Petrol Prices Hit $3 as Middle East Conflict Fuels Increase | RNZ News

Fresh Zealand motorists are facing higher prices at the pump, with 95 octane petrol now exceeding $3 per litre in some areas. The increase is directly linked to ongoing conflict in the Middle East, which is putting upward pressure on global oil prices. The situation is prompting consumers to adjust their fueling habits and raising concerns about household budgets.

Rising Costs at the Forecourt

As of Friday morning, Z Kapiti Road was charging $3.019 per litre for 95 octane, while g.a.s Waikanae recorded $3.059 per litre, according to the fuel price monitoring app Gaspy. RNZ reports that even more isolated locations are seeing similar or higher prices, with NPD Fox Glacier at $3.089 per litre and stations in Greymouth also around the $3 mark. The price of 91 octane has also been climbing, with one Kapiti Coast resident reporting a 12-cent increase at his local station in the past week.

The escalating costs are hitting consumers hard. An Otaki grandmother told RNZ she’s proactively filling up her tank whenever possible, anticipating further price hikes. “I gassed up yesterday and I gassed it up again now, before it shoots up in price. It’s only a matter of time,” she said. Bill Turner, a Kapiti Coast resident, expressed concern about the impact on his household budget, stating he’s continuing to function despite being of retirement age to cover the increased expenses.

Geopolitical Factors and Market Uncertainty

The primary driver behind the price increases is the instability in the Middle East. The conflict is creating significant uncertainty in the oil market, as it disrupts supply chains and raises fears of further disruptions. Mike Newton, spokesperson for Gaspy, highlighted the parallels with the Russian invasion of Ukraine, which also triggered substantial price increases. Though, Newton suggests the current situation may be even more uncertain, particularly given restrictions on Iranian oil exports. 1News reports Newton stating, “There’s a lot of uncertainty about where it’s going to head, how long it’s going to last … There’s definitely a feeling that prices are going to rise.”

Newton also noted that the national average price for 91 octane is currently $2.66 per litre. He recalled that after the invasion of Ukraine, the government temporarily halved the fuel excise tax to mitigate the impact on consumers. Whether similar measures will be considered in response to the current situation remains to be seen.

Regional Variations and Discount Retailers

While the $3 per litre mark is becoming more common, price variations exist across the country. Gaspy data indicates that some discount retailers are absorbing some of the cost increases, at least temporarily. For example, an NPD station in Paraparaumu has only increased prices by 6 cents, while other stations in the area have seen larger increases. This suggests a complex interplay between market forces and retailer strategies.

Other regions are also experiencing differing levels of price increases. Nelson has seen an average increase of 6 cents, while most other regions have experienced increases of 3 to 4 cents. These regional variations highlight the localized nature of fuel pricing and the influence of factors such as transportation costs and competition.

Oil Futures and Inflationary Pressures

Looking ahead, the outlook for fuel prices remains uncertain. AA policy adviser Terry Collins pointed to rising oil futures prices as a key indicator. He noted that oil futures for April had reached US$85 a barrel, a 12-cent increase from the previous week. The Otago Daily Times reports Collins stating, “The longer the fighting continues the more the upward trajectory in price.”

Collins cautioned that oil prices could potentially reach US$100 a barrel, which could push 95 octane petrol prices to $3.20 or $3.30 per litre. Infometrics chief executive Brad Olsen echoed this sentiment, suggesting that the current price increases are likely to persist. He also highlighted the potential impact on diesel prices, which could further exacerbate inflationary pressures in the commercial sector. Olsen explained that higher transport costs could be passed on to consumers, potentially delaying the government’s efforts to bring inflation back within the target range of 2%.

The Lag Effect and Supply Chain Dynamics

Olsen also pointed out a crucial dynamic in the fuel market: the “lag effect.” He explained that fuel already in New Zealand helps to moderate prices in the short term, but as that supply is depleted, prices are likely to reflect the higher cost of new shipments. “The challenge is that you notice fuel prices go up quicker than they reach down the other side,” Olsen said. “Part of that is because you often see people that buy fuel during times of challenge at the moment because you’re not sure when you can get the next substantial shipment of fuel in.”

This dynamic underscores the complex interplay between global events, supply chain logistics and consumer behavior in determining fuel prices. It also suggests that even if the conflict in the Middle East were to de-escalate, it could take time for prices at the pump to reflect any improvements in the global oil market.

What to expect in the coming weeks: Monitoring oil futures prices and geopolitical developments will be crucial in assessing the trajectory of fuel prices in New Zealand. Consumers can expect continued volatility in the short term, with the potential for further increases if the conflict in the Middle East escalates or if global oil supply is further disrupted.