Petrol prices to fall further before Christmas - analyst
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Drivers have already enjoyed 12 petrol price cuts since a peak in October, but there are more to come, says market analyst David Lewis of Milford Asset management.
"I think, if you look over the next few weeks, prices will continue to decline by
another 10 cents or so," said Lewis, Milford portfolio manager.
"And we don't expect that we're going to get back to prices as high as
what we saw in September when they reached $2.40 or $2.50 per litre."
Oil prices soared this year, through to a peak in early October, which coincided with a fall in the kiwi dollar and new fuel taxes to hit drivers in the pocket.
But in a dramatic market shift - which caught many traders off guard - oil prices have slumped in the past two months.
They are now down 34 per cent since a peak on October 3.
The kiwi dollar has also bounced back - up about 7 per cent since the start of October.
"From an investor perspective, there is cause for concern and the reason is that this
very sharp fall is an indicator of a softness in global demand – a softness in the global economy," Lewis said
The Prime Minister has also announced that the Commerce Commission will carry out a price study of the industry to look at the margins local companies are charging.
Lewis notes that the margins in the pump prices have risen in the past decade.
"At a high level, the companies' margins are a small piece of the total price you pay.
But that margin has increased markedly over the last several years and is high
relative other countries, including Australia," he said.
"The Government's initial conclusion last year was that basically, yes, there are indications that there could be some gouging – although they don't use that term.
"But the market is not working well for consumers at the moment."
Meanwhile, the dramatic surge in oil prices continues to show in economic data with today's terms of trade showing the rise in import costs outstripping rising export returns in October.
"Specifically, petrol and petroleum products prices lifted 6.4 per cent quarter on quarter, taking the annual rise to over 50 per cent, the ASB economics team noted.
"Price lifts were more mixed for other imports: consumption goods prices rose 4.7 per cent quarter on quarter, whereas capital goods prices fell 1.4 per cent."
Exports prices rose 2.3 per cent quarter (8.1 per cent year on year).