What is up with petrol prices?

The cost of a barrel of oil is down to $35US and the exchange rate is loitering around $1NZ=$0.52US. Why is fuel at $1.63? A rough and ready look at the numbers suggests approximately $1.40 to me – although with a big error band (Note: less than 20c though).

The rumours I’ve heard are:

  1. Refiners are increasing margins (how?)
  2. Tacit collusion between retailers (then why do margins appear to be average in the MED data?)
  3. Premium based on exchange rate and oil price uncertainty which is elevated (but is it any worse than a few months ago?)
  4. Retailers have put themselves in at fixed oil/exchange rate contracts that are at worse rates than current spot prices (when did they start doing this?)

So, does anyone have any knowledge or suggestions that they would like to share with me 🙂

Update:  Paul Walker at Anti-Dismal discusses the role of consumer search in the adjustment of petrol prices.

  • Try here.

  • Hi Paul,

    Thanks for that – I’ll link to it in the post.

    Search will definitely be part of the issue. I think tacit collusion also plays a role – there is nothing wrong with that in itself either, as I’m not sure that prices would be stable up there in the long-run.

  • The MED keeps data on margins etc.
    Here’s a chart with all that info


  • Hi Bernard,

    Thanks for the graph. I have seen these figures on margins before – and I noticed that they were tightening through January – but they now appear to have returned to about average. This is the key issue against my view of tacit collusion.

    I was wondering if anyone knew what is happening to refining costs – I have heard rumours that this is where the heat is coming on petrol prices.