Cheap fuel and nowhere to go. What a waste of a long weekend.

EASTER is traditionally a time when thousands of New Zealanders hit the road for an autumn break before the onset of winter.

But not this time – the COVID-19 Level 4 lockdown has required us all to remain at home in our ‘bubbles’.

Spare a thought for one of the Kiwi businesses most affected by this: the fuel retailers.

They’re officially considered essential services so are remaining open, but they are suffering a massive 80 percent fall in fuel sales and an estimated 40 percent reduction in shop sales.

Over the long weekend, instead of enjoying bumper trade as motorists parked to fill their vehicles with the cheapest petrol and diesel for years, the forecourts have been largely empty.

One retailer who talked on condition of anonymity - citing contractual obligations with the service station’s fuel supplier - said business had reduced so much that it was hardly worth remaining open.

“However we are an essential service, so we are continuing. But business is very hard right now, and we think it will be some time before any recovery begins.”

The irony of all this is that right now petrol and diesel prices are at historically low levels in New Zealand. They have reduced to the extent that prior to Easter 91 octane petrol could be purchased for as low at $1.70 in parts of New Zealand when discounts were applied. It’s because of continued production disputes between the major oil nations, and the global effects of the pandemic, which have combined forces to result in the biggest collapse in worldwide crude oil demand in the history of the oil industry.

And when demand – and therefore the price of crude - falls, then so do petrol prices.

At the beginning of the year the Brent benchmark for crude oil prices had the commodity at US$68 a barrel. But just before Easter it was hovering at around US$31, with many international commentators suggesting that the price has all the potential to fall into the US$20s as the battle continues over whether worldwide supply restrictions should be introduced to counter the effects of the Coronavirus pandemic.

Close to 60 percent of all New Zealand’s petrol and 67 percent of the country’s diesel comes from the Marsden Point refinery, which under normal circumstances imports around 42 million barrels of crude a year, primarily from South-east Asia but also from the Middle East and Russia. And normally this crude is processed into around 6.5 billion litres of petrol, diesel, jet fuel and other petroleum products.

But the COVID-19 lockdown and the virus-caused collapse of New Zealand’s aviation industry has resulted in a huge drop in demand for fuel, which has forced Refining New Zealand to essentially halve its output by rotating its processing facilities - operating only half at a time and keeping the remaining equipment “warm”. Marsden Point will continue operating this way at least until the end of August, and it warns that there is likely to be further reductions in production due to insufficient fuel storage capacity throughout the country.

The fuel retailers have been closely monitoring the situation, and have been responding to the ructions in the global oil market by progressively reducing the prices of petrol and diesel. It’s difficult to say whether prices will drop further, because the price of crude oil is just a small part of the total fuel pricing model – other factors include the value of the New Zealand dollar, shipping, rent, maintenance, and localised competition caused by a proliferation of other fuel retailers, which in recent times has had a major impact on pump prices in various parts of New Zealand.

It’s doubtful whether 91 octane petrol will ever get to the very low prices currently being experienced in Australia, where motorists in Sydney can pay less than 80 cents a litre for their 91 octane petrol at some locations. And in Melbourne, petrol at less than $1 a litre is easy to find. But there are five times more people in Australia than in New Zealand, and the sheer volume of petrol sold means it can be offered at cheaper prices at the pump.

It’s no use getting concerned over all of this though – because since we can’t drive anywhere anyway,  it’s not worth spending the money buying the fuel at the current low price.

But if we could, here are some calculations just to make your day.

In January this year, 91 octane petrol cost an average of $2.28 in Auckland and $2.15 in most other parts of New Zealand, which would have meant it would have cost $114 to fill an average car from empty in Auckland, and $107elsewhere. Just before Easter the prices had lowered to the extent the price to fill had reduced to $91 in Auckland and $85 elsewhere.

That would have been a saving of $23 in Auckland and $22 elsewhere – a not insignificant amount.  But cheer up everyone – it’s also about the equivalent of a decent bottle of wine for you to enjoy in your bubble.