The Automobile Association (AA) is warning petrol prices could increase by up to 40 cents by July.
It comes after fuel prices hit record highs in 2022, with the Government slashing fuel taxes and public transport fares in March last year to respond to soaring prices.
But an AA spokesperson said with fuel taxes being reintroduced and the international price of oil barrels increasing, Kiwis can expect to pay more soon.
Oil prices internationally have surged after Saudi Arabia and other OPEC+ producers announced a surprise round of output cuts on Monday. Brent oil futures jumped by $3.94 to reach a total of $83.83 a barrel following the news output would be cut by around 1.16 million barrels per day.
AA principal policy advisor and fuel spokesperson Terry Collins said the cut in production globally is around one percent, but because the market is so balanced that reflects around a five percent price increase across the board.
“The key thing is it looks like OPEC+… they’re seeking permanent higher price crude oil and we won’t see the days of cheap fuel anymore, they’re going to use production cuts,” Collins told AM.
“It’s inflationary so that also means they’re going to drop in demand. If they get a drop in demand, they appear to be putting the price up.”
Collins said every dollar increase in the price of barrels adds around one cent to fuel prices and with the Government’s fuel tax cut set to end on June 30, the price of fuel could balloon around 30 to 40 cents.
He said he believes Brent oil is looking to push the price of barrels to over $90, around $10 more than the current price. This would likely see fuel prices increase by around 10 cents.
“We have our fuel excise duty going back on at the end of June. With GST that’s about 29 cents. We see another 10 percent push perhaps in the price of petrol as a consequence of these supply cuts and we could be looking at another nearly 40 cents being added, 30 to 40 cents, somewhere in that margin by July.”
Prime Minister Chris Hipkins told AM co-host Ryan Bridge later on Tuesday the Government doesn’t have any control over the international price of oil. He said the Government has responded to higher prices with actions such as the fuel tax reduction. He said further decisions on whether to extend the cut would be announced as part of their 2023 Budget.
“We’ve got a big programme of work as a Government and as a country ahead of us to move to more renewable energy sources because ultimately the price of oil over time is likely to trend one way and it’s not going to be favourable to people who have to fill up their car on a weekly basis,” Hipkins said.