Fuel prices in NZ may have bottomed out, experts warn increases loom

After months of gradual declines, fuel prices in New Zealand may have reached their lowest point, with industry experts warning motorists shouldn't expect petrol to become much cheaper anytime soon.

According to fuel price tracking app Gaspy, the national average price for 91-octane petrol briefly dipped below $3.00 per litre in late June for the first time in months.

As of this week, the average price sits at $2.92 per litre for 91-octane petrol, while 95-octane averages $3.11 per litre, 98-octane costs $3.28 per litre, and diesel averages $2.38 per litre.

However, fresh geopolitical tensions in the Middle East are expected to place renewed upward pressure on global oil markets, limiting any further relief at the pump.

Westpac NZ chief economist Kelly Eckhold told Stuff current prices are likely to remain within a $2.80 to $3.00 per litre range unless global conditions improve significantly.

"We're past the period now where we should expect large, significant falls unless something changes," Mr Eckhold said.

"If I look at where those futures are now, given where the exchange rate is, somewhere in the $2.80 to $3 range broadly looks about right."

He said motorists hoping for another sharp fall in fuel prices are likely to be disappointed, with lower prices dependent on sustained increases in global oil supply and refinery output.

"The reality is that's going to require a sustained period of above-average oil flows that reach the refineries and allow people to rebuild inventories again," Mr Eckhold said.

"I think that'll be a much longer-term proposition, not something that'll happen in two or three weeks, but perhaps over two or three months."

The outlook is shared by the AA, which believes the recent low point may already be behind us.

AA principal policy adviser Terry Collins said current prices are "probably as good as it's going to get", with fuel costs now under renewed pressure.

"Are they going to go up? Yeah, they're going to go up a bit," Mr Collins told Stuff.

"There won't be any more easing, that's for sure. You probably won't see the big specials like we saw, and you might see a bit of upward movement over the next week or two."

Recent military action involving the United States and Iran has renewed concerns over shipping through the Strait of Hormuz, one of the world's most important oil transport routes. Any disruption to supply through the region typically pushes crude oil prices higher.

Mr Collins also pointed to the ongoing conflict in Ukraine as another factor affecting fuel prices.

Recent attacks on Russian oil infrastructure and restrictions on diesel exports have tightened global diesel supply, forcing countries that previously sourced fuel from Russia to seek alternative suppliers, including in Asia where New Zealand imports much of its refined fuel.

"Although Russian oil or diesel does not go into European or US markets, it has already had an impact," Collins said.

"Mid-last week, we saw the price of a barrel of diesel - that's the refined price - jump to about US$154. That's about an 11 percent jump."

While neither expert expects a return to the fuel price spikes seen during previous international crises, both say motorists should prepare for petrol prices to trend upwards rather than continue falling through the remainder of winter.