$2-plus petrol new reality

The days of less than $2-a-litre petrol have run dry.

Prices have reached their highest level in three years, with BP, Shell, Caltex and Mobil increasing prices this week by 3c to $2.1899 a litre in the main centres.

The long-term outlook was for petrol prices to remain "pretty stable", but was unlikely to return below $2 a litre, Fueltrac analyst Chris Kable said.

Short-term prices were also set to rise if unrest in oil-producing countries continued, he said.

"Markets don't like uncertainty, so if the position worsens prices will rise again."

The petrol price rises three years ago resulted in a "proliferation of bio-diesel suppliers", but many went out of business when the price of oil fell later that year, Mr Kable said.

"The choke point for consumers is a bit of a moving target, and prices would need to remain high for a long period of time before alternative fuels become attractive."

The record of $2.19 a litre for 91 octane was reached in July 2008, when crude oil rose to $US137 a barrel.

Hale & Twomey energy consultant Steve West said the prices of three years ago resulted in a short-term dip in demand, but it was too early to predict what would happen as a result of the latest price spike.

Unrest in the Middle East and North Africa, growing demand from the developing countries of China and India, and a weakening New Zealand dollar were all contributing to increased prices.

Automobile Association spokesman Simon Lambourne said it did not look as if petrol prices would come down soon.

"Motorists should be thinking at this time of driving in a fuel-efficient manner," Mr Lambourne said.

Petroleum Exploration and Production Association executive officer John Pfahlert said while the high price of oil was hitting consumers, the country could benefit from increased interest from oil exploration companies.

"The more expensive oil gets, the more attractive distant frontiers, like New Zealand, are to explore."

Mr Pfahlert said filling up your car in New Zealand was more expensive when compared with North America - due to government subsidies - but cheaper than United Kingdom prices.

The last time Dunedin Taxis raised its fares was when 91 octane reached $2.189 in August 2008 - the same price as at today's pumps.

Drivers continued to absorb increased fuel costs, but fare changes were "on the radar", chairman Tony Ross said.

Prices rises were also increasing interest in alternative fuels, Steve Henry, biodiesel consortium project leader and director of the Otago Polytechnic Centre for Sustainable Practice, said.

Since the first community biodiesel pilot programme was launched in Queenstown a year ago, Queenstown commercial operators were using up to 15,000 litres each month of the cooking oil and mineral diesel blend.

The Biogold NZ20 was available to 20 tourism operators using 66 commercial vehicles for the same price as diesel available at the resort.

Cromwell and Wanaka were being investigated for dedicated biodiesel depots, with a suitable site yet to be found in Dunedin.

Mr Henry said his goal was for the general public to access biodiesel through mainstream fuelling facilities.

"That is what we want to do in the long term."

Paddy Ford said he was "very aware" of fuel prices as part of his daily commute from his Dunedin home to his job as principal of Balclutha Primary School.

Through driving efficiently, he was able to achieve 600km per tank of petrol in his six-cylinder car, 120km more than if the car was being driven around the streets of Dunedin.

He had been making the commute for five years and car-pooled with other teachers.

"It has helped reduce fuel costs by a third."

- Additional reporting by NZPA

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