Elevator up, stairs down: brief ceasefire relief, but pump pain may linger

Summarised by Centrist

Oil prices briefly plunged on news of the announcement of a two-week US-Iran ceasefire, and hopes of some movement through the Strait of Hormuz. But by Thursday morning, part of that fall had already been erased as the truce showed signs of strain and markets questioned whether shipping would really resume in any meaningful way.

Brent crude fell about 16% to roughly US$92 after the announcement, prompting Westpac chief economist Kelly Eckhold to say petrol could fall about 20 cents a litre, taking 91 to roughly $3.30, if prices held. That caveat matters more now. Reuters reported oil had already bounced back on Thursday as fighting in Lebanon continued and doubts grew over whether the Strait was genuinely reopening.

That leaves the slower-moving New Zealand story largely intact. Infometrics chief forecaster Gareth Kiernan said there was still a month-long “air bubble” in supply, while the AA warned insurers and traders may need more than a short truce before any lower prices reach motorists. MBIE’s latest stocktake also shows fuel supply remains stable, with 62.6 days of petrol, 51.7 days of diesel and 53.5 days of jet fuel available or on order, and no sign of supply disruption.

Luxon said the best-case scenario for lower fuel prices was still “a matter of weeks”, noting traffic through the Strait remained badly disrupted. Willis added that cheaper crude can take longer to reach the pump because refined fuel markets and damaged regional facilities are also part of the picture.

Editor’s note: The “air bubble” is essentially the industry’s name for a supply-chain lag. Fuel already bought or already on the water at crisis prices is said to hit consumers before any cheaper fuel bought after the price drop does. That may explain some delay, though it does not fully answer why rises often feel faster and cleaner than falls.

Read more over at RNZ, and 1News here and here 

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