Kiwis 'could see drops' in petrol prices this summer, AA says

Lower petrol prices could be on the cards for Aotearoa over the summer.
Lower petrol prices could be on the cards for Aotearoa over the summer. Photo credit: Getty Images

Lower petrol prices could be on the cards for Aotearoa over the summer, following a massive drop in international crude oil prices.

The AA's principal policy advisor, Terry Collins, told Newshub crude oil has dropped in price at least 20 percent since September's highs.

The drop in petrol prices is due to a combination of lower refining and shipping costs, plus weaker demand, Collins said.

"We're not getting that big volatility seen before."

Back in September, Collins expected prices to increase "closer to $3.50" than $3.00 by the end of December, but "that would have been the extreme case", he stressed.

Instead, Kiwis "could see drops of seven to 10 cents [per litre]" over the next few months, as futures contracts for oil get fulfilled.

Even though that sounds good now, Collins said predicting future petrol prices is a tough task.

"In Auckland alone, you can get a 50-cent variation between the pumps!"

He said the oil markets are "like a 15-ball juggler", and future international events could cause renewed instability.

"We could have a huge storm that knocks out refineries in the Gulf of Mexico," Collins said as an example.

This week, Reuters reported oil prices had fallen to a near five-month low, even after OPEC+ oil-producing countries pledged to cut output.

In terms of currencies, the New Zealand dollar has improved recently, Collins said, which helps us get more bang for our buck on imported goods like oil.

Meanwhile, two of the main types of crude oil have fallen to lows not seen for six months.

West Texas Intermediate (WTI) crude oil fell below US $70 a barrel for the first time since July, while Brent crude fell to its lowest level since June.

Collins said refining margins and shipping costs have come down recently too.

US data this week showed it had a bigger-than-expected rise in its refined fuel stockpiles, causing oil prices to drop 4 percent in one day, Reuters reported on Thursday.

When it comes to supply, the OPEC+ countries purposefully limit their oil production "to try and keep the price up" artificially, Collins added.

He said some of the drop in prices can also be attributed to weak demand in China as its gigantic property market faces turmoil.

"The domestic situation in China is pretty poor."

Meanwhile, Europe has "plenty of supply they could put to market," but they're not doing so currently, Collins said.

Countries not members of OPEC+ are trying to supply the market at the current price - including the US, which is now producing its highest-ever level of crude oil, the New York Times reported this week.

Even with higher oil supply in the market, Collins said he can't see prices returning to the glut of 2015 and 2016, when Brent crude went below US $40 a barrel.

According to petrol price app Gaspy on Thursday, average fuel prices in Aotearoa are:

  • $2.74 - for 91
  • $2.95 - for 95
  • $3.06 - for 98
  • $2.17 - for diesel.

Collins has some simple advice for Kiwis this summer.

"Be safe, don't speed, conserve fuel, and take it easy."