Why petrol prices could soon top $3 a litre

Tuesday, 14 January 2025

Thames residents are fuming at petrol prices

Petrol and diesel prices in New Zealand expected to rise due to higher international oil prices and a weaker NZ dollar.

91 petrol prices could soon hit $3.00 a litre, the highest since October 2023.

Fuel price increases are likely to exacerbate transport costs, adding further inflationary pressures on products in New Zealand.

It has been getting a bit pricier at the pump recently, and it is only expected to get worse.

The price of 91 petrol could tip $3 a litre.

Infometrics chief forecaster Gareth Kiernan said international oil prices had pushed upwards over the past few weeks and were now at their highest level in five months, nearing the price they were a year ago.

“That trend is obviously adding to upward pressure on retail petrol prices within New Zealand,” he said.

Looking back to January 12, 2024, Dubai crude oil prices were slightly under US$78/barrel, equivalent to NZ$124/barrel, with the exchange rate at about US62c. At that time, the price for 91 was about $2.63 a litre and diesel was $2.08 a litre.

Now, with the exchange rate at under US56c, oil prices in NZ-dollar terms are about $142/barrel.

If the current combination of international oil prices and unfavourable exchange rates persists, “I’d expect to see diesel prices of about $2.32a litre,” Kiernan said.

That would be 28 cents higher than a year ago, and the highest since November 2023.

“And 91 petrol prices of about $3.00 a litre,” he continued, which would be 37 cents higher than a year ago, and the highest since October 2023.

The lower exchange rate alone added to inflationary pressures for imported and tradeable products.

“These pressures could be exacerbated by the effects of higher fuel prices for transporting products as well,” Kiernan said.

BNZ senior economist Mike Jones said retail petrol prices had lifted about 8c a litre since the end of last year, with further increases on the way thanks to the NZD.

“That’s going to provide a little more drag on household spending appetites, and it also adds to inflation estimates.

“Higher petrol prices have seen us nudge up our Q1 Consumer Price Inflation pick by 0.3% to 2.5% y/y, where it is expected to stay for the next couple of quarters. The Reserve Bank has said it will look through short term shocks which is entirely appropriate, but such movements will be disconcerting nonetheless.”