singapore "but we can't count on that not happening".

He said industry profit margins were tight and invited the Herald to call him again tomorrow.

Automobile Association spokesman and former oil company official Mike Noon said his organisation did not want to add to speculation, for fear of fuelling "a self-fulfilling prophecy", but vowed to be vigilant on motorists' behalf against any unjustifiable rise.