Concerns of oil supply disruption as commentators say $3 per litre fuel to become the norm

Fuel commentators now say it is only a matter of time before $3 a litre will be the norm. Photo / Duncan Brown

By Leah Tebbutt of RNZ

Unrest in the Middle East is stoking fears of an oil supply disruption while New Zealand has seen an all-time average price high of $2.52 at the pump.

Fuel commentators were not certain last year, but now say it is only a matter of time before $3 a litre will be the norm.

But what else is at play in driving those prices up?

The unrest in the Middle East is part of it, but the tension between Ukraine and Russia is concerning.

Russia is one of the world's largest oil producers and Ukraine a major transit hub. If there is an invasion or war all bets are off.

AA principal policy adviser Terry Collins said there was little Aotearoa could do about that but taxes, a global supply and demand issue, and a 60 per cent reduction in gas exploration all contributed to pain at the pump.

However, Omicron would immediately determine how sharply prices rose, Collins​said.

"This big spike where everybody gets it and herd immunity kicks in, the economies open up and start moving - people travel, people fly - all of a sudden that's the demand.

"If that demand spikes rapidly like it did in the later quarter of 2021, then you will see sharp price increases."

Brent crude was up 75 cents at US$87 a barrel and Collins said he was certain it would rise to at least US$100 by the end of the year.

"If we get another variant of Covid or Russia invades Ukraine then it could go up much quicker or flatten right out."

There was a lot of uncertainty around the industry, but looking at the underlying fundamentals prices, would be going up, Collins said.

"We're caught between the economic and social well-being of our people and the needs to try and meet our climate change obligations.

"Some people have to rely on their vehicle and they cannot afford a $40,000 electric car, so they are going to get stuck using their car and paying high prices - it's going to be one of the biggest challenges coming up."

Gaspy, a fuel spy app, recorded the cheapest prices today at $2.23 a litre in Manawatū-Whanganui region.

But on January 15 it also recorded the all-time average high of $2.52 across the country.

Spokesman Larry Green said it was one of many all-time highs he expected this year.

"It's not like the rise has just come out of the blue, it's been rising for over a year consistently," Green said.

"It's the high for 2022, but it's likely to be the first of many."

Consumer NZ chief executive Jon Duffy said the fuel market was made up of many components but there was a lack of competitiveness within New Zealand.

In February, fuel stocks would have to disclose detail to the Commerce Commission so it could establish if there was an excess of profits being made, he said.

"We don't know at the moment whether what consumers being charged at the pump is a fair price," Duffy said.

"I don't see that the price of fuel is going to come down though, because that does need to be paid for somehow."