22 September 2005

Oil companies should soften Rita's blow to NZ motorists

The price of oil is likely to spike next week because of the impact of Hurricane Rita but oil companies should absorb the rise themselves before passing it on to Kiwi motorists, Green Co-Leader Jeanette Fitzsimons says.

Hurricane Rita is likely to seriously reduce US oil production when it makes landfall in Texas in the next couple of days. The National Hurricane Centre predicts it will hit the Texas coast at 1.00am Saturday local time, (6.00pm Saturday, NZ time) then turn inland (see www.nhc.noaa.gov). Galveston, a major oil refining centre, is given a 42 percent chance of being hit. There is also a likelihood of oil wells further inland being closed down.

The Texas Coast has four million barrels a day (mbd) of refining capacity. The world currently uses about 84 mbd. Coming on top of Katrina, and the 120 platforms in the Gulf that are still shut down, this will be a major disruption of supply. In previous years the impact of extreme events on oil-producing regions could be mitigated globally by an increase in production elsewhere, but now not even the Saudis have the capacity to cover the loss of Texas.

"The world is currently close to maximum oil production to meet the huge and growing demand from China and India coming on top of the OECD countries, so there simply isn't the slack in the system to accommodate a major oil production region being knocked out," Ms Fitzsimons says.

"So I want to lay down a challenge to New Zealand's oil companies - tighten your belts first, as we have all had to, rather than trying to maintain your very healthy profits by raising prices before the spike has actually reached your bottom line.

"The companies are suspiciously quick to put up the price of petrol as soon as the cost of oil rises, much sooner than the oil in question has rippled through the delivery and refining process. I'm not asking the companies to subsidise motorists, just to keep their margins reasonable during this period.

"New Zealanders also need to be aware that yesterday's current account deficit blow out will push our dollar down. That means that while Rita may make the price of petrol go up, it will be the Kiwi dollar that will stop it from coming down again any time soon," Ms Fitzsimons says. For more information

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