Retail petrol prices

IBISWorld expects the average retail price of petrol to fall 3.6% in 2024-25, to 264.5 cents per litre. An improvement in the value of the New Zealand dollar relative to the US dollar, meaning the New Zealand dollar can effectively purchase a more significant portion of crude oil, underpins this decline. The world price of crude oil is expected to contract over the year as market conditions stabilise, further alleviating petrol prices. However, the Russia-Ukraine conflict's adverse effect on global oil supply is expected to keep crude oil prices significantly above the pre-pandemic level. Russia is a major crude oil supplier, accounting for approximately 12% of global oil production. Sanctions and restrictions on Russian exports are expected to tighten supply in oil markets, filtering downstream through higher petrol prices. The OPEC has also enforced oil production cuts to lower demand, placing upward pressure on oil prices. For example, Saudi Arabia recently announced plans to slash crude oil output by 1 million barrels per day, in addition to cuts made over the previous year.

Movements in the world price of crude oil heavily affect petrol prices. Global oil prices are highly volatile, influenced by various factors, including the value of the New Zealand dollar, production volumes and downstream demand conditions. The COVID-19 pandemic has added further volatility to global energy prices. In March and April 2020, global road transport activity fell by almost 50%, and international commercial air travel declined by nearly 75%. Weakening demand significantly impacted global oil prices, causing them to fall sharply. In April 2020, OPEC agreed to cut oil production by 9.7 million barrels per day. But demand declines outpaced this output cutback, with global oil prices plummeting in the 2020 calendar year. Production cuts were scaled back to 7.7 million barrels per day in August 2020, with further reductions to production cuts occurring as demand for oil recovers. The Central Governments' (Te Kawanatanga o Aotearoa) restrictions on movement also limited road transport activity and demand for petrol, a trend displayed across nations. International border closures compounded declines in demand for fuel due to fewer tourists travelling around New Zealand by motor vehicle. Recovering global demand conditions in the pandemic's aftermath sent crude oil prices surging, prompting OPEC to reduce oil production by 2 million barrels a day in October 2022.

As crude oil is priced in US dollars, movements in the value of the New Zealand dollar relative to the US dollar can cause volatility in retail petrol prices. Over the past five years, the value of the New Zealand dollar has depreciated against the US dollar. This has meant that each New Zealand dollar can effectively buy a smaller amount of crude oil on the international market, which has placed upward pressure on retail petrol prices in New Zealand. The Russia-Ukraine conflict is expected to cause deficits in the global supply of crude oil, driving up oil prices and retail fuel prices in the current year. Overall, IBISWorld forecasts the average retail price of petrol will rise at a compound annual rate of 4.2% over the five years through 2024-25.