Petrol prices 'as good as we are going to get'

Tuesday, 16 August 2022

The Government has extended its 25 cent-per-litre reduction in the petrol excise duty until the end of January next year.

Petrol prices might be “as good as we are going to get”, AA policy adviser Terry Collins says.

The price of petrol has slipped as international oil prices dropped in recent months.

In central Auckland, 91 is now retailing for about $2.74 a litre, while in Christchurch it is about $2.50, and Wellington about $2.60. Prices have previously been over $3 a litre.

Oil prices fell again overnight after weaker Chinese economic data prompted further fears of a global recession. Brent crude oil dropped to US$92.78 a barrel on Monday after hovering over $100 consistently in recent months.

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Collins said that 3.5% drop in fuel prices had yet to be seen in the prices charged at New Zealand petrol pumps.

But he said oil had dropped to this price before, then it tended to climb again.

“It seems to be finding its balance $5 either side of $100. It’s all driven by a fear of recession, people worried about demand weakening and there being an oversupply.”

He said there was potential for a crunch in the first week of December when there was extra demand in the Northern Hemisphere for diesel as summer came to an end and more harvesting was happening.

At the same time, a European Union ban on seaborne imports of Russian oil will take effect.

New Zealand’s emissions trading scheme could also push up the cost of fuel in the future, he said.

If a global recession was avoided and demand increased, further pressure would go on prices, Collins said. “What we are seeing now, unless something significant happens, this is about as good as it’s going to get. “

Economist Brad Olsen said, if Chinese economic activity continued to slow, there might not be as much demand for oil. There was also the potential for a deal with Iran to unlock more supplies.

“Fuel prices are the lowest they’ve been since mid-April but it would be premature to say the pricing challenge is over.”

The Government has extended its 25 cent-per-litre reduction in the petrol excise duty until the end of January next year.

It had been intended to last until August 15.

Olsen said when and how the fuel excise tax returned would be a political question for the Government to manage.