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Warning: Fuel Price Rise Will Hit Hard

Posted on: Thursday, 21 July 2005, 18:00 CDT

FOOD and other consumer goods will inevitably rise in price and some families will have to curb their leisure travel after another big hike in fuel prices, industry bodies are warning.

Pump prices have increased by 3c a litre this week taking 91- octane petrol to 134.9c and 96-octane to 139.9c in response to higher international oil prices and a weaker exchange rate.

The price of petrol is at a 10-year high.

Government ministers yesterday said the reasons for the rise were out of their control, and they did not plan any immediate policy changes as a result.

Finance Minister Michael Cullen rejected a suggestion from Automobile Association spokesman George Fairbairn that the Government could have helped ease the rise by providing "some cushioning" when it increased petrol tax by 5.6c a litre on April 1 to pay for transport projects. "This money has already been distributed into the regional transport programmes on a proportional basis. To attempt to wind it back now would require borrowing," Dr Cullen said through a spokeswoman.

Road Transport Forum chief executive Tony Friedlander yesterday warned that higher prices for petrol and diesel would push up prices across the board.

"Everybody will see that in everything they consume." Diesel prices had risen 40 percent in a year and those costs had been passed on by most, if not all, of the forum's members.

The latest increases would have to be passed on, because the industry operated on tight margins.

"They have no ability to absorb increases of this magnitude." However, big price rises presented a particular problem for smaller operators who faced fixed contracts or needed to warn customers before introducing higher prices.

"The typical small family business does not have the huge reserves to cover those sort of short-term changes." Freight carriers would continue to seek better fuel efficiency, but in general if there was room to improve efficiency it would have been taken.

The amount of truck activity would not decrease because of the price rise.

"The only reason freight activity would drop off is if our clients stopped producing." Mr Fairbairn said some families may have to trim important social and family events to pay for the increasing price of petrol.

He also expected rises to feed through into inflation.

"But it's a world price and New Zealand has to bite the bullet." Meanwhile, Energy Minister Trevor Mallard said plans were well in train to address New Zealand's shortfall in strategic oil stocks. New measures were likely to go to Cabinet next week and would include holding some stocks in storage overseas.Officials in March estimated reserves were 28 days short of the required buffer of 90 days' supply set by the International Energy Agency.

Motorists will face another 1c a litre price rise to pay for the increased reserves.

Source: Southland Times, The

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