Used car prices soar. Petrol prices creep higher

Used car prices soar. Petrol prices creep higher

Petrol Prices; Used car prices

Fuel prices: The national average price of unleaded petrol rose by 2.7 cents to 119.2 cents a litre last week according to the Australian Institute of Petroleum.

Monthly used car prices: The Datium Insights – Moody’s Analytics Used Vehicle Price Index increased 29.9 per cent on a year-ago basis in September. This is the highest rate for the series, which goes back to 1999.

Used car prices: According to Datium Insights (and based on Pickles auction data), used car prices rose by 0.7 per cent last week.

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. The purchasing manager surveys provides insights into business activity.

What does it all mean?

• While essentially the same product, petrol prices vary considerably across Australia. Today in Brisbane unleaded fuel prices are at the peak of the discounting cycle at 144.4 cents per litre according to Motormouth. Sydney prices peaked on Saturday at 135.7c/l. But Melbourne prices have been falling for 41 days to 109.2c/l.

• Globally, the COVID-19 era has meant less demand for fuel. But in response, key OPEC producers have reduced crude oil output. So the Brent and Nymex crude oil benchmarks have held close to US$40 a barrel. That price level looks set to hold with second waves of the coronavirus leading to tighter restrictions on movement in a number of European countries.

• Global oil prices were weaker by 1.0-1.5 per cent on Friday on news that the Norwegian oil worker strike had ended. But prices were supported by news that Hurricane Delta had shut in most of the oil production in the Gulf of Mexico. Traders continued to watch progress on a fiscal stimulus package in the US. Brent crude fell by US49 cents or 1.1 per cent to US$42.85 a barrel. And the US Nymex fell by US59 cents or 1.4 per cent to US$40.60 a barrel.

• Over the week Brent rose US$3.58 or 9.1 per cent and Nymex rose US$3.55 or 9.6 per cent. The previous week Brent fell by 6.3 per cent and Nymex fell by 8 per cent.

• One interesting by-product of the COVID times is that a global slowdown of car exports has occurred, leading to shortages of vehicles and driving up prices of the available stock – that is, pre-owned vehicles. This is a nice surprise for vehicle owners that have been used to seeing the value of their asset fall, rather than rise. And it has provided a challenge for insurers, wondering how long the trend is likely to last.

What do the reports and figures show?

Petrol prices

• The national average price of unleaded petrol rose by 2.7 cents to 119.2 cents a litre last week according to the Australian Institute of Petroleum. Metropolitan prices rose by 4.1 cents to 120c/l with regional prices down 0.1c to 117.5c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 18 cents to 132.0 c/l), Melbourne (down by 3.8 cents to 110.6 c/l), Brisbane (up by 13.5 cents to 126.0 c/l), Adelaide (down by 24.7 cents to 104.0 c/l), Perth (up by 0.3 cents to 117.6 c/l), Darwin (steady at 117.6 c/l), Canberra (up by 0.2 cents to 120.9 c/l) and Hobart (up by 0.1 cents to 123.4 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 16.83 cents to 16.81 cents (24-month average: 14.8 cents a litre).

• The national average diesel petrol price fell by 0.2 cents to 119.0 cents a litre over the past week. The metropolitan price was flat at 117.6 cents a litre and the regional price was down 0.1 cents to 120.1 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was flat at 104.3 cents a litre. The terminal gate diesel price rose by 0.1 cents to 99.6 cents a litre.

• Today, the average unleaded TGP stands at 103.9 cents a litre, down by 1.1 cents over the week. The terminal gate diesel price stands at 100.1 cents a litre, up 0.6 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 134.5c/litre; Melbourne 109.2c; Brisbane 144.4c; Adelaide 100.1c; Perth 106.2c; Hobart 123.1c; Darwin 117.6c; and Canberra 120.8c

• Last week the key Singapore gasoline price rose by US$2.35 or 5.1 per cent to US$48.20 a barrel after falling by US$2.65 a barrel or 5.5 per cent the previous week. In Australian dollar terms, the Singapore gasoline price rose by US$2.92 or 4.5 per cent to $67.14 a barrel or 42.23 cents a litre.

Monthly used vehicle prices

• The Datium Insights – Moody’s Analytics Used Vehicle Price Index increased 29.9 per cent on a year-ago basis in September. This is the highest rate for the series, which goes back to 1999. Car prices rose 26.4 per cent while truck prices increased 41.5 per cent.

• Vehicle retention value, measured as price/manufacturer’s suggested retail price (MSRP), rose 30.3 per cent compared with the same month last year, with the car component increasing 25.9 per cent and the truck component increasing 38.5 per cent.

Used vehicle market – Week ended October 9

• Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. In the week to October 9, used motor vehicle prices rose by 0.7 per cent after rising 4.4 per cent in the previous week.

• In the latest week supply fell 5.1 per cent after rising 7 per cent the prior week. Clearance rates rose 0.1 per cent. Datium notes that “stock remains considerably low.”

• Prices of SUVs fell 1.4 per cent with passenger vehicles up 4.1 per cent and light commercial fell 0.4 per cent.

• By vehicle, Datium reported, “Prices for top 15 traded vehicles were largely negative with most vehicles seeing small declines. Holden Colorado (+7 per cent) and Toyota Rav4 (+4.2 per cent) drove increases”.

• The Toyota Hilux retains 82.1 per cent of its new vehicle price after three years.

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. 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.

• Also Datium Insights and Moody’s Analytics compile a monthly index of user car prices.

What are the implications for investors?

• Demand for second hand cars remains firm during the pandemic with Aussies preferring to drive their own cars rather than catch public transport due to health concerns. This is certainly not an Australian phenomenon – lower exports by major vehicle manufacturers has created a global shortage – boosting prices of used cars vehicles.

• While clearly good news for car owners – the humble family car has become more of an asset – it is less positive for those wanting to move safely around the city in these COVID times.

• Despite higher prices in the past week, petrol prices remain historically low, boosting the spending power for Aussie motorists. Tax cuts, new employment programs and super-low interest rates are other key supports for spending.

Published by Craig James, Chief Economist, CommSec