The Automobile Association (AA) expects high fuel prices to last at least another six weeks, with global oil supply problems and the US midterm elections shaping what comes next.
If filling up has felt more painful lately, the numbers back that up. The average price of 91 unleaded reached $3.25 a litre on Friday, according to fuel-monitoring site Gaspy. In an RNZ broadcast, the Automobile Association says drivers shouldn’t expect relief any time soon.
That price is up nearly 25 cents a litre in 28 days, and it’s the highest average since late May. The AA expects prices to stay high for at least another six weeks, and possibly through to Christmas.
Why the pump price keeps climbing
The main cause is a long way from any New Zealand forecourt. Global crude prices have climbed steadily above US$100 a barrel in recent weeks. The conflict between the US and Iran continues to restrict supply from key Middle East producers.
AA principal policy advisor Terry Collins lists several factors pushing up the cost of petrol by the time it lands here:
- restricted supplies through the Strait of Hormuz
- attacks on Saudi oil pipelines
- soaring insurance costs for oil tankers
- a weaker Kiwi dollar
Any one of these would push prices up. Together, Collins says, they mean there’s likely a little more pain to come. He doesn’t expect much relief before Christmas unless something major happens geopolitically.
An election on the other side of the world
One date matters more than most. Collins says the US midterm elections on 3 November could be a big factor in where oil prices go before the holidays.
He believes Iran is deliberately restricting supply to keep fuel expensive for American drivers. If Donald Trump’s Republican Party lost control of both the House of Representatives and the Senate, the White House could be weakened. Collins also notes that US diesel prices per gallon are at record highs.
That view of Iran’s strategy is Collins’ own reading, not a confirmed fact. Still, it explains why the AA is watching Washington as closely as the oil markets.
Diesel is the bigger worry
Diesel in New Zealand currently costs $2.96 a litre. That’s well below April’s peak of around $3.80. Collins doesn’t expect a return to those levels, because that spike came mostly from early uncertainty and volatility around the war.
Even so, prices are heading up. Collins says countries around the world are competing hard for diesel, and local prices are likely to rise further. That reaches well beyond private motorists. Diesel runs trucks and harvesting equipment, and higher prices flow on to fertiliser and other costs.
A price problem, not a supply problem
There is some good news. Collins is confident New Zealand won’t have major trouble getting fuel into the country. He credits a storage plan that the government and industry put together. It includes extra diesel and more tank capacity at Channel Infrastructure’s Marsden Point site. Accurate data on incoming ships also helps manage the load.
In other words, the country’s tanks should stay full. The real question is how much it will cost to fill yours. For anyone with a long commute or a thirsty engine, it’s worth watching 3 November as closely as the price board at the local station.
