Retail diesel prices

IBISWorld forecasts the average retail price of diesel to fall by 0.7% in 2024-25, to 209.5 cents per litre. The retail price of diesel is correlated with the world price of crude oil, which exhibits significant volatility. Despite volatility in global energy markets due to the ongoing Russia-Ukraine and Israel-Hamas wars, diesel prices are expected to decline in 2024-25. Uncertain global economic conditions, especially in the major economies of China and the United States, are weighing on global demand and prices for diesel. The New Zealand dollar is also forecast to strengthen against the US dollar during the year, reducing the relative price of oil in New Zealand dollar terms.

Various factors influence retail fuel prices, such as crude oil production levels, government policy both domestically and in other nations, and downstream demand. The number of vehicles and the total amount of distance covered, particularly by freight transport, also determines demand. The world price of crude oil is priced in US dollars per barrel. Consequently, the domestic retail price of diesel is also influenced by changes in the value of the New Zealand dollar relative to the US dollar.

Over the past five years, the retail diesel price has fluctuated widely but has ultimately increased. The COVID-19 pandemic significantly decreased global demand for oil from the manufacturing and aviation sectors, resulting in a sharp decline in oil prices and a fall in the average retail price of diesel. For example, New Zealand retail diesel prices in the December 2020 quarter were the lowest since September 2017, when prices were slowly recovering from the crash in world crude oil prices that occurred in 2015-16. The Organisation of the Petroleum Exporting Countries (OPEC) and other oil producing countries, such as Russia and Malaysia, agreed to cut supply from April 2020 to balance supply and demand conditions, which provided some support for oil prices. Russia is a major producer and exporter of crude oil. Consequently, crude oil prices have soared since the start of the Russia-Ukraine conflict in February 2022, reaching a record high in September 2022. The latest Israel-Hamas war has also added to volatility in world oil prices. Additionally, New Zealand has witnessed growth in its number of licensed motor vehicles over the past five years, boosting fuel demand. Overall, IBISWorld forecasts the average retail price of diesel to rise at a compound annual rate of 7.9% over the five years through 2024-25.