BP Announce Petrol Price Increase
Exchange Rate, Refined Product Costs Lead To Price Increase
A massive increase in the refined (ready-to-go) cost of diesel and a decline in the value of the New Zealand dollar have forced BP to increase prices at its company-owned service stations with immediate effect. The amount of increase is 4 cents a litre on petrol and 5 cents a litre on diesel.
Both petrol and diesel have been adversely affected by the sharp decline in the value of the New Zealand dollar against the US dollar. Since BP’s last increase on August 19th, the NZ$/US$ exchange rate has fallen from $0.4521 to $0.4287. The impact of the exchange rate alone has added about NZ$4.50 to the cost of a barrel of refined petrol and NZ$5.00 to the cost of a barrel of refined diesel.
Additionally, BP’s Managing Director,
Peter Griffiths, said that the price increase on diesel does
not cover the massive spike in diesel costs since the
beginning of August. “Early this month, refined diesel was
trading at around US$31 a barrel - now its US$41. As if
that’s not enough, the exchange rate has declined as well.
It means that we’ve seen an increase in our costs of around
16 cents for every litre of diesel, excluding GST. The
maths says we are still absorbing cost.”
Refined product costs are determined by supply and demand. Crude oil represents a major cost for a refinery - currently, crude oil is continuing to trade at high price levels, with Dubai at around US$29 a barrel.
The market for refined products continues to reflect high demand in the United States and Asia. Furthermore, refineries struggling to meet demand have reduced their stock levels to a critical point, which may lead to further cost increases.
“We don’t like increasing prices” said Mr. Griffiths. “We keep holding off price increases as long as possible, in the hope that refined product costs will decrease or the exchange rate will recover. That simply hasn’t happened - right now, all of the factors that affect our pricing decisions are working against us.”
“I’ll repeat again the promise I made at the time of our last increase - when our costs start to reduce, we will pass on the savings to our customers.”