Petrol expected to rise by 12c

Economists are predicting petrol prices will rise by up to 12c a litre even if world oil prices stabilise.

As well as facing a 2c rise in the accident compensation levy on petrol on July 1 - and a $25 increase in the annual registration fee for petrol vehicles - motorists may be in for a price rise of 10c or more as the value of New Zealand's dollar slides.

That would push 91-octane petrol to at least $2.23c a litre.

Bank of New Zealand chief economist Tony Alexander yesterday said he expected local prices to keep rising even if the international oil market stabilised.

A lag in the past three months between international crude oil prices and those at local petrol pumps meant a further rise of 10c a litre looked likely.

That was even after last week's increases of 10c to 12c a litre, which the Automobile Association said should be enough to satisfy the oil companies.

Mr Alexander disagreed, noting "quite an unusual gap opening up in recent weeks between escalating oil prices and not-sufficiently-rising pump prices".

A Ministry of Economic and Development energy review yesterday said an increase of almost 10% in the three months to March 31 in the cost of crude oil was offset partly by a 4% rise in the New Zealand dollar against the greenback.

But the kiwi has slipped 6% since then, contributing to a 34%-41% rise in crude-oil prices in New Zealand-dollar terms.

Petrol prices have risen 18.5% and diesel 37.9%.

Part of the difference is taxes of 50.5c for every litre of petrol sold, but road-user charges for diesel users are separate.

The taxes include an ACC levy of 7.33c, soon to rise to 9.34c.

Because there is no accident levy on diesel, its users face an increase of $49 in their annual registration fees.

The Government also takes 23.4c in GST from the 210.9c price of 91-octane petrol, and 20.4c from diesel's 183.9c.

UBS Investment Bank senior economist Robin Clements said although a strong exchange rate had insulated New Zealand to some extent from international price rises, "that protection is starting to slip away".

The kiwi rose slightly yesterday to US75.61c, after a three-week slide, but he expected it to continue ultimately to "something more normal, like US65c".

Mr Alexander said it was "reasonable" to expect the kiwi to fall to US70c by the end of 2008.

But he opposed calls from the AA and other groups for the Government to reduce GST on fuel.

"You don't want to be chopping and changing your tax system," he said.

"The lesson Japan provided the world in the 1970s is that when you get a price shock like this, you . . . make your adjustments in the size of your cars and the way you use petrol."


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