New Zealand petrol prices have jumped nearly 20 percent since late June and are now at their highest levels for more than a year.
The average price of unleaded 91 ticked up to $2.81 per litre at the start of August. That price is the highest since July last year when the cost of 91 was $2.86 a litre.
So why are petrol prices climbing?
According to independent economist Cameron Bagrie, international oil prices have risen to about $84 a barrel from $70.
Oil prices have now propelled for seven weeks in a row - the longest run since last year.
"On top of that, of course, we've also got - in the third quarter of the year - the reversal of the [fuel excise duty] subsidy that was in place," Bagrie told AM. "Petrol's going to be a pretty big contributor to third-quarter inflation and that's going to add, potentially, a little bit of stickiness into that declining inflation dynamic."
Bagrie said the major contributor to the rise in oil prices was supply cutbacks.
According to a report by the International Energy Agency last week, Saudi Arabia and Russia's supply cuts, as part of OPEC+, are anticipated to reduce oil inventories and potentially increase prices.
"The flip side is that global demand conditions are still looking pretty brisk," Bagrie explained. "So you get less supply and a little bit more demand because the global economy has outperformed all expectations in the last two to three months - you've got a recipe for higher prices, not lower prices.
"In the last 12 months, we've seen energy prices… be a big negative contributor to inflation coming down - what we're going to see in the next six months is it's going to reverse on the other side."
Walter Zimmerman, the chief technical analyst at energy commodities broker ICAP-TA, told Reuters given China's economy was struggling to regain pre-pandemic demand levels, oil markets now had limited prospects for future growth.
But New Zealand's Reserve Bank would be watching global oil prices closely, Bagrie told AM co-host Laura Tupou - given Aotearoa's core inflation remained relatively high.
Watch the full video for more.
