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AA Petrolwatch – September 2005

Media Release: October 4 2005

AA PETROLWATCH – September 2005

Fuel prices for September

In September petrol prices were at record levels following Hurricane Katrina, increasing 8c/litre to a peak of $1.56/litre for 91 octane in mid September, but easing off 4c/litre towards the end of the month. Oil companies absorbed the worst of the Hurricane Katrina peak (proven by low importer margins) but through the rest of September importer margins remained above average.

With supply and demand being very tight, experts are predicting prices are to remain volatile for the medium term.

Changes to meet new Government fuel specifications

In September there were also changes to the New Zealand refinery, to enable product to meet new Government fuel quality standards by the January 2006 deadline. For the motorist this means many oil companies are already introducing the new product by mixing it with existing stocks. This does not affect motorists using regular 91 petrol, but may affect those using either diesel or 96 octane petrol.

Diesel: For diesel, phasing the sulphur levels down from 500ppm to 50ppm from now to January 2006 may create problems in some older diesel vehicles. Owners, particularly of pre-1995 Japanese diesel vehicles, should watch for fuel leaks and if any are found, act quickly to avoid ongoing leakage. Motorists will need to be vigilant for some months as the sulphur levels will continue to be lowered progressively to reach the new 50ppm specification by January 2006.

Premium: The new Government specifications also affect premium petrol. 96 octane is being phased out and replaced by 95 octane that meets the new specification. The vast majority of vehicles that use 96 octane are also designed to run well on 95 octane and most motorists can expect to have no problems. Some vehicles will need to be re-tuned slightly to run well on 95 octane, but only a very few are likely to need to add an octane enhancer (if they do not have access to 98 octane). Oil companies have provided information on the changes on their websites and through leaflets at service stations.

Introduction of 98 octane

We would alert buyers of premium petrol that they may find their local service station has replaced 96 octane with a new grade 98 octane, which carries a price premium. Motorists should be vigilant so as to not be caught out by the change. Before you fill up, check the pump price and octane rating, so as to not end up buying the more expensive 98 octane fuel without intending to.

ENDS

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