What does future look like for petrol prices now?

The government's decision to delay fuel tax increases has provided some short-term relief to motorists, but economists anticipate that petrol prices will not return to pre-Middle East conflict levels, according to analysts. Instead of the previously planned tax rises of 12 cents in January and incremental increases throughout 2029, the tax will now increase by 5 cents every six months, starting in 2028.

According to Gaspy data, 91 petrol has decreased by 1.6 percent over the past 28 days, averaging $3 nationwide. Diesel prices have dropped 0.62 percent, and 95 petrol is down 1.4 percent during the same period. The cheapest petrol on Tuesday was recorded at Pak 'n Save Tauranga, priced at $2.676.

ASB senior economist Mark Smith expressed surprise at the benign fuel prices, considering the closure of the Strait of Hormuz and the ongoing conflict between the US and Iran. He noted that fuel supplies have been diverted through alternative channels, such as pipelines, and that the US has increased its production, contributing to the current prices.

Smith warned that it's difficult to predict fuel prices for the remainder of the year and into 2027, as the conflict remains fast-moving. He pointed out that fuel spreads have increased from about $20 a barrel to $70, which will further impact prices.

While oil prices are expected to decrease, refineries are likely to maintain higher prices due to the added risk premium associated with the ongoing conflict. BNZ chief economist Mike Jones agreed that fuel prices are likely to remain higher than pre-conflict levels in the near term, though they may ease towards the end of the year.

Jones emphasized that significant changes and rapid developments can occur, as seen in June when the Strait of Hormuz reopened, causing crude oil prices to temporarily return to pre-conflict levels.