Matthew Theunissen

Matthew Theunissen is a reporter for the Herald on Sunday.

Petrol today still cheaper than in 1980s

Rotorua motorists can fill up for less than $2 per litre. Photo / Thinkstock
Rotorua motorists can fill up for less than $2 per litre. Photo / Thinkstock

Although the price of petrol has soared to its highest ever level, an academic says it's still cheaper than it was in the 1980s.

Most petrol outlets were last night selling 91-octane fuel for 222.9c a litre, leaving economists like UBS New Zealand's Robin Clements fretting about the effect on household spending through the fragile financial recovery.

"Petrol is such a pervasive product - it is like a tax - it will crowd out other spending," he said.

But University of Canterbury senior economics lecturer Eric Crampton said petrol was actually more expensive in 1981.

"Back then petrol prices were less than 60 cents a litre. While that sounds wonderful, when you adjust for inflation, that is $2.46 per litre in today's dollars, much more than we are paying now.

"While petrol prices have increased substantially recently, they are not hitting ranges where I would expect substantial adverse consequences. Also, people now buy cars that are far more efficient than the ones available even a decade ago, so the cost of driving per kilometre has not risen as substantially."

Mr Crampton said if petrol prices continued to increase due to global economic growth it could have significant consumer effect, but this would be offset by growth in export markets.

"People get very excited about petrol prices because they see them every day while driving. I'm far more worried about inflation in housing costs in Christchurch."

Oil companies are blaming the increase on greater economic confidence overseas - in both the United States and Europe - as well as perennial tensions in the Middle East.

AA spokesman Mark Stockdale said that after a succession of cuts in May and June, petrol had risen by 26c a litre in the past six weeks because of rises in international commodity prices, fuel tax and oil company profit margins.

Meanwhile, in Rotorua, motorists are gassing up on the cheapest petrol prices in the country, paying less than $2 per litre for 91 octane at some local service stations.

Mr Stockdale said this was because big corporations were offering incentives to customers.

"It just remains to be seen if it can be sustained though. You can only reduce prices so much to match the competition ... they are absorbing the cost in other ways though so they don't have to pass the cost on to customers. That is good news for Rotorua motorists."

- APNZ

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