Shell and BP reduce prices 2c from today

By STUART DYE

Motorists will enjoy cheaper petrol from today despite predictions that prices would rise after the war in Iraq.

Shell and BP said yesterday that they would reduce prices by 2c a litre, citing an easing in international oil prices.



Prices jumped twice within a week in July, rising by around 5c a litre.

But a spokesman for Shell said the strength of the New Zealand dollar was helping to offset any rises caused by the war.

The price drops were effective from midnight last night, with prices at Shell and BP pumps down to $1.039c a litre for unleaded 91, $1.089c a litre for 96 grade and 57.9c a litre for diesel.

Shell retail manager Mark Nobilo said: "Shell is constantly monitoring the sometimes volatile mix of product price and currency fluctuations which determine the price of fuel here, and we are committed to ensuring that New Zealanders are paying a fair price for their fuel."

The BP drop came shortly after Shell's, with managing director Peter Griffiths saying the company was keeping to its promise to pass on the benefits of lower international prices to motorists.

However, he said that regions already enjoying discount pricing might see a smaller decreaseor no change at the pump.

Oil prices, supply and demand and price competition all have an impact on what motorists pay at the pumps.

These factors can change hourly, and the constant state of flux leads to the variation in fuel prices.

There are several reasons for the regular ups and downs:

* Currency - oil (crude and refined) is traded internationally in US dollars. A movement in the value of the NZ dollar against the US dollar will alter the cost of oil.

* International markets - as an internationally traded commodity, oil is affected by the views and perceptions of oil traders.

* Weather (actual or forecast) - higher demand in other parts of the world as the seasons change alters the demand and therefore the price.

* Prices - as a general guide, every US$1 increase in crude price generally has a flow-on effect of 1c a litre at service station pumps.

In New Zealand, 51 per cent of the price per litre goes to duties and taxes, 37 per cent is spent on the product and shipping, and the remaining 12 per cent on transporting it round the country and getting it into the pumps before the petrol companies take their profit.

New Zealand petrol prices average between the lowest and third-lowest in the OECD.