Oil price pumps up cost of petrol

The major petrol outlets all raised their prices by five cents today in response to a new high in the cost of oil, which broke the $US100 a barrel mark yesterday.

BP raised pump prices this morning by 5c on petrol and 6c on diesel, in a move followed soon after by other oil companies, taking 91 octane to 175.9c/litre, 95 to 180.9c and diesel to 130.9c.

Petrol prices are now only 1c short of record high prices set in July 2006.

Mobil spokesman Alan Bailey told Stuff today that the price of petrol at all Mobil operated service stations would rise five cents to 175.9 cents for 91 octane and 180 for 95 octane.

Mobil's prices last rose in early December, Mr Bailey said.

Shell also raised it's pump prices by 5c on petrol and 6c on diesel this afternoon.

Shell spokesperson Jackie Maitland told stuff that the company waited for as long as possible before putting up prices.

"We've been reviewing our prices more than once a day, given recent fluctuations in the market, and we held out as long as we could, but we moved the price up just after 1.00pm," she said.

The international oil price hit - and then broke through - US$100 a barrel for the first time yesterday, spooking an already volatile world economy.

US crude climbed 47 cents to $US100.09 a barrel by 5:57 am NZT, breaking Thursday's record high of US$100 even. Brent crude rose 45 cents to US$98.29 a barrel.

With oil affecting most prices, New Zealand households can expect to pay more for petrol, groceries, manufactured goods, public transport and air travel. And extra spending will keep upward pressure on mortgage interest rates.

Record oil and gold prices are throwing United States shares into turmoil as investors worry about the world's biggest economy being pushed into recession.

The international spike in oil prices triggered a near 1.7 per cent fall in US shares, almost matched by a drop in Australia. New Zealand got off lightly with a small dip.

The US price of oil has gone up almost 57 per cent in the past year, though New Zealand has been protected so far from the worst effects by a rising Kiwi dollar.

Westpac calculates the present price could push petrol up by 5 cents to about $1.76 a litre for 91- octane.

Fuel prices hit nearly every industry, especially those with a transport or manufacturing component. Retail and wholesale goods use oil derivatives in manufacturing, particularly plastics, and most goods have distribution costs.

New Zealand tour operators and freight companies cite fuel as the toughest cost component, as all transport prices have to be reconsidered each time fuel goes up.

As motorists pump more disposable income into their vehicles, the spending pressure on inflation could give the Reserve Bank reason to keep interest rates up.

The $US100-a-barrel price is a psychological barrier described as "once unfathomable" by international commentators, and comes only three months after the US$90 price ceiling was broken.

OMFinancial oil analyst Mark Johnson said political unrest around the world could send prices up further. "If it breaks through and holds through [the $US100 level] we'd be looking at a move to $US110, if not higher.

"It's uncharted territory - we haven't been this high before."

The Automobile Association's Mike Noon said recent data showed oil companies making enough profit per litre not to need a price rise, but that could be changing.

Holidaymakers who had made it home would miss any rise at the pump but would still have paid hefty sums to fill their cars. Yesterday's price of $1.71 was "still very high".

Australian-based international airline Virgin Blue has announced a 30 per cent rise in its fuel surcharge from next month, reflecting that jet fuel has nearly doubled to $US112.60 a barrel since 2005.

The rise was driven by fighting in Nigeria, cutting the country's output by 20 per cent, a cold snap in the US increasing demand for heating oil, and speculative trading in oil markets.

Mr Johnson said instability in Iraq and Iran and the assassination of Benazir Bhutto in Pakistan were all adding to concerns over fuel supply. "There is no end of geopolitical tension in sight at this stage."

Economic recession in the US triggered by oil, a housing slump and a credit crisis would be a concern for New Zealand because it is its second-biggest export market after Australia, worth more than $4.6 billion a year.

The price of gold was up to almost $US860 an ounce, buoyed by oil and because it is seen as a haven in times of crisis. It has risen about a third in the past year.

Petrol companies did not increase prices yesterday, Caltex saying the New Zealand dollar was insulating the pump price from global volatility. Prices were $1.71 a litre for 91-octane, $1.76 for 95 and $1.25 for diesel.

- with Reuters