Oil firms feel heat as crude price drops

Pressure is mounting on petrol companies to cut near record prices after the cost of crude oil dropped to US$92.69 a barrel.

But relief for motorists is far from assured, with fuel companies expected to reassess current costs this week and warning world oil prices remain volatile.

The cost of oil peaked on January 3 at US$100 a barrel, prompting most oil companies to lift their fuel prices by five cents. They have since resisted cutting fuel prices back – even though oil prices dropped at the weekend.

Shell spokeswoman Jackie Maitland said a sustained drop in the cost of both crude and refined product, combined with exchange rate movement, would dictate when lower prices were passed on to consumers.

"There's a lot of continued volatility in the market and reviewing prices every day is the best way to deliver the best prices at the pump," she said.

Automobile Association spokesman Mike Noon said the trend represented by the falling crude prices and a strong New Zealand dollar were two " hopeful" indicators there could be eventual relief for motorists at the pump.

Prices for 91 octane have climbed to $1.75.9 per litre – just a cent less than the record high reached in July 2006.

The cost of consumption was also hitting the freight industry.

Members of lobby group the Road Transport Forum had noted the effect of higher fuel prices on carrying goods destined for the pre-Christmas shopping rush, and now into the summer/autumn period as rural production peaked.

Chief executive Tony Friedlander said high international prices were passed on to the forum's clients, unavoidably affecting freight rates.

"High fuel costs are particularly severe at this time of the year because of the high volumes of freight being moved," he said.

Internationally, oil traded above US$90 for a month before breaking the US$100 a barrel mark, driven higher by strong demand and tight supplies.

Disruptions in supply from major oil exporters underpinned the gains.