Saudi attacks: Global oil prices spike, uncertainty over petrol prices locally
An energy consultant says it's too soon to say exactly what impact an attack on an oil processing plant in Saudi Arabia will have on New Zealand petrol prices as global oil prices spike.
Image: Marco Verch on Flickr
There are warnings the price of petrol could spike as a result of drone strikes on what's described as the world's most important processing centre in Saudi Arabia.
Wholesale prices for two benchmarks rose as much as 18 percent, as futures trading resumed this morning.
Economist Cameron Bagrie said one third of fuel prices at the pump are passed-on import costs, meaning petrol prices will go up.
"It's entirely reasonable to expect them to pass on a fair bit of that to consumers, unfortunately. It's a consequence of what we're seeing around the globe at the moment," he said.
"We're going to start seeing a bit of pain at the pump and we're not talking about a small number," Mr Bagrie said.
The Commerce Commission's draft fuel market study released last month concluded the lack of an active wholesale fuel market in New Zealand was one of the main reasons consumers are paying more for fuel than they should be.
Mr Bagrie said fuel companies were still under the spotlight.
"The Commerce Commission might be looking closely in regard to how quickly they pass it on, or the extent of the price increases."
Brent crude oil prices jumped to a high of nearly $US72 a barrel before settling back to around $US64, a 13 percent rise on the weekend closing price.
The other main measure - West Texas Intermediate - surged more than 15 percent in early trading.
Energy Consultant Ian Twomey told Morning Report there was still a lot to find out about the scale of the damage.
"It's going to depend on how quickly the Saudis respond. If they show they can get a lot of the plant on and get things pumping again, that'll ease the market," he said.
Saudi Arabia's national oil company said it expected to restore roughly a third of crude output by tomorrow.
It's estimated the drone attack, claimed by Yemeni Houthi rebels, has cut production at the giant facility by nearly six-million barrels a day, about five percent of global demand.
Local fuel retailers have suggested pump prices here might rise between 5 and 10 cents a litre if the disruption continues for any length of time.
Mr Twomey said it was not a cause for panic, and Saudis had been pulling back on their oil production in recent years because of the rise in US production.
"It's still essential, but perhaps not as essential as it might have been 10 years ago."
He said people might want to play it safe by filling their tanks earlier rather than later but there was currently more variation in prices than the predicted shock.
The Automobile Association's petrol prices spokesperson, Mark Stockdale, said that, although we didn't buy much oil from Saudi Arabia, there would still be a global effect if supply was reduced.
"That really doesn't matter; what this is about is global supply of oil and, as we know, one of the key uses of oil is to refine that into petrol or diesel.
"If there's a reduction in the global supply of oil, it'll likely have an impact on the cost of petrol or diesel regardless of where it's sourced from.
Mr Stockdale said it was difficult to say what the effect would be, but said it didn't bode well.
"This will have global ramifications but we really don't know what that impact will be just yet...
"Part of that will depend on how much oil is available in the world to meet the current level of demand."
He said there was always an excess of capacity of oil as a buffer, but it was unclear whether that buffer would be able to cope with this.
"All we can say is that this is not a positive development. It could mean higher fuel prices but we'll have to wait and see.
"This is something that affects pretty much all humans around the world. We are pretty dependent on fossil fuels, not just for cars, it's buses, trucks, planes, agricultural machinery, ships that transport goods to and from New Zealand.
"It'll affect everybody, and in different ways," Mr Stockdale said.