Petrol prices rose to more than $1.75 per litre at times during the September 2006 quarter. This compares with retail pump prices of less than 60 cents per litre 25 years earlier in 1981, following oil price shocks in 1974 and in 1979. It is interesting to note, however, that petrol prices have not increased as strongly as consumer prices overall since 1981. This article looks at how petrol prices and the overall Consumers Price Index (CPI) have tracked since 1981, when the CPI petrol index started.
The graph below shows that from the March 1981 quarter to the December 2006 quarter the CPI increased overall by 254.4 percent. Over the same period, the CPI index series for petrol increased by 168.5 percent.
The largest quarterly increase in petrol prices over this period was of 15.6 percent in the September 1984 quarter. This came after the 1982–1984 price freeze was lifted and after the New Zealand dollar was devalued by 20 percent, which had an upward influence on import prices of 25 percent. By the September 1985 quarter, prices were 35 percent higher than in the June 1984 quarter. Not long after, however, petrol prices fell by 18.6 percent in the year to the September 1986 quarter – the largest annual fall in the time series.
GST was introduced in October 1986. Petrol prices rose by 7.2 percent in the following quarter and by a total of 18.1 percent over the three quarters from the September 1986 quarter to the June 1987 quarter.
During the 12-year period from the June 1987 quarter to the June 1999 quarter, petrol prices were generally quite stable, with the exception of the December 1990 quarter, when prices rose by 13.9 percent and then fell a total of 9.9 percent in the following two quarters. This short spike in prices would have been influenced largely by the Gulf War from August 1990 until February 1991.
Prices rose by a total of 106 percent from the June 1999 quarter to the June 2006 quarter. During the first 18 months of this period up until the December 2000 quarter, the New Zealand dollar, as measured by the trade-weighted exchange rate index, weakened by nearly 20 percent, which will have had an upward influence on fuel import prices. During the remainder of the period, from the December 2000 quarter to the June 2006 quarter, petrol prices rose by 46.5 percent despite the dollar strengthening by more than 30 percent.
Petrol prices have fallen by a total of 15.9 percent over the two quarters since the June 2006 quarter. The largest quarterly decrease during the overall period was a fall of 15.2 percent in the December 2006 quarter. The introduction of fuel discount schemes related to spending at supermarkets and in-store at petrol stations made a small contribution to the decrease, but it mainly reflected decreases in pump prices.
The graph shows that there has been more volatility in petrol prices since 1999. Some of the factors contributing to this volatility have been:
- concerns about security of supply caused by political uncertainty in the Middle East and parts of Africa
- growing demand by emerging economies such as China and India
- extreme weather events, such as Hurricane Katrina, which have disrupted oil refineries
- concerns about limited oil supply
- currency fluctuations
- limited refining capacity
Key dates:
- June 1982–February 1984 price freeze
- July 1984 New Zealand dollar devalued by 20 percent
- December 1984 all controls on both outward and inward foreign exchange transactions removed
- March 1985 New Zealand dollar floated
- October 1986 GST introduced at 10 percent
- October 1987 world sharemarket crash
- July 1989 GST increased to 12.5 percent
- August 1990–February 1991, Gulf War
- June 1999 quarter–December 2000 quarter the Trade Weighted Index (New Zealand Dollar) fell by 19.1 percent
- December 2000 quarter–June 2006 quarter the Trade Weighted Index rose by 31.5 percent
- April 2003 US entered Iraq
- August 2005 Hurricane Katrina hit the United States, shutting down a number of oil refineries.
Back to Price Index News: April 2007