Source: Radio New Zealand
RNZ / Dan Cook
It’s feasible that petrol prices could reach $4 a litre, economists say.
Ongoing conflict in the Middle East has pushed up oil prices, taking petrol prices with them.
Over March, the average price of 91 has risen about 50c a litre, according to price monitoring app Gaspy. On Monday it was just over $3 on average across the country.
Westpac chief economist Kelly Eckhold said if the crisis were to continue, the price of oil could hit US$200 a barrel, which would take retail petrol prices past $4.
Westpac noted last week that refining margins had already lifted from US$20 ($NZ34) to around US$35 a barrel, which amplified the effect on retail prices for petrol in New Zealand.
“Refining margins will go quite high because there’s the supply chain that’s going from the Middle East to the refiners in Asia who are overwhelmingly reliant on crude oil coming out of the Middle East, with a three-week lag, maybe a month if you want to be generous.
“Those refiners in Asia are already considering reducing production because they don’t want to shut down a refinery. They would prefer to run it at a lower level because if you shut it down it’s really expensive and hard to start back up again.
“What that will mean is that there’ll be increasingly reduced supply of refined products around Asia and that will obviously be an important input into petrol and diesel here … $4 petrol prices are eminently feasible if you end up in some of those quite negative scenarios.”
Simplicity chief economist Shamubeel Eaqub said oil prices at around US$150 a barrel would mean $4 a litre for motorists.
Infometrics chief forecaster Gareth Kiernan said with oil prices at around US$100, petrol should be at about $3.27.
“We’re pushing towards that … if you had another US$35 a barrel on top of that, US$135 on a sustained basis, you could be pushing $4. I’ve seen people talking risks around $150.
“I think Westpac came out with $185 and others are talking $200 …. you look at some of those numbers and you’re talking well north of $4 potentially.”
He said every US$1 increase in the oil price added about 2.2c but Eaqub said as long as the refining crack spread remained the same it could be about 1.2c. Westpac estimated a US$10 increase in the price of oil added 11c a litre.
Murat Ungor, at Otago University, said the market was very sensitive to price movements
“If crude oil were to reach US$130 to US$140 per barrel and stay there for three to four weeks, petrol prices could quickly move into the $3.50-$3.70 range.
“To break the $4 barrier, we would likely need a combination of extreme factors, such as crude sustained at US$140-US$170 per barrel, matching or exceeding the record highs of 2008, or such high prices combined with a weaker New Zealand dollar and higher shipping margins.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
