Business Editor for the NZ Herald

Petrol prices likely to remain stable in 2011

Petrol prices are likely to remain stable over 2011. File photo / NZ Herald
Petrol prices are likely to remain stable over 2011. File photo / NZ Herald

Petrol prices are likely to remain stable over 2011 but will slowly creep up, say analysts.

It's not likely to go down in the next few months," said Mark Stockdale from the Automobile Association's Petrolwatch.

"But international analysts are suggesting things will hover around the prices which they are now, which is around $90US (a barrel).

Stockdale said it was unusual for prices at the pump to go up over this period, and claimed they normally begin to increase around March.

However, 91 octane reached $1.95.9 a litre half way through December, while 95 Octane tipped over the two dollar mark at $2.02.9 a litre. Diesel rose 4 cents to $1.32.9 a litre.

Stockdale blamed this rise on the frosty European winter.

"The European winter is increasing demand for heating fuel which derives from oil and diesel and that's why we're seeing a bit of a spike at the moment.

If in fact the winter turns out not to be too bad, that will take pressure off demand and so we might see a reprieve in the next few weeks," said Stockdale.

Although prices rose over December, Stockdale was quick to point out that prices have been "remarkably stable" over the past year.

"If you look at 2010, the pump prices have only really increased 10c a litre since the start of the year, excluding rises in tax. 10c increase in the course of a year is actually quite modest," he said.

"We had times in the year - November was one and June was another - where we'd go for a month without any price change at all at the pump."

Stockdale attributed this to the global economic downturn, which reduced demand for fuel.

Looking ahead, he predicted the current price stability would continue into the near future.

"It might hit as much as $100 US a barrel by the end of 2011, which translates to another 10c increase (at the pump)."

Michael Milne from Craigs Investment Partners agreed that small increases in price were likely and did not believe prices would fluctuate as they did in 2008.

Prices changed rapidly at the pump across 2008 - 91 octane was selling at $2.11 cents per litre in July but had fallen to $1.33 a litre by December.

"I think it will be gradual growth - there won't be too much of a spike," Milne said.

Nevertheless, Stockdale warned that stability would depend on the rate of economic recovery.

"As economies improve, that will increase demand [for fuel] that puts pressure on prices and then we might see more fluctuation than we've seen in the last two years," he said.

But he said motorists must get used to the idea that fuel is not going to get much cheaper.

"New Zealanders need to be aware that the days of cheap fuel are gone, We're not going to see a dollar fifty again, we're not going to see a dollar twenty again. We're not seeing prices going down."

Ways you can keep your fuel costs down this summer:

* Check your tyres are pumped to the right pressure

* Drive smoothly as opposed to accelerating quickly and braking sharply

* Take off roof racks when not in use

* Close windows when driving on the open road.

For the AA's full list, click here.

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