Falling NZ dollar adds to pressure on fuel prices

Petrol prices are causing freight business to run at a loss. File photo / NZ Herald

World oil prices may have eased, but a declining Kiwi dollar means motorists may face even harder times since the latest 5c rise at the pumps.

Any decision by Reserve Bank Government Alan Bollard to reduce interest rates today may devalue the dollar further, increasing fuel import costs.

Automobile Association spokesman Mark Stockdale said yesterday he hoped world prices had peaked for now, and that a reduction on Tuesday night in expectation of extra supplies from the Organisation of Petroleum Exporting Countries (Opec) would discourage more increases at the pumps.

That follows a 13c rise in the litre price of petrol and an 18c one for diesel since the start of last week - including a 5c lift on both fuels on Tuesday.

The big four oil companies were selling 91-octane petrol for $2.16c a litre in Auckland last night - just 3c short of a record set in 2008 - although Gull was undercutting them by 3c for its bioethanol-petrol blend.

Diesel prices ranged from $1.58c at Gull to $1.61c at BP pumps.

Mr Stockdale said the rises were in response to a sharp spike in the global market a fortnight ago, and would have been passed on to this country's motorists sooner had it not been for the Christchurch earthquake.

"Instead of passing it on in one lump sum, they staggered the increase."

He said the AA would not expect any more increase on diesel, as it believed the companies had fully recovered their import costs, and it hoped for restraint on petrol.

"We're looking for restraint and waiting to see what happens to the oil price and exchange rate, and if things stabilise because Saudi Arabia is increasing output, then no further increase would be warranted."

His reference was to an offer by that country to help to make up for supply disruptions caused by fighting in Libya. But Road Transport Forum chief executive Ken Shirley said unrest was also building in Saudi Arabia - where more than 17,000 people have signed up to a Facebook page calling for a "Day of Rage" tomorrow.

Mr Shirley, representing road carriers, said diesel increases ran deeper through the economy than petrol rises because it was the main fuel for carrying freight. Diesel had been hit even harder than petrol because of increasing demand from China, where stockpiling was suspected.

As a rough rule of thumb, each United States dollar change in the world price equates to a difference of about 1c to New Zealand pump prices.

Mr Shirley said the volatility of the market made life particularly harsh for freight operators, many locked into fixed contracts with clients who resisted higher charges.

"A lot of freight businesses are operating at a loss - they're not making ends meet," he said. "The big are getting bigger and at the bottom end there are high levels of attrition."

But Mr Shirley said the big line-haulage companies generally had fuel adjustment clauses in contracts, so would have started passing their costs through the supply chain.

"This will be having a significant and immediate increase in prices across the economy - it's everything, your supermarkets, your electronics, your whiteware."

Although oil companies are generally reluctant to signal their next moves, Gull retail manager Graham Stirk said Gull was committed to holding its prices until tomorrow morning.

That would give it time to review factors such as whether Dr Bollard had decided this morning to reduce the official cash rate for borrowing, which Mr Stirk feared might drag the exchange rate down further, increasing import costs.