Higher petrol prices to increase inflationWeekly petrol prices
Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 1.9 cents to 139.9 cents a litre in the past week – the largest increase in six weeks. The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?
On Wednesday the latest inflation reading is released. We expect the headline consumer price index to rise by 0.7 per cent in the December quarter, to be up by 2 per cent on the year. Petrol prices rose by around 10 per cent over the quarter, likely adding 0.26 percentage points to the growth in prices.
Inflation expectations are also growing globally, and they may have some eventual impact on monetary policy settings. Longer-dated global government bond yields are rising in anticipation of potential inflationary pressures due to rising commodity prices.
Oil prices rose have risen to 3-year highs. A weaker US dollar improves the purchasing power for key commodity buyers in Europe and Asia. Last week, Brent crude rose by 2.7 per cent to US$70.52 a barrel. And the US Nymex price rose by 4.3 per cent to US$66.14 a barrel.
The Aussie dollar, however, is continuing to act as a ‘shock absorber’ placing a lid on overseas gasoline prices. The Aussie dollar is at 4-month highs against the greenback. The Singapore gasoline price remains below A$100 a barrel for an eighth consecutive week.
In more good news, retail petrol margins continued to decline after peaking at a record high 15.96 cents a litre on January 14. Last week the five-week average gross retail margin (gap between the pump and terminal gate price) declined to 14.78 cents a litre – the lowest level in nine weeks.
Across capital cities the discounting cycles are approaching peaks in Sydney and Adelaide, causing retail unleaded petrol prices to fall to their lowest level in around three months. Prices remained elevated in both Brisbane and Melbourne.
What do the figures show?Petrol prices
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 1.9 cents to 139.9 cents a litre in the past week. The metropolitan petrol price rose by 2.6 cents to 139.9 cents per litre and the regional price increased by 0.6 cents to 139.9 cents per litre.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 6.9 cents to 130.8 c/l), Melbourne (up by 10.0 cents to 146.5 c/l), Brisbane (up by 12.9 cents to 147.9 c/l), Adelaide (down by 11.9 cents to 125.9 c/l), Perth (up by 0.2 cents to 137.8 c/l), Darwin (down by 0.2 cents to 150.2 c/l), Canberra (unchanged at 148.4 c/l) and Hobart (up by 0.2 cents to 146.4 c/l).
The national average Australian price of diesel petrol rose by 0.2 cents to 139.0 cents per litre. The metropolitan price rose by 0.2 cents to 139.6 c/l and the regional average price rose by 0.1 cents to 138.5 c/l.
Today, the national average wholesale (terminal gate) unleaded petrol price stands at 123.5 cents a litre, down by 0.3 cents over the week. The terminal gate diesel price stands at 126.1 cents a litre, down by 0.4 cents over the past week.
Last week the key Singapore gasoline price rose by US$1.65 or 2.1 per cent to US$80.35 a barrel. In Australian dollar terms the Singapore gasoline price last week rose by $1.13 or 1.2 per cent to $99.27 a barrel or 62.43 cents a litre.
MotorMouth records the following average retail prices for capital cities today: Sydney 128.3c; Melbourne 144.2c; Brisbane 146.1c; Adelaide 123.3c; Perth 127.8c; Canberra 148.4c; Darwin 150.2c; Hobart 136.0c.
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?
Elevated petrol prices continue to pressure Aussie household budgets as we commence the new school year.
Rising fuel prices are expected to add to headline consumer prices. Global central banks will be monitoring the impact of rising commodity prices on inflation.
We expect rising pump prices added to headline inflation in the December quarter, however, the Reserve Bank is primarily focused on underlying measures of inflation which exclude volatile energy and food prices.
The strengthening Aussie dollar – now up by 8 per cent against the US dollar since December – presents another headwind to inflation, especially for imported (tradable) goods.
CommSec expects interest rates to be unchanged through until at least December.
Originally published by Ryan Felsman, Senior Economist, CommSec