Relief at the pump coming - for a while

File photo / NZ Herald

New Zealand motorists should expect to see a drop in the cost of filling up their cars early next week, an AA spokesman says.

The expectation comes after the oil price dropped nearly 9 percent overnight, the biggest one-day percentage decline in more than two years.

The price of petrol rose three cents per litre on Tuesday, the first increase in six weeks, bringing the price of 91 octane to at least $2.22 per litre at most pumps around the country.

AA PetrolWatch spokesperson Mark Stockdale said the drop in crude oil should see that increase reversed.

"Going by recent history the oil companies usually pass price increases on within two to three days," Mr Stockdale said. "So we would expect the reverse to apply, that means within the next couple of days we would expect to see a reduction at the pump.

"The AA would expect the oil companies to reverse the price increase earlier this week and then some."

Thursday's decline of $9.44 per barrel, or 8.6 per cent, brings the week's loss for oil to $14.13, or 12.4 per cent, a drop Mr Stockdale called "substantial", although he did not know how much less motorists could expect to pay at pump.

"The only wildcard is the exchange rate, which is high but has started to fall - it has now gone under 80 US cents. The falling exchange rate is not good - it will offset some of the oil price decrease but not much, and overall I think motorists can expect quite a big saving at the pump early next week."

Mr Stockdale said motorists can expect to continue to see fluctuations this year, but the trend is prices will go up, not down.

"The drop in the oil price - that has given us a bit of a reprieve, it's not clear why that has happened. The increase in oil prices this year is mostly due to the Middle Eastern crisis, so that won't last.

"Hopefully we won't see any traumatic price spikes but the trend is prices will go up, not down.

"As far as the long term future, all we can say is that the price of petrol has doubled in the last 10 years and we need to get used to the idea it is going to increase from now on. Higher fuel prices are here to stay, but we should grab these price reductions while they are here."

By the end of 2008, petrol had dropped to $1.33, before a 30 cent increase hammered motorists, and prices have continued to rise ever since. Mr Stockdale said people have learnt to adjust their transport arrangements accordingly.

"In 2008 when we had that spike there was an increase in public transport patronage at that time. Now that prices are over $2 a litre and are likely to stay, people will be getting used to the idea of higher fuel prices and will be thinking of whether they can change their travel behaviour to manage rising fuel bills. So for some people that means public transport, for other people its walking or cycling to work, other people it is trading in to a more fuel efficient car - there is a whole host of options."

Mr Stockdale does not expect to see the price of consumer goods to increase at the moment as diesel has not had the level of increases petrol has had.

"[Diesel prices are] much below what they were in 2008, so there is no real need for transport companies to increase costs but over time that is likely to change," he said.