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Petrol rises hurt economy

by Mike Bruce

Oil companies' 3c-a-litre haymaker to consumers will send shock waves through all sectors of an economy reeling from the 10th petrol price rise in a year.

The companies yesterday completed their fourth round of price rises this year with a 3c-a-litre increase, making the average price in Christchurch $1.03 a litre for unleaded 91, $1.08 for premium unleaded, and 67.5c for diesel - an 11-year high.

The companies have blamed the increase on the price of crude oil which has rocketed from $US24 to $US27 a barrel since February.

Last March petrol prices were 79.9c and 84.9c a litre in main centres, and prices did not move until July when a string of increases began.

Spokesman for the South Island Road Transport Association, Mark Kunnen, said that while petrol had increased almost 29 per cent in price since last July, diesel had gone up almost 43 per cent, which spelt price increases on most consumer goods.

"At the end of last year most operators were getting price increases of 3 to 5 per cent on their contracts. That will probably be more like 7 to 9 per cent now," Mr Kunnen said.

The regions would be hardest hit as the companies had used the increases as a means of eroding the cross-subsidisation on diesel that had existed between urban and rural areas, he said.

"Every product moved by road, rail, and ship will be affected but agricultural products and rural communities will probably be the hardest hit. The sector to see the quickest impact will probably be fresh fruit and veges which are trucked long distances."

University of Canterbury senior lecturer in economics Paul Dalziel said because transport made up about 10 per cent of the Consumer Price Index, the latest increase was bound to have a "small but noticeable" effect on inflation".

"The (petrol price) increases last year were offsetting falls over the previous couple of years but this is the first inflationary bite we may see," he said.

While the Reserve Bank would probably tolerate this increase, it may have to resort to interest-rate manipulation should petrol-price increases create any more inflationary pressure, he said.

Chairman of the Canterbury branch of the Automobile Association, Tom McBrearty, said the association was disappointed with the increase but said it should make people more conscious of their transport habits.

Energy Minister Pete Hodgson made no comment on the increase yesterday

-- Carl Jenkins (, March 08, 2000


This situation has been made worse because of the weakness of our currency compared to the US$. In July last year we were NZ$1 to US$0.53, we are now NZ$1 to US$0.48. Thus our fuel prices are being hit twice, once because of the high oil prices, and again because of the movement in exchange rates.

-- Malcolm Taylor (, March 08, 2000.

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