Petrol prices in New Zealand could climb to $4 a litre if the conflict in the Middle East escalates, economists warn. The average price of 91 octane fuel has already risen by approximately 50 cents a litre in March, reaching just over $3 nationwide as of Monday, according to price monitoring app Gaspy.
Kelly Eckhold, Chief Economist at Westpac, stated that a sustained crisis could drive oil prices to US$200 a barrel, pushing retail petrol prices beyond the $4 mark. Westpac analysis indicates that refining margins have already increased from US$20 to around US$35 a barrel, exacerbating the impact on New Zealand consumers.
The potential for escalating prices stems from disruptions to the supply chain. Refineries in Asia, heavily reliant on crude oil from the Middle East, are already considering reducing production to avoid costly shutdowns, according to Westpac. This reduction in refined product supply across Asia would further impact petrol and diesel prices in New Zealand.
“Refining margins will go quite high because there’s the supply chain that’s going from the Middle East to the refiners in Asia who are overwhelmingly reliant on crude oil coming out of the Middle East, with a three-week lag, maybe a month if you want to be generous,” Westpac noted in a recent report.
Simplicity chief economist Shamubeel Eaqub suggested that oil prices around US$150 a barrel would translate to $4 a litre for motorists. Infometrics chief forecaster Gareth Kiernan calculated that current oil prices of around US$100 a barrel already equate to approximately $3.27 a litre. He added that a further US$35 increase could push prices towards $4, with some analysts predicting even higher levels.
“I think Westpac came out with $185 and others are talking $200… You look at some of those numbers and you’re talking well north of $4 potentially,” Kiernan said.
Murat Ungor, an economist at Otago University, emphasized the market’s sensitivity to price fluctuations. He stated that sustained crude oil prices between US$130 and US$140 per barrel could quickly raise petrol prices to the $3.50-$3.70 range. Reaching $4 a litre, Ungor explained, would likely require a combination of extreme factors, including sustained high crude oil prices – potentially exceeding the 2008 record highs – coupled with a weaker New Zealand dollar and increased shipping costs.
While economists outline potential price increases, the government and fuel suppliers have urged against panic.
