The price of petrol is quickly moving toward levels last seen in March 2020.
Weekly fuel price monitoring data from the Ministry of Business, Innovation and Employment (MBIE) shows the price of regular petrol currently sat at $2.28 per litre for the week ended June 4, 2021.
This is the highest its been since the price of petrol exceeded $2.28 per litre for the week ended March 6, 2020.
This steady price increase is also reflected in the cost of a litre of premium fuel, with that rising to $2.42 in the latest data. This is the highest level since the week ended February 21, 2020.
These figures put petrol prices on par with the high levels seen before the impact of the pandemic.
As Covid-19 spread across the world, demand for oil dropped significantly as the need for transportation dropped with people confined to their homes.
This led to a massive drop in oil prices, with the price of crude sitting as low as US$18.43 per gallon at one stage during the pandemic, according to the MBIE data.
With the rollout of vaccines and the steady relaxation of lockdown conditions, demand has returned and the price of oil has steadily increased.
This has had the knock-on effect of steadily increasing prices at pumps.
This week, the price of oil broke the $70 threshold since May 2019.
Oil analysts have noted that these increases come while the market is still depressed, given air travel hasn’t come close to pre-pandemic levels.
As a greater number of airlines reintroduce routes, the demand for oil will only increase.
The Financial Times has reported that Opec and other large oil producers, which have been curtailing production during the pandemic due to the fall in demand, are starting to add barrels back to the market as consumption improves.
However, it is unclear at this stage whether they hold enough spare capacity should demand start to rise significantly above its pre-pandemic level of about 100m barrels a day.
The Financial Times went on to note that given the continued uncertainty in the market, oil demand is likely to fluctuate in the coming year.
This also comes amid growing concerns about the spectre of inflation both here and abroad.
Data out of the US overnight showed consumer prices rose 5 per cent year-on-year in May which is the highest inflation amount since August 2008 in the US. Excluding food and energy, core inflation rose 3.8 per cent, the greatest increase in almost 30 years.
In May, Reserve Bank Governor Adrian Orr said the RBNZ saw New Zealand inflation reaching 2.6 per cent in the second quarter of this year.
The inflationary pressure has led to forecasts that the Reserve Bank may need to increase interest rates to head off inflation in the coming year.
RBNZ’s forecasts now suggest it is on track to begin lifting the official cash rate in the second half of 2022.
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