Petrol price drops 3c but diesel still at record high

Motorists were treated yesterday to their first petrol price cut this year, after three increases this month, but diesel remains at a record high.

The price drop of 3c a litre - down to $1.45 for 91-octane petrol and to $1.50 for 95-octane - followed increases totalling 12c since the end of December, including a 6c rise last week.

Diesel remained at $1.06 a litre as the Road Transport Forum met the Commerce Commission in defence of fuel surcharges, which the commission says many trucking and courier firms are imposing illegally.

But the petrol cut came in good time for homeward-bound motorists at the end of the Auckland Anniversary long weekend and was welcomed by the Automobile Association as evidence that oil companies could act fast to reduce as well as to raise prices.

"Isn't it great to see that volatile prices actually means prices can come down as well?" said AA spokesman Mike Noon.

Shell Oil was first to move, about 7am yesterday, in response to a drop in the cost of refined imported petrol quoted from Singapore late last week and over the weekend.

Spokeswoman Jackie Maitland said this followed a re-evaluation by analysts that found the level of world stocks to be healthier than feared.

But diesel stocks remain tight, as some United States refineries keep struggling to resume production after Hurricane Katrina in August and the price of crude oil rose to more than US$67 ($98) a barrel at the weekend after falling several days earlier.

Oil markets were soothed last week by an assurance from top exporting nation Saudi Arabia that it would fill any supply gap but not enough to eclipse anxiety about reduced supply amid unrest in Nigeria and the growing international standoff over Iran's nuclear programme.

Trucking firms are meanwhile appealing to the Commerce Commission to allow them to keep adding fuel surcharges to customer invoices to allow them to survive the record price of diesel.

The commission and its lawyers met the Road Transport Forum and its legal advisers in Wellington yesterday for what forum chief executive Tony Friedlander said were "pretty useful discussions".

He was reluctant to disclose details while the commission was making up its mind but said he believed it recognised that freight carriers had to pass on their costs and that the issue should be resolved as soon as possible.

He said the commission had asked the forum for more information on how it believed costs could be passed on without breaching the Fair Trading Act, details of which it would supply today in the hope of a resolution by the end of the week.

"It is not possible for transport operators to operate and not pass costs on, and we are looking for a transparent way," Mr Friedlander said.

The commission said last week that it had found 32 out of 70 firms, mainly in the road transport industry, imposing extra charges for fuel in what it believed was behaviour contrary to a court's judgment against advertising by Air New Zealand.

Judge Stan Thorburn said in his Auckland District Court ruling in November that fuel was a normal operating cost of business and must be included in prices, rather than listed as a separate item.