Higher Aussie to soften petrol pump pain

Higher Aussie to soften petrol pump pain
Petrol Prices; Used vehicle market; Household survey

• Fuel prices: Last week the national average price of unleaded petrol rose by 2.2 cents a litre to 131.2 cents per litre (c/l) according to the Australian Institute of Petroleum.

• Used car prices: According to the Datium Insights, used vehicle prices fell 2.8 per cent last week.

• Covid-19 survey: The Australian Bureau of Statistics released its January survey of Aussie households. While most respondents expect spending to remain the same over the next four weeks, more expect spending to fall than rise across all categories except motor vehicle costs (including fuel) and recreation/leisure activities.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. Used car price data is useful in gauging activity levels in the motor vehicle market. ABS surveys provide insights into how COVID-19 is affecting the economy.

What does it all mean?

• Global crude prices are just off 13-month highs and those lofty levels are in the process of being passed on to Australian petrol prices. Pump prices in Darwin, Canberra and Hobart are near 11-month highs. While other capital cities are affected by the vagaries of the discounting cycle, Brisbane pump prices are already averaging almost $1.56 a litre. Sydney and Melbourne motorists need to brace for pump prices lifting similarly to near $1.60 a litre – most likely later this week. Some Sydney service stations are selling unleaded petrol at super-low levels near $1.12 a litre currently. So the current, and projected higher petrol prices represent a significant risk to retail spending enthusiasm.

• One positive for motorists is that the higher Aussie dollar is working to restrain local pump prices. When Singapore gasoline was last at current highs, the Aussie dollar was closer to US69 cents rather than the current US78-79 cents. Overall the higher Aussie dollar is saving motorists roughly 10 cents a litre at the petrol pump.

• While the supply of used cars remains low, there was some improvement in availability last week, putting downward pressure on prices. Over the past year, used vehicle prices are up around 36 per cent. With the price gap between used and new cars narrowing, some buyers are being attracted to the latter, attracted by long warranty periods. Still, low availability of stock affects new vehicles as well as used.

What do you need to know?

Weekly petrol prices

• Last week the national average price of unleaded petrol rose by 2.2 cents a litre to 131.2 cents per litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices rose by 2.6 cents to 130.9 c/l and regional prices rose by 1.4 cents to 131.6 c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 4.8 cents to 126.6 c/l), Melbourne (down by 4.7 cents to 127.0 c/l), Brisbane (up by 15.2 cents to 137.4 c/l), Adelaide (up by 21.6 cents to 141.6 c/l), Perth (up by 1.1 cents to 131.1 c/l), Darwin (up by 2.9 cents to 129.6 c/l), Canberra (up by 1.3 cents to 130.1 c/l) and Hobart (up 3.0 cents to 131.3 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 15.90 cents per litre to 15.2 cents a litre (24-month average: 15.33 cents a litre).

• The national average diesel petrol price rose by 2.1 cents to 128.5 cents a litre over the past week. The metropolitan price lifted 2.0 cents to 127.6 cents a litre and the regional price was up 2.1 cents to 129.2 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up 1.5 cents to 118.1 cents a litre. The terminal gate diesel price was up 2.3 cents to 118.5 cents a litre.

• Today, the average unleaded TGP stands at an 11½-month high of 119.5 cents a litre, up by 1.7 cents over the week. The terminal gate diesel price has also hit an 11½-month high at 119.5 cents a litre, up 1.7 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 124.3c/l; Melbourne 124.3c/l; Brisbane 155.8c/l; Adelaide 130.2c/l; Perth 123.6c/l; Hobart 132.0c/l; Darwin 129.8c/l; and Canberra 130.5c/l.

• Last week the key Singapore gasoline price rose by US$4.25 or 6.5 per cent to a 13-month high of US$69.75 a barrel. And in Australian dollar terms, the Singapore gasoline price rose by $5.20 or 6.2 per cent to a 12-month high of $89.77 a barrel or 56.46 cents a litre.

Weekly used vehicle market

• Datium Insights have reported the following results for the past week:

• “Prices fell last week (-2.8 per cent) with ex-leases (-4.7 per cent) leading the decreases

• Supply was up (+5.3 per cent) with ex-leases seeing the largest influx (+19.6 per cent)

• Clearance rates were largely flat (-0.1 per cent)

• Prices for the top 15 traded vehicles were mixed with the Toyota Hiace (+3.3 per cent) leading increases and the Isuzu D-MAX seeing the greatest decrease (-2.6 per cent)

• Stock still remains considerably low.”

Household Impacts of Covid-19 Survey

• The January survey was released by the ABS.
While most respondents expect spending to remain the same over the next four weeks, more expect spending to fall than rise across all categories except motor vehicle costs (including fuel) and recreation/leisure activities.

What is the importance of the economic data?

• Weekly petrol prices data 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.

• Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. Datium Insights and Moody’s Analytics also issue a monthly reading on used vehicle prices. The data assists in gauging the strength of a key component of consumer spending and provides insights on the Autos and components sector of the sharemarket.

• The Australian Bureau of Statistics (ABS) is providing updates on the coronavirus impact on households and businesses to provide timely information for decision makers.

What are the implications for investors?

• Filling up the car with petrol is the single biggest weekly purchase for most families. So a lift of around 10 cents a litre, compared with the start of the year, could translate to about $15 extra per month being forked out at petrol retailers, reducing broader spending power.

Published by Craig James, Chief Economist, CommSec