If the price stays below $3 for four consecutive weeks, the Government’s fuel support package aimed at 143,000 low-to-middle-income families will end.
They’re currently getting $50 a week through a boost to the in-work tax credit.
But how low will prices go? And how likely is it that prices will soar again?
AA fuel spokesperson Terry Collins told The Front Page that there are concerns about how quickly fuel companies pass on cost changes.
He said the Commerce Commission had identified an effect called “rocket and feather”.
“That is when the prices of fuel went up; the price rocketed up. When the price of fuel came down, it floated down like a feather.
“So really what the Commerce Commission is saying is that we don’t wanna see that effect. The petrol companies’ purchasing model is replacement cost.
“A good example would be if I’ve got $100,000 worth of fuel and it’s gonna cost me $120,000 to replace it, I better charge $120,000 for the stuff I paid $100,000 for because I’ll have a cashflow problem. I’ll need to find an extra $20,000 for our next fleet.
“So they work on a model of what it will cost to replace it. And when it goes up, we see those rapid prices. Well, now that it’s coming down, we equally wanna see just as rapid decreases in the price ‘cause that same model should work both ways,” he said.
While petrol has fallen from about $3.48 a litre in mid-April, the pace has been significantly slower compared with its upward trajectory when the Middle East conflict began.
The Commerce Commission recently put fuel retailers on notice, saying it expected to see decreases in global costs passed through to prices at the pump “in the same way the increases have been”.
“Now that we’re seeing some stability in the region, we expect this will lead to lower imported fuel costs, and we want to see that reflected in the prices consumers are paying,” Commissioner Bryan Chapple said.
Listen to the full episode to hear more about:
What makes up the price of petrol?How motorists can save moneyWhy do prices vary so muchGeopolitical risks.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5pm. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.