'It's going to be 1975 again': Diesel prices face sharp jump

Motorists using diesel are being warned to expect to see its price lift over $4 a litre this week.

Z has issued a national list price advisory for commercial customers, effective Tuesday, noting that diesel will lift 55c a litre.

That would put the price at service stations to $4.16 a litre.

AA spokesperson Terry Collins said he was at a meeting on Tuesday where it was indicated that price could soften a little, but he said it would remain over $4.

He said the cost of refining had lifted 600 percent.

"Refining is now more than the cost of oil."

A spokesperson for Z said it set retail prices based on replacement cost.

"This means prices are based on what it will cost to buy our next shipment of refined fuel from overseas, not the fuel that is already sitting in tanks today.

"We remain committed to responsibly managing the fuel needs of our New Zealand customers.

"Some of Z's commercial customers are supplied under a weekly National List Price, which provides a consistent price nationwide. These prices are generated through automated, formula based pricing mechanisms that reflect underlying market costs.

"While we can't speculate on future fuel price movements, it is important to note that recent pricing is a result of increases in underlying global fuel market costs, rather than changes in Z's pricing approach."

Simplicity chief economist Shamubeel Eaqub said the increase was in line with what he expected.

"We have no refining capacity in New Zealand. Crude prices mean nothing to us. The only thing that matters is whether we can get refined diesel and petrol to come into the country. They mainly come from two places, Singapore and Korea. And those two markets are struggling to provide everything that we need."

He said oil commodity prices were still working on the basis that the war would be over shortly.

"It could be, who knows? I doubt it. I think it's going to be 1975 all over again. People don't understand that any kind of warfare is going to be asymmetric and the entire supply chain for fuel, for fertilizer, for plastics, for chemicals is going to be disrupted for months, if not years to come."

He said it was surprising how much heavy traffic volumes had dropped in recent weeks, because it tended not to be something that responded to the price of fuel.

Auckland heavy traffic is down 6.3 percent compared to a year earlier, Canterbury is down 7.3 percent and Wellington 1.9 percent.

"Either it's telling us there's been a real collapse in economic activity or that our heavy industry is being really careful in managing its use, which we haven't seen in a big way in the past."

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