Record Fuel Prices Spark Economic Concerns Across New Zealand
Petrol prices in New Zealand have hit a record high of $3.52 per litre for regular 91, marking a 15.9% increase over the past 28 days. Diesel has also surged to $3.23 per litre, up 18.25% in the same period. This surge surpasses the previous high set in April following US and Israeli strikes on Iran, highlighting the economic impact beyond just commuters' pain at the pump.
The real concern lies in the freight and transport sectors, where diesel is the lifeblood of the economy. According to Transporting NZ’s Mark Stockdale, approximately 93% of annual freight tonnage is moved by road. The recent spike in diesel prices has led to a significant increase in producer input costs, with diesel input costs rising 52.6% and road transport input costs 12.2% in the June quarter. This cost pressure is squeezing margins for businesses reluctant to pass on the increases to customers in a soft demand environment.
The Commerce Commission’s data debunks the notion that retailers are profiting from the price hikes. The average price-cost spread on 91 has actually decreased from 51 cents in 2025 to 44 cents, while diesel spreads fell from 55 cents to 47 cents. The root causes are global, with Brent crude at US$101.5 a barrel and a weaker New Zealand dollar, exacerbating the cost of importing fuel. Attacks on Russian refineries have further tightened supply, adding another layer to the existing Middle East supply shock.
Businesses are already feeling the pinch, with surcharges appearing on invoices. Andrew Olsen of Rural Contractors New Zealand advises members to use Fuel Adjustment Factor pricing to track fuel costs. While strong dairy, meat, and wool prices are helping farmers absorb the surcharges for now, other sectors like couriers, hauliers, and tourism operators may not find customers as accommodating. Treasury warns that the fuel shock will continue to transmit broadly, raising business input costs and potentially leading to higher prices for other goods and services over time.
The Reserve Bank has responded by raising the Official Cash Rate to 2.75%, but not everyone agrees with this approach. Simplicity chief economist Shamubeel Eaqub argues that fuel inflation makes people poorer rather than feeding a price spiral. Transporting NZ proposes doubling diesel reserves and introducing a new 1 cent per litre levy to fund a Fuel Resilience Fund, though this idea has been met with skepticism due to the additional permanent charge at the pump.
Experts advise treating the current fuel price surge as a cost reset rather than a temporary spike. Businesses are urged to check supplier contracts for fuel clauses, build these into their own quotes, and prepare for further increases in freight costs heading into summer.