Melbourne petrol prices hit 11-month high
Biggest lift in Singapore gasoline prices in 4 years
Weekly petrol prices; Manufacturing & services sector gauges
Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 0.6 cents in the past week to a near 4-month high of 144.2 cents a litre.
Melbourne pump prices: Over the past week, Melbourne unleaded petrol prices lifted by 31 cents to an average of near $1.64 a litre today – the highest level in 11 months. Unleaded petrol prices are well above the wholesale price of $1.38 a litre as retailers increased prices.
Singapore benchmark gasoline price: Last week, the Singapore benchmark gasoline price – the largest component of fuel prices paid by motorists – rose for a third consecutive week to US$81.10 a barrel. While that’s the highest level in 5 months, the weekly increase of US$7.80 was the biggest lift in over 4 years.
Manufacturing & services sectors: The ‘flash’ CBA/IHS Markit Manufacturing Purchasing Managers’ Index fell from 50.9 points in August to 49.4 points in September – the first contraction in factory activity in over 3 years. But the ‘flash’ CBA/IHS Markit Services Purchasing Managers’ Index rose from 49.1 points in August to a 9-month high of 52.5 points in September. Any reading over 50 indicates expansion.
Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The manufacturing data provides guidance for companies in the Industrials sector. The services sector gauge highlights conditions in the sector as well as providing guidance on the economy more generally.
What does it all mean?
• The school holidays have commenced in Victoria. But Melburnians hitting the road for a well-earned break will be confronted with petrol pump price pain. And Richmond supporters are well advised to leave the car at home and catch public transport to the “G” for the AFL Grand Final on Saturday. Melbourne unleaded petrol prices have lifted by 31 cents in the past week and are now averaging around $1.64 a litre today as the retail discounting cycle ended.
• Prices at the bowser are set to increase across the country. International benchmark gasoline prices rose sharply last week. In fact, the Singapore benchmark gasoline price rose for a third consecutive week to US$81.10 a barrel.
• While that’s the highest level in five months, the weekly increase of US$7.80 was the biggest lift since April 19 2015. And in Aussie dollar terms, the Singapore gasoline price rose by $12.58 or 11.8 per cent to an 11-month high of $119.23 a barrel or 74.99 cents a litre – the biggest weekly increase since January 25 2009.
• Last week, the Brent crude oil price rose by 6.7 per cent to US$64.28 a barrel – the biggest weekly increase in eight months. And the US Nymex oil price rose by 5.9 per cent to US$58.09 a barrel.
• Global oil prices are set to rise further following Wall Street Journal reports overnight that full repairs to Saudi Arabian oilfields hit by recent drone attacks may take months, signalling a potentially slower-than-expected return of lost output. And geo-political tensions intensified on Friday after the US announced sanctions against Iran’s central bank in retaliation for the alleged attack on Saudi Arabian oil facilities.
What do the figures show?
• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 0.6 cents in the past week to a near 4-month high of 144.2 cents a litre. The metropolitan price fell by 0.3 cents to 144.2 cents a litre, but the regional price rose by 2.5 cents to 144.1 cents a litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 7.1 cents to 144.2 c/l), Melbourne (up by 15.2 cents to 147.9 c/l), Brisbane (down by 13.7 cents to 143.7 c/l), Adelaide (down by 8.1 cents to 134.5 c/l), Perth (up by 4.8 cents to 143.3 c/l), Darwin (down by 0.4 cents to 137.9 c/l), Canberra (up by 2.1 cents to 143.5 c/l) and Hobart (up by 0.1 cent to 151.5 c/l).
• The smoothed gross retail margin for unleaded petrol rose from 11.51 cents a litre last week to 11.60 cents a litre (24-month average: 13.1 cents a litre).
• The national average diesel petrol price rose by 0.6 cents to 147.4 cents a litre over the week. The metropolitan price also rose by 0.6 cents to 145.8 cents a litre and the regional price lifted by 0.7 cents to 148.7 cents a litre.
• MotorMouth records the following average retail prices for capital cities today: Sydney 138.9c; Melbourne 163.9c; Brisbane 139.4c; Adelaide 157.5c; Perth 136.0c; Canberra 145.1c; Darwin 137.9c; Hobart 151.5c.
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 138.4 cents a litre, up by 7.4 cents over the week. The terminal gate diesel price stands at 138.9 cents a litre, up by 3.3 cents over the past week.
• Last week, the key Singapore gasoline price rose by US$7.80 – the biggest increase in over 4 years – or 10.6 per cent to US$81.10 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $12.58 – the biggest increase in 10½ years – or 11.8 per cent to an 11-month high of $119.23 a barrel or 74.99 cents a litre.
Commonwealth Bank Purchasing Managers’ Indexes – September
• The ‘flash’ CBA/IHS Markit Manufacturing Purchasing Managers’ Index fell from 50.9 points in August to 49.4 points in September – the first contraction in factory activity in 41 months. But the ‘flash’ CBA/IHS Markit Services Purchasing Managers’ Index rose from 49.1 points in August to a 9-month high of 52.5 points in September. Any reading over 50 indicates expansion.
• According to CBA/Markit, “The divergence in the readings on the manufacturing and services sector is somewhat unusual, though not unprecedented. The dip in the manufacturing reading was a touch disappointing, particularly given the ongoing weakness in the Australian dollar. It may be the case that the raft of so-called geopolitical tensions are having a dampening impact on the local manufacturing sector. Overall, a move in the right direction, but the level of the headline index continues to imply that the economy could do with more stimulus. The case for fiscal easing through personal income tax cuts remains.”
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 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.
• The Commonwealth Bank Purchasing Manager indexes (PMIs) for services and manufacturing are released each month. The Australian PMIs are the local equivalents of similar indexes released for other countries. The PMIs are amongst timeliest economic indicators released in Australia. The PMIs are useful not just in showing how the sectors are performing but in providing some sense about where they are heading. The key ‘forward looking’ components are orders and employment.
What are the implications for interest rates and investors?
• Australia currently imports more than 90 per cent of its fuel needs, with almost half of the refined product coming from Singapore and South Korea, making us vulnerable to global oil shocks. But changes in international prices can take 10-14 days to work their way through the supply chain to metropolitan areas and even longer for regional Australia.
• It’s also important to note that the usual ready reckoner is that a US$1 a barrel lift in crude oil translates to a 1 cent per litre increase in the local petrol price. At present, Aussie motorists are paying slightly less at the petrol pump than a year ago (based on the national average retail unleaded petrol price). But motorists should get used to pump prices nearer to $1.50 a litre or higher. The large lift in the terminal gate price (wholesale price) to $1.38 a litre, implies that a higher floor has been set for retail unleaded pump prices – subject to the vagaries of the discounting cycle – in the near term.
• Aussie manufacturers are under pressure. Factory sentiment is being adversely impacted by the ongoing US-China trade war and weakness in Aussie residential construction activity.
• The Commonwealth Bank factory gauge contracted for the first time in its 41-month history in September. While activity indexes can be volatile on a month-to-month basis, rising input prices continue to pressure profit margins, weighing on trading conditions. Wage increases are working their way through Australia’s factory sector following the minimum wage increase on July 1. And the recent lift in fuel prices will add to plant’s costs.
• Commonwealth Bank Group economists expect a rate cut in October and a follow-up reduction in February 2020.
Ryan Felsman, Senior Economist, CommSec