Petrol prices in parts of Modern Zealand have climbed above $3 a litre, with motorists reporting rapid increases at the pump as global oil prices surge past US$100 a barrel. The rising cost of fuel is prompting some consumers to alter their driving habits, filling up more frequently in anticipation of further price hikes.
On Friday morning, Z Kapiti Road was recording $3.019 for 95 octane petrol, while g.a.s Waikanae charged $3.059 for the same grade, according to the fuel price monitoring app Gaspy. NPD Fox Glacier was also reporting $3.089 for 95, and stations in Greymouth were around the $3 mark. The average price of 91 octane was $2.64 on Monday afternoon, Gaspy reported.
The price increases are being attributed to ongoing conflict in the Middle East, which is driving up oil prices globally. A logistics boss warned that the increased cost of oil is contributing to “off the charts” freight prices, and that these costs will inevitably be passed on to consumers in the form of higher prices for goods and services. The war in Iran has closed the Strait of Hormuz, a vital shipping route for approximately 20% of the world’s oil and gas.
However, some consumers and economists question whether price increases are reflected as quickly as price decreases. Several motorists contacted RNZ over the weekend to express concern that fuel companies are swift to raise prices when oil costs increase, but slower to lower them when oil prices fall.
Otago University economist Murat Ungor describes this phenomenon as the “rockets and feathers” effect. “This label suggests asymmetries in the immediate adjustment to a cost change as well as in the number of periods needed for a complete adjustment,” he said. He explained that the pattern is not necessarily evidence of price fixing, but rather a rational response to market structure, search costs, and competitive dynamics. “When oil prices travel up, petrol stations need to replace their fuel at higher costs, so they raise prices quickly to avoid losing money. But when oil prices drop, there is less urgency.”
A 2024 report from the New Zealand Commerce Commission found that fuel companies do increase prices more quickly than they decrease them. The commission estimated that if companies lowered prices as rapidly as they raise them, consumers would save approximately $15 million annually. The report confirmed that fuel companies do ultimately pass on cost increases and decreases to consumers, but the timing of these adjustments varies.
However, Simplicity chief economist Shamubeel Eaqub questioned the existence of the “rockets and feathers” effect, suggesting that observed patterns may be due to cognitive bias or the significant proportion of fuel prices comprised of fixed taxes. He stated that his analysis of 20 years of data from the Ministry of Business, Innovation and Employment did not confirm the hypothesis.
BP stated it is monitoring the situation closely and reviews prices daily to maintain competitiveness. Z did not provide a spokesperson for comment. The company noted that independent operators set their own prices.
