Petrol prices rocket in new oil shock

By MATHEW DEARNALEY and ANNE BESTON

Petrol prices are the highest they have been for at least five years after two sharp price hikes.

And no relief is in sight.

At the beginning of last week, motorists faced a 3c-a-litre rise - to $1.17 for 91-octane, $1.22 for 96 and around 70c for diesel.

By yesterday those prices had risen again, to $1.22 for 91, $1.28 for 96 and 74.9c for diesel.

Petrol prices have risen about 11c a litre since the beginning of the year.

Worldwide demand and Middle East uncertainty are blamed for a 13-year-high in the price of crude oil, which has peaked at US$40 a barrel.

Automobile Association spokesman George Fairbairn said petrol prices were possibly the highest they had been since the oil shocks of the 1970s.

"Oil is a product bought on the world commodity market, and regrettably New Zealand is going to have to bite the bullet like every other country is doing," he said.

People could also be hit by the indirect costs of petrol and diesel being more expensive.

The price of diesel has gone up 20 per cent in the past three months, meaning the price of goods in supermarkets could rise if trucking companies pass on increased costs.

Airlines could also decide to pass on increased fuel costs to passengers.

British Airways is considering adding a "fuel surcharge" to ticket prices unless crude oil prices fall.

The price increases are affecting motorists worldwide.

In the United States, petrol prices are at a new high - just as demand peaks with the start of the summer holidays.

US Treasury officials have criticised Opec, which represents about half the world's oil producers, for decreasing production and keeping prices high.

Opec dropped its production target by 4 per cent last month.

But Opec countries, which include Iran and Saudi Arabia, blamed rocketing demand in China - now the world's second biggest oil consumer after the United States.

Oil analyst Paul Ashby, of ABN Amro in Sydney, told the Herald that world demand was higher than at any time since 1977, and his firm expected oil prices to remain high until at least next year.

Shell Oil New Zealand spokesman Simon King said the market was volatile and it was difficult to predict what prices would do.

"It's anyone's guess. Oil prices are controlled by a lot of different factors and we monitor the situation daily."

Mr Ashby said there should have been some let-up in world prices at this time of year, before demand became even greater in the last two quarters, but uncertainty in the Middle East was adding a security premium.

Industry fears were fuelled this month by a terrorist attack on a Saudi Arabian petrochemical port in which six people were killed.

Saudi Arabia is the world's largest oil producer.

Green Party co-leader Jeanette Fitzsimons warned that the petrol price rise was a foretaste of what is in store.

"Petrol will cost more and more, and will be affordable only for the most essential and efficient applications," she said.

Energy consultant Alan Jenkins, a former senior Government oil and gas official, questioned the latest prices, saying petrol cost little more than 55c a litre in 1981, when world oil prices were about the same as now at US$34 a barrel.

The New Zealand dollar was worth about 64USc then - also about the same as now - and petrol taxes were at similar levels before being reduced by the fourth Labour Government.

Next year every New Zealand motorist will pay an extra 5c a litre to help finance the Government's transport package, which includes $1.6 billion for Auckland.

FILLING UP

The cost for a 1.6-litre Toyota Corolla with a 40-litre tank

* Last week: $45.60

* This week: $48.80

* Increase: $3.20