\u201cI think probably the key thing is how long is this going to last for?\u201d<\/p>\n
Smith said Brent crude was around US$83 ($143.6) a barrel, well down from the US$110-$120 seen in April.<\/p>\n
But he said recent developments in the Middle East were an \u201cunwelcome distraction\u201d for consumers, households and firms looking to put the crisis behind them.<\/p>\n
\u201cWe had expected [petrol prices] to go into the low $2.70s per litre. If anything, this has put a floor behind it and we\u2019re probably looking at $2.90 now,\u201d Smith said.<\/p>\n
\u201cAgain, it\u2019s going to depend on how long this lasts for.\u201d<\/p>\n
According to fuel tracking app Gaspy, the price of 91 octane on average is $2.93 a litre, up more than 17% compared with early March\u2019s $2.49. <\/p>\n
However, petrol has fallen from around $3.48 in mid-April.<\/p>\n
Smith said given where inflation is, there was a risk that if it remains high, the Reserve Bank (RBNZ) will have to respond.<\/p>\n
\u201cThe key thing for this is the persistence of the shock. That\u2019s what really matters. From a Reserve Bank point of view, that\u2019s what they\u2019re worried about,\u201d he said.<\/p>\n
\u201cThey put out some interim forecasts for CPI [consumers price index] inflation, so they had 3.9% in Q2 and 3.3% for Q3.<\/p>\n
\u201cThere\u2019s clear upside risk to their 3.3% CPI pick for Q3 and obviously the longer this stuff goes on the harder it will be to get inflation below 3%.\u201d<\/p>\n
Kiwibank economists said the ongoing instability in the Middle East has driven sharp swings in oil prices. <\/p>\n
\u201cThese fluctuations continue to weigh on global sentiment and introduce volatility into the NZ dollar,\u201d they said.<\/p>\n
\u201cThe last few months have left us battered. As the escalations and de-escalations continue, the price of oil follows, and our heads spin.\u201d<\/p>\n