While the weakening United States dollar is underpinning the high oil prices to some extent, without the converse strength in the New Zealand dollar at present, motorists could already be paying as much as $35c more per litre of fuel, if the kiwi were trading about US60c instead
of US79.4c.
Oil prices this week were at record highs, almost $US120 per barrel, before pulling back - West Texas sweet crude was trading at about $US119.20 yesterday.
The combined effects next year of the Government's emissions-trading scheme starting and the possible introduction of regional fuel taxes could add another, separate 10c-20c per litre, ASB chief economist Nick Tuffley said yesterday.
"The trend of oil prices has been one way lately, with only some brief exceptions,'' he said. Oil only reached the milestone $US100 per barrel on January 2 this year.
Fuel prices in remote New Zealand areas have already topped $2 per litre, and late on Tuesday mainstream prices rose to new highs with petrol up 3c to $1.86 and diesel up 5c to $1.59 - an overall 17% rise in four price hikes totalling 11c per litre in the past month.
Minister of Finance Michael Cullen has rejected renewed calls by the Automobile Association to remove GST from petrol prices, saying oil prices had risen 80% in the year to January and the global price would have negated any benefit from changes to GST.
"In other words, if the New Zealand Government had changed GST rules along these lines 12 months ago, no-one would have even noticed as the benefits would have been wiped out almost immediately by the global rise in oil prices,'' Dr Cullen said.
Mr Tuffley said with so many variables affecting global oil prices, it was "near impossible'' to predict when New Zealand might hit $2 per litre, but said it was more likely to happen in a 12-month timeframe.
"[However], there is the risk we could get there in a few weeks, if oil prices continue up as rapidly as they have been,'' he said.
Keeping the price in check is the slowing global economy and increasing oil exploration, but countering that is general China demand, fears of production disruption, and China stockpiling supplies before the Olympic games in August, he said.
The US remains the largest oil consumer in the world, but for the 10 years to 2006 its oil use rose 12.5% while China and India's use rose respectively more than 100% and 50% during the same period.
Research by brokers ABM Amro Craigs said US oil prices had risen almost 15% since the beginning of the month, and in the US, gasoline prices had hit a record $US3.40 per gallon.
"Gasoline futures, which are up 25% compared with their January average, signal further price increases ahead,'' the research said.
When oil futures leapt to a record close of $US119.37 a barrel amid a tumbling US dollar, unrest in Nigeria and Opec's reluctance to increase oil output, the US markets responded negatively.
Reuters reported yesterday that Wall Street stocks skidded on Tuesday as market sentiment took a hit from the new records reached on the oil futures market, plus a weak report on US housing and cautious guidance from companies reporting earnings.
The Dow Jones industrial average dropped 96.32 points, or 75%, to 12,728.70 at the close, the Nasdaq tech composite retreated 29.93 points, or 1.24%, to 2378.11, and the Standard & Poor's 500 broad-market index fell 11.29 points, 0.81%, to 1376.88.
