Petrol smashes $3/litre barrier, and could go higher as New Zealanders budgets stretched

Filling up at the petrol pump is costing New Zealanders up to $9 more than a month ago, putting further pressure on household budgets.

The end of fuel price hikes is not yet in sight, an expert warns, with a number of domestic and international factors likely to force them higher still in coming months.

That will add put more pressure to New Zealanders’ pay packets alongside high rents and rising food prices.

Unleaded 95 has passed $3/litre at more than a dozen petrol stations around the country, according to fuel tracking website Gaspy.

The average price of 95 is $2.79, up 22c from a month ago. That means a smaller car with a tank of 40 litres would cost $8.80 more to fill up compared with the same time last month.

The average price of 91 is $2.61, up 14c from a month ago. Diesel has had the biggest increase, up 10 per cent, or 17c, in just a month.

Automobile Association principal advisor Terry Collins said rising fuel prices were being driven by a range of factors, including import costs, supply problems, Omicron and international unrest.

The price of oil had risen to $92 a barrel – the highest since 2014. While forecasts are mixed, Collins expected oil to hit $100 a barrel. Domestic costs were also a factor – the Emissions Trading Scheme levy had doubled from 8c to 16c in the last year, and was also likely to increase further this year.

The reopening of New Zealand’s borders could also increase fuel demand because of an increase in flights, the gradual return of tourism, and a rise in commuting.

Collins said petrol was not an elastic commodity – when prices rose people did not reduce their fuel use at a similar rate.

“When fuel goes up about 10 per cent, it only has about a 1.5 per cent impact on demand. People just have to travel, and there are many people that just don’t have access to good public transport or alternatives.

“If they’re on a budget and they’re paying for fuel, something else has got to give to make them pay for it.”

Christine Liggins, director of budgeting service Debtfix, said lower income families were forced to spend less on essential items when petrol prices were high.

“A lot of our clients have to cut back on food. Because they still have to drive to their place of work – that hasn’t got any closer.

“When you look at the car costs and you add up the petrol, it can be cheaper for you to ditch the car and not work. It has a huge impact.”

Auckland Action Against Poverty coordinator Brooke Stanley Pao said the rising price of petrol also had a social impact.

“It means beneficiaries or low wage earners are not able to travel to family events, or need support with going to a tangi. These are everyday things that middle or higher-class earners don’t think about.

“For others, every dollar counts. Trying to juggle ‘Can I take the kids to school? Can I check out new accommodation? Can I even go to the doctors?’ People don’t have a lot of choice.”

Rising fuel costs were another reason to lift core benefits, she said. Two increases by Government since the pandemic began were still not sufficient to meet the cost of living.

AA’s advice for motorists to save on fuel was to plan ahead and drive carefully. Heavy braking and accelerating used up more fuel. Routes should picked carefully and motorists should keep an eye on prices.

“A few weeks ago there was a 40c difference in diesel between two service stations 2.5km apart,” Collins said. “If you had a 50-litre tank, you’d use 33c of diesel to $22.50 worth of fuel.”

Rising fuel costs come on the back of record-high food prices and rising rents.

In the year to December 2021, inflation rose by 5.9 per cent in New Zealand, the fastest growth since 1990. Price rises were driven by increases in food, housing and transport costs. Wages also rose but not at the same rate.

Prime Minister Jacinda Ardern has noted that New Zealand is not alone in that respect, with inflation up 3.5 per cent in Australia, 5 per cent in the Eurozone and 7 per cent in the United States.

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