AA warns NZ petrol prices could reach $4 per litre

The AA has warned Kiwis petrol prices could reach $4 per litre after global oil prices surged on Monday morning due to the war in the Middle East.

The price for a barrel of Brent crude, the international benchmark, spiked by more than 17 per cent after trading opened yesterday, reaching a peak of US$92.69.

This morning the price jumped again to US$116.18 shortly after trading resumed, up 25 per cent from its previous high at the end of last week.

A key concern for oil markets is disruption around the Strait of Hormuz, a vital shipping route between the Persian Gulf and global markets, including New Zealand.

AA senior policy adviser Terry Collins told Stuff about one-fifth of the world’s oil passes through the Strait of Hormuz every day.

“If they shut that, that means we’ve only got 80 per cent of the world’s oil available at any one time,” Collins said.

“And the laws of supply and demand mean prices will go up.

“What’s happening is this conflict now looks like it’s going to last much longer. It’ll be a matter of months, not weeks.

"Four years ago in March, when the Russian and Ukrainian war was at its peak, we were seeing oil prices of US$110 a barrel. Back in 2008 we saw prices of US$147 a barrel. Some oil ministers in the Gulf region are predicting prices that could exceed that.”

If prices were to rise above the US$150 threshold, Collins said “you won’t be able to get anything under $3 (per litre for 91), and it’ll be somewhere between $3.50 and perhaps $4 if those extreme prices are met.”

The Minister of Finance and Economic Growth Nicola Willis told media yesterday they are monitoring the situation closely and New Zealand’s fuel stocks remain high.

“I wish to first assure you current events do not pose an imminent challenge to New Zealand’s fuel security,” said Willis.

“We have a national fuel plan in place, and government agencies have activated work with fuel companies, distributors, and retailers to coordinate our response.

“The Ministry of Business, Innovation and Employment (MBIE) has published updates on its website. These show that in addition to up to 28 days of petrol, diesel, and jet fuel already in the country, there are a further 29 days of fuel en route on ships that have entered New Zealand’s territorial waters.

Willis said the government will also keep an eye on the price fuel companies charge Kiwi motorists as prices begin to rise at the pump.

“The government is, of course, also actively monitoring the impact international fuel prices are having on the price Kiwis are being asked to pay at the petrol pump,” she said.

“We understand there will be unavoidable market movements, but we do not expect to see fuel companies take advantage of this. We have asked the Commerce Commission to step up its monitoring of fuel prices and, if necessary, call out any suspect pricing behaviour by retailers.”