"Those are record prices for petrol - previously it reached a high of $1.77 per litre in July and August 2006 following Hurricane Katrina, although diesel briefly hit $1.31 this January," says Mike Noon, AA Motoring Affairs General Manager.

Prices rose once during the month of March, up from $1.75 and $1.26 per litre for petrol and diesel respectively, with another increase coming on 1 April. 91 octane rose 2 cents at the beginning of April and is now retailing for $1.80 per litre, while diesel jumped seven cents, and is selling for between $1.37 and $1.39 per litre.

"The latest fuel price increases come despite crude oil falling from a high of US$109 a barrel in mid-March, to just under US$100 at the end of the month. Bucking that trend, international refined prices rose sharply in late March offsetting the gain," says Mr Noon.

"The AA's monitoring of oil company margins shows that increases in petrol costs have been fully passed onto motorists by the oil companies, whereas lower margins for diesel meant the price increases were not unexpected"

According to AA PetrolWatch, diesel prices have risen 42 per cent in the last 12 months - up 41 cents per litre - compared to just 18 per cent or 28 cents for petrol. This reflects the international pressure on diesel prices.

"So what does this mean for motorists? A 1.6 to 2.0 litre diesel car would now be paying an extra $365 a year for fuel to travel an average 14,000 kilometres compared to a year ago. An equivalent petrol car would be paying $336 more."

Outlook

"What is the outlook on prices? When will pump prices reach $2.00 a litre? These are questions the AA is often asked," says Mr Noon.

"We do not speculate on future fuel prices, indeed no one can accurately predict future prices in what has become an extremely volatile fuel market."

"That said, three key factors largely set the prices New Zealand motorists pay. The most influential of these is the refined price for petrol and diesel, this is fuel made to meet this country's fuel specifications and can be imported and used immediately in vehicles. The second factor is the exchange rate of the New Zealand dollar against the United States dollar - the strength of the US dollar has immediate impact on the pump prices in New Zealand, as all fuel is traded in US dollars. The third factor is the price of crude oil, but variations in these prices often take time to be seen at the pump. Add to these three key factors geopolitical influences and unrest, or supply disruption through weather, protest or refinery breakdowns, and it is easy to understand why it is very difficult to predict New Zealand fuel prices into the future."

"What we do know is that there are some fuel increases on the medium horizon that are generated by the actions New Zealand is taking, in particular to combat transport carbon emissions. Firstly, the introduction of biofuels is predicted to increase pump prices by around seven cents per litre. Based on today's cost of carbon we can also add another seven cents per litre as a result of the emissions trading scheme. Motorists in major metropolitan cities that require additional funding for transport infrastructure, like Auckland, can also expect another ten cents per litre due to the phased in implementation of regional fuel taxes."

"So all in all the outlook is not for relief at the pump in the medium term, in fact it is quite the reverse," says Mr Noon.

"We are at a point where motorists are now feeling the impact of high prices with a difficult outlook. The AA believes most motorists are now better stewards of fuels and are more careful in their use of them. That is a good thing, but the truth remains - many of us simply do not have the option of a life without cars, and the mobility and economic benefits they bring."

For tips on how to save fuel, go to www.aa.co.nz or www.fuelsaver.govt.nz.

For more information contact

Mike Noon
General Manager - Motoring Affairs
New Zealand Automobile Association
T. +64 4 931 9984
F. +64 4 931 9964
M. +64 21 659 704
E. mnoon@aa.co.nz

The New Zealand Automobile Association is an incorporated society with over one million members. It represents the interests of road users who collectively pay over $2 billion in taxes each year through fuels excise, road user charges and GST.