16 Nov 2018

Z Energy expects higher earnings due to petrol price drop

11:15 am on 16 November 2018

A major fall in oil prices overseas has dropped the price of fuel here, sweetening the industry's outlook.

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Z Energy chief executive Mike Bennetts predicts lower fuel prices could lift its second-half earnings. Photo: RNZ

The price of Brent crude oil dropped more than 20 percent over the past few weeks, sending it back to the same price it was at the beginning of this year.

It hit a four-year high last month, which increased prices at the pump and hurt the underlying earnings of the largest fuel retailer, Z Energy.

Z Energy chief executive Mike Bennetts said it had dropped fuel prices by an average of six to eight cents a litre this week.

Mr Bennetts said price drops differed around the country, as some areas saw a 30 cent per litre drop.

"A higher New Zealand dollar and a lower fuel price means we can reflect a lower pump price," he said.

"Certainly sometimes the reverse of that happens as we've seen in the April through to September period of this year."

He said the change in fuel costs could boost its earnings for the second half of this financial year.

"We're certainly looking forward to a better second half where lower prices mean perhaps people have a little bit more money to spend and our volumes return and our margins perhaps track back to where they were previously.

"That's all subject to competitive dynamics and my crystal ball on that is no better or worse that my crystal ball on the oil price."

Mr Bennetts said he did not know how long fuel prices would remain low, but the factors that played into pricing were currently well balanced.

The Organisation of the Petroleum Exporting Countries (OPEC) was eyeing production cuts of about 1 million barrels per day, later this year, in an effort to to stop the price of crude crashing further.

United States President Donald Trump opposed such cuts.

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