Short-term relief is at hand from this morning, when Gull plans brief discount.

Petrol prices are set to rise next week to their second highest level ever - thanks to a Government tax hike.

Oil firms are expected to pass on to motorists the petrol excise rise of 3c a litre to be imposed on Tuesday.

That follows a 2c increase at the pumps last week, which the industry blamed on higher world oil prices caused by the Iraq crisis.

The Automobile Association said then that the high kiwi dollar added only 1c a litre to import costs, and the industry's profit margins were high enough for it to have spared motorists.


But some short-term relief is at hand for them from this morning, when industry minnow Gull plans a brief spurt of discounting which may spark competitive responses from other suppliers such as BP.

Diesel prices will not be directly affected by next week's tax impost, although consumers of that fuel face equivalent rises in road user charges paid according to vehicle weights and classifications.

Barring any major fall in overseas oil prices - unlikely after Sunni Islamic rebels captured Iraq's big Baiji refinery on Tuesday - the standard rate for 91-octane petrol is expected to hit 223.9c next week and 95-octane fuel will be 8c higher than that again.

That will take prices to within 3c of a record of 226.9c set last July for 91-octane petrol, and 234.9c for 95-octane.

A small blessing is that the AA expects the oil companies to absorb the extra GST of almost half a cent on top of the excise increase, as they did after a 3c tax rise in July last year.

It is encouraging motorists to take advantage of any discount deals, such as will be offered by Gull from 7am today until noon tomorrow, to fill up before the tax rise.

Gull will drop its prices temporarily by 10c a litre, to reduce its top rate for 91-octane petrol to 205.9c a litre.

Z Energy would not flag what might happen to its prices before Tuesday, except to say they would be reviewed daily.

Christine Langdon of Z confirmed its intention to pass on to motorists the 3c excise rise, but said she assumed the company would absorb the extra GST, as predicted by the AA.

"It is a government excise increase, so realistically it is an increase consumers will pay at the pumps," the Z spokeswoman said.

Jonty Mills of BP indicated a similar response by his company to the excise rise, although he said it had yet to decide what to do about GST.

But he said BP would keep an eye on "competitive activity" by other suppliers such as Gull in localised pockets around the country and might respond in kind.

AA Petrolwatch manager Mark Stockdale acknowledged a likelihood of a 3c rise next week.

But he said it would be a pleasant surprise if the oil companies stopped short of that mark, given their high profit margins.

Government figures from last week showed the industry was making an average importers' margin of 29.9c a litre on 91-octane petrol, compared with 27.5c when pump prices were at their highest last July.

The Government said excise increases, which will include another 3c rise in July next year, are needed to shore up the national land transport fund and extra spending on its "roads of national significance" programme.