Crude likely to keep falling says Z boss, and that’s good for him — and motorists.

Z Energy boss Mike Bennetts says the return of $2 a litre petrol could be on the cards if oil prices continue to plummet.

While the exchange rate and tax are the other big influences on prices, crude's plunge in the last two months had been dramatic and it had dipped below US$80 ($101) a barrel on Friday.

"We're more likely to see US$75 for Brent oil rather than $100," said Bennetts.

Economic weakness in China and Europe combined with surging production in Saudi Arabia and the US had pushed prices down.


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On Friday the overall price swing throughout the day was more than US$5 - a much bigger range than normal and a reflection of greater market volatility.

Bennetts said the $2 mark for 91 octane petrol was an important psychological barrier for motorists.

"It's disappointing the dollar's not higher. Crude prices have come down but the dollar's coming down as well."

If it did fall to that level there would be more discretionary motoring, which could reverse a trend over the past few years in which the overall volume of petrol was declining.

"When prices are high it's harder for us to make money than when prices are low," said Bennetts, who has been Z chief executive for more than four years.

Latest figures show total fuel sales across the industry fell slightly in the September quarter compared to last year, a trend that started seven years ago.

Government data shows that fuel consumption peaked at 4.2 billion barrels in 2007 but is expected to fall to 3.6 billion barrels in the next decade.


Bennetts said diesel sales were up year on year for his company but acknowledged Z was prepared for lower petrol sales.

"We've always said the focus of our business needs to be managing margins rather than selling lots of units. When you're in a mature market that's where your attention needs to go," he said.

Petrol and diesel margins during the past year had risen for all fuel companies, and were now being used to make up for losses they have suffered through their shareholding in New Zealand Refining.

The refinery at Marsden Point near Whangarei had suffered from intense global competition and problems during a maintenance shutdown earlier this year, he said.

Z has a 15 per cent stake in the refinery. "We're taking a hit through our refining acclivity so our marketing margins have expanded to offset the losses."

Drivers had cut back on journeys for a variety of reasons, including skyping relatives rather than driving to see them.

"It is a sunset industry if you want to describe it that way but the sun is going to take a hell of a long time to set."

Alternative fuel and battery technology was improving rapidly but hydrocarbon-based fuel was expected to power most cars for decades.

Z will later this month begin building a biodiesel plant at Wiri, South Auckland. It is expected to begin production around the middle of next year.

The $21 million plant will use inedible animal fat to produce 20 million litres a year.

While a small part of the 1 billion litres Z sells annually, Bennetts said it was it was an important first step.

Other biofuel schemes in New Zealand had failed, largely because of the price of feedstock and the absence of a distribution network.

AA Petrolwatch spokesman Mark Stockdale said a $2 petrol price "would be nice".

But about 45 per cent of the pump price was made up of tax and the cost of shipping refined or raw product to this country, meaning further steep falls in crude would be needed if this was to be achieved.

h3>The corner office

Mike Bennetts, Z Energy chief executive
What is your personal business philosophy or key business focus?

It's all about people. All the businesses I've been in, you've either got customers at one end or your employees at the other and as long as you focus on people and they feel included and they do their best, then customers will be delighted.

What was the best business decision you made for the company?

Changing brands - it wasn't to say that Shell was a bad brand but Z opened up opportunities. We got to refresh ourselves internally and we got to present something different to New Zealanders. The brand is just the logo on the front wall but we had the chance to be a start-up with a 99-year legacy.

What was the hardest or worst business decision you made and what did you take away from it?

While at BP, I took over as a project manager of an IT project that was on its way to being a failure. I was more flattered by being appointed to it than in taking the time to research what the project entailed. A few months in I realised the project was in bad shape. I learned to really understand what I was taking on before taking it on and I learned that no matter how hard you try, sometimes you can't get it done.

What was your first job?

A trainee sales rep for Europa oil back in 1983.

What do you think are some of the top fundamentals that businesses need to do to be successful?

They've got to have a clear competitive advantage, they've got to be great at delivering for their customers, and have a committed employee base.

Do you have a golden rule you follow or a business motto?

Leaders are leading or the circumstances are. You can go through and your business can be quite successful, but how much of that was gifted to you versus what you've actually created?

Who's your business hero?

Nobody really ... but a boss at BP, Vivienne Cox - one of the top five in BP - opened up my mind to how businesses interact with the outside world.

Anything about your job that keeps you awake at night?

I'm generally not a worrier. The thing that would scare me the most would be a work accident where someone gets hurt or killed, or something damaging to the environment.