$2-a-litre petrol could bring chaos

By John Cousins
Higher grocery bills. Economic stagnation. Difficulties running volunteer welfare organisations.
These have all been forecast if the cost of petrol hits $2 a litre by the end of this year.
Transport industry spokesman Tony Freidlander said trucking companies did not have the ability to absorb the substantial increases, predicted by transport energy specialist Michael Saunders in yesterday's Bay of Plenty Times.
Mr Saunders, a former Tauranga Boys' College pupil studying for a doctorate at the University of Sao Paulo in Brazil, warned there would be no end to increasing oil prices once next month's cyclical dip had passed.
His prediction to a meeting of Tauranga engineers that an imbalance in supply and demand would see petrol reach $2 a litre was questioned by Mr Freidlander and shocked a cross-section of Tauranga residents.
Mr Freidlander said the cost of diesel had already risen 50 per cent over the past 18 months and another substantial increase would have flow-on effects into the cost of goods (such as groceries) and marginally profitable industries.
For instance forests which were marginally profitable at the existing cost of extraction, would stay in the ground until either timber prices rose or fuel prices dropped.
Likewise, farmers already experiencing low stock prices would see returns fall even further on the back of higher haulage costs, forcing them to cut back on expenses such as fertiliser, which in turn affected productivity.
However, he was not convinced that Mr Saunders' predictions would come true.
Mr Freidlander said the $2 a litre scenario was more likely to come true in the short term. He was partly supported by Ministry of Economic Development papers, which lean towards the forecasts of the oil futures market.
In contrast with Mr Saunders' prediction that oil prices would reach $US100 a barrel (and $2 a litre) by the end of the year, the futures market was saying that prices of about $US60 a barrel would be maintained out to 2010. Beyond that, industrial analysts were predicting prices in the range of $US25-40 a barrel.
However, the ministry cautiously included a "high price" outlook based on another school of thought in which oil spikes to $US120 a barrel in 2010 and 2015, reflecting a peak in oil production in 2008 - followed by a decline to $US75 a barrel in later years.
Unleaded 91 is $1.41 - of which nearly 70c is taxes and levies. It peaked at $1.56 last September in the wake of Hurricane Katrina disrupting production on oil platforms in the Gulf of Mexico.
Claire Fisher of the Alzheimers Society's Tauranga branch said a 59c-a-litre price rise would affect all community service organisations providing home help using a volunteer support network.
She said it would put more pressure on trying to keep services going. Usually, volunteers received little or no reimbursement for vehicle running costs.
Mrs Fisher said she would consider buying a scooter if prices reached $2 a litre.
Tauranga early childhood student Kelly Boardman said the price rise would be a "huge bummer" that she would have to wear.
Every dollar counted but the convenience of a car to get where you liked, when you liked, meant she would make savings elsewhere.
Otumoetai College 7th Former Bronson Semmens, a part-time fast food worker, said $2 a litre was "pretty ridiculous".
"I'm always on the empty light."
It would lead to more car pooling to keep costs down and a lot more biking.
Tauranga builder Pat Temara was relieved he had already traded his old six-cylinder Nissan for a less thirsty four-cylinder model.
However, like everybody else, he would be passing on the costs of higher running costs for his work vehicles. Bayline's managing director Tony Lugg said he would not be surprised if petrol reached $2 a litre, particularly from the double whammy of a lower New Zealand dollar and rising prices for crude.
He hoped that higher fuel costs to run the Bay Hopper service would be matched by more people catching the bus to work.