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Anon

If the petrol prices have increased because of the 'poor dollar' why hasn't this also affected the diesel prices? There always seems to be some excuse or another for petrol hikes.

Why does it take so long for global price decreases to take effect? (up to 3 months) Yet when they increase global petrol prices consumers in NZ get the increase in their petrol prices instantly.

I believe the reason quoted recently for consumers in NZ not seeing the price decrease straight away is that there are reserves of petrol so it takes time for the price decrease to come through.

If this was true why are consumers being hit with the price increase as soon as it happens?

There must be reserves of petrol when price increases occur. No one could predict when the dollar or petrol prices would fall or rise dramatically.

Hope you can clarify.

Bridgette

From the "Ask Jack" archives - 5 February 2009

jbiddle

From our analyst Mark:

It's a common misconception that petrol and diesel prices move together, usually because of the price of crude oil. Believe it or not, the three are not that closely linked, and prices for refined petrol and diesel are set independently on the global commodity market. Lately we've had the situation of crude prices coming down, yet refined petrol prices have gone up.

Since the start of January, refined petrol prices have gone up 40%, and as these are set in US$, this has been exacerbated further by the decline in the Kiwi exchange rate. Over the same time, refined diesel prices have risen a net 2%. The AA monitors these international price variations and the effect of the exchange rate, and calculates what is known as the 'importer margin', which is the difference between the pump price and import costs less taxes etc.

As long as the average margin remains roughly the same, then that suggests the pump price fairly reflects the latest international price and exchange rate, all things being equal. Our monitoring shows that despite the 20c rise in petrol pump prices, the petrol importer margin is still below average, but that the diesel margin is within the normal range despite the lower dollar.

The AA called for an inquiry into the NZ fuel price market last year, which was commissioned by the Minister of Commerce, the resulting NZ Petrol Review report was published by the MED (www.med.govt.nz).

The report's authors monitored retail price movements versus international price movements over a 2-year period to May 2008, and found that retail prices went up as quickly as they went down, and that retail price movements tended to lag international movements by no more than one week (whether up or down).

From the peak prices last July until the end of 2008, petrol and diesel prices dropped 86c and 88c respectively. The way that retail prices are set has nothing to do with the amount of fuel in reserve, i.e. it is not set according to the cost of the fuel in service station storage tanks, but the replacement cost as per above.