Petrol prices under $3 a litre - and further drop likely, expert says

A barrel of crude oil has dropped from US$110 to US$96.78 in less than a week. Photo / Michael Cunningham

By RNZ

While costs at the pump are looking lower, drivers can expect a further drop over the next week, says a petrol pricing expert.

Costs in the main centres are well below $3, according to price tracking app Gaspy.

Early on Thursday afternoon, the app showed Waitomo on Tinakori Rd in Wellington was charging $2.59 a litre; Caltex on Newton Rd in Auckland was charging $2.65; and in Christchurch, Waitomo on Fitzgerald Avenue was charging $2.47.

Automobile Association principal policy adviser Terry Collins said the price of crude oil had dropped significantly in the past few days, meaning costs in New Zealand were likely to fall further next week.

A barrel of crude oil has dropped from US$110 to US$96.78 in less than a week.

"It's come as a surprise on the international market, and it has been rapid over the last couple of days," Collins said.

The decline came as a result of demand falling short of predictions in the United States due to recession fears, he said.

"Why it was unexpected is because in the US and globally, demand is starting to come back a bit.

"The inventories in the US went up, and with weakening demand, prices went down as a consequence."

Costs in the main centres are well below $3, according to price tracking app Gaspy.

Waitomo Group managing director Jimmy Ormsby said the drop was great news for customers.

"If the global price of crude is on its way down, then that's reflected within a relatively short period of time at the pump in New Zealand," Ormsby said.

"I'd say if there's been a consistent drop this week, then you'd expect to see that at the pump within the next week to 10 days."

However, Ormsby warned global crude prices were still fluctuating week-to-week.

Collins said an array of factors could kick costs back up, the most significant being further sanctions from the European Union on Russia due to take effect in December.

Supply also remains tight and international demand is predicted to increase in coming months.

"We've still got China in the lockdown as a consequence of Covid, so when that demand starts coming up, that could have some consequences," Collins said.

"It's extremely volatile, there's still a lot of things to be sorted out in the long term."

The government's fuel excise duty cut of 25 cents a litre has been extended until the end of January.