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Rising petrol prices pressure householdsWeekly petrol prices
Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 4.4 cents last week to 141.5 cents a litre – the highest level since 5 July 2015. The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?
Petrol prices have risen to the highest level in 28 months in the lead-up to the peak holiday driving season in Australia. Aussie households are contending with increased spending on motor vehicle fuel, stretching budgets in the lead-up to Christmas.
Prices have lifted markedly in Adelaide and Melbourne recently and remain elevated across most capital cities. As a result, the margin between retail and wholesale unleaded petrol pump prices has lifted over 15 cents, up from more average levels of 10-12 cents observed a few weeks ago.
As always, Aussie consumers are encouraged save money by purchasing petrol at the bottom of price cycles,though some peak cycles last around six weeks in some metropolitan cities. Petrol price smart phone Apps such as MyNRMA, GasBuddy, MotorMouth and FuelCheck provide real-time fuel price information across most metropolitan cities and regions.
All eyes will be on Vienna this week when the Organisation of Petroleum Exporting Countries (OPEC) and Russia meet. Oil prices have increased by around 25 per cent since the start of September on heightened market speculation that an agreement will be reached to prolong oil output reductions beyond March 2018.
Recent comments by Saudi Arabia and Russia, the two largest members of the OPEC ‘accord’, suggest an extension is likely when OPEC meet on November 30. Russia’s energy ministry and oil companies have reportedly discussed a six month extension. Saudi Arabia, however, prefers a nine month extension and there is some risk that major Russian producers are reluctant to rollover the 1.8 million barrel a day production cut for all of 2018. Saudi is targeting a more aggressive reduction in global oil stockpiles to around the five year average.
The US shale industry remains the ‘wildcard’ in OPEC attempts to rebalance the oil market. Forecasting US oil output growth is challenging with lead times measured in weeks rather than years for new shale projects. There are also a large number of companies now operating in the sector. The uncertainty makes it very difficult for OPEC and its allies to assess how they should respond.
Global oil prices are currently trading around 2-year highs. The continued shutdown of the Keystone pipeline that runs from Canada to the US is expected to reduce supply into the Cushing, Oklahoma oil storage facility. Crude inventories fell by 1.9 million barrels in the past week according to data from the US Energy Information Administration. Last week, Brent crude rose by 1.4% to US$63.86 a barrel while Nymex rose by 4.2% to US$58.95 a barrel.
What do the figures show?
Petrol prices
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 4.4 cents last week to 141.5 cents a litre – the highest level in 28 months. The metropolitan petrol price rose by 5.4 cents to 143.1 cents per litre while the regional price rose by 2.2 cents to 138.1 cents per litre.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 3.2 cents to 140.5 c/l), Melbourne (up by 18.5 cents to 147.3 c/l), Brisbane (up by 1.4 cents to 147.3 c/l), Adelaide (up by 7.5 cents to 136.1 c/l), Perth (up by 0.5 cents to 137.2 c/l), Darwin (up by 3.0 cents to 145.8 c/l), Canberra (up by 1.4 cents to 144.7 c/l) and Hobart (up by 1.5 cents to 142.6 c/l).
The national average Australian price of diesel petrol rose by 0.9 cents to 134.7 cents per litre. The metropolitan price rose by 1.2 cents to 135.2 c/l, while the regional average price rose 0.7 cents to 134.3 c/l.
Today, the national average wholesale (terminal gate) unleaded petrol price stands at 124.0 cents a litre, down 0.4 cents over the week. The terminal gate diesel price stands at 122.8 cents a litre, up 1.0 cents over the past week.
Last week the key Singapore gasoline price rose by US$2.35 or 3.2 per cent to US$76.55 a barrel. In Australian dollar terms the Singapore gasoline price rose by $2.43 or 2.5 per cent to $100.39 a barrel or 59.24 cents a litre.
MotorMouth records the following average retail prices for capital cities today: Sydney 136.8c; Melbourne 145.2c; Brisbane 144.2c; Adelaide 148.4c; Perth 126.6c; Canberra 137.6c; Darwin 146.3c; Hobart 143.0c.
What is the importance of the economic data?
Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
What are the implications for interest rates and investors?
Motorists may need to get used to paying higher prices for petrol as global oil producers attempt to rebalance markets after a period of excess supply.
The OPEC meeting on Thursday will have a significant influence on financial and commodity markets. The energy sector was the strongest performer on the S&P/ASX 200 index last week, rising by 2.3 per cent. Australian-listed producers such as Origin Energy (+4.9 per cent) and Woodside Petroleum (+2.2 per cent) were among the strongest performers.
Any disappointment could reverse the recent rally in oil prices and energy stocks. The Brent crude oil price has risen by 38.6 per cent since its low-point of US$42.53 per barrel on June 21. The low was reached after OPEC fell short of market expectations at its May meeting.
In terms of monetary policy, the Reserve Bank of Australia is primarily focused on underlying inflation, which excludes volatile components such as energy prices. While rising oil prices could impact headline inflation, the Reserve Bank appears more concerned about persistently low wages and goods prices in its inflation outlook.
CommSec expects the next move in interest rates to be up, but not until later in 2018.
Originally published by Ryan Felsman, Senior Economist, CommSec