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Petrol price fails to distract Aussie consumers
Petrol prices; Used car market

Fuel prices: Last week the national average price of unleaded petrol fell by 4.5 cents to a 4-week low of 122.2 cents a litre (c/l), according to the Australian Institute of Petroleum.

Used car prices: Datium Insights reported that wholesale used car prices fell by 3.0 per cent in the past week but remain 33 per cent higher on the year.

China purchasing manager index (PMI): The Caixin PMI for manufacturing fell from 54.9 to 53.0 in December (survey: 54.8).

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers.

What does it all mean?

• Demand and supply for oil are reasonably balanced at present. Demand is restrained by the high and rising number of global Covid-19 cases, restricting mobility and therefore demand for fuel. But supply is also being restrained by key oil producing nations. Crude prices are now broadly US$45-55 a barrel, well off the April 2020 lows.

• The OPEC+ oil nations are due to meet later today to discuss production quotas and prices.

What do the figures show?

Weekly petrol prices

• Last week the national average price of unleaded petrol fell by 4.5 cents to 122.2 cents a litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices fell by 6.4 cents to 122.9c/l with regional prices down 0.6 cents to 120.7c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 6.9 cents to 121.4 c/l), Melbourne (down by 7.3 cents to 122.8 c/l), Brisbane (down by 12.0 cents to 131.8 c/l), Adelaide (down by 3.3 cents to 113.0 c/l), Perth (up by 0.7 cents to 119.9 c/l), Darwin (down by 0.1 cent to 115.8 c/l), Canberra (up by 0.1 cent to 122.7 c/l) and Hobart (unchanged at 123.9 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 18.15 cents to 17.81 cents (24-month average: 15.1 cents a litre).

• The national average diesel petrol price rose by 0.3 cents to 120.2 cents a litre over the past week. The metropolitan price also lifted 0.3 cents to 118.9 cents a litre and the regional price was up 0.2 cents to 121.2 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up 0.5 cents to 108.4 cents a litre. The terminal gate diesel price rose by 0.1 cents to 109.5 cents a litre.

• Today, the average unleaded TGP stands at 108.9 cents a litre, up by 0.9 cents over the week. The terminal gate diesel price stands at 109.7 cents a litre, up 0.4 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 118.0c/l; Melbourne 120.1c/l; Brisbane 126.4c/l; Adelaide 134.1c/l; Perth 112.1c/l; Hobart 124.0c/l; Darwin 115.8c/l; and Canberra 122.7c/l.

• Last week the key Singapore gasoline price rose by US10 cents or 0.2 per cent to a 9½-month high of US$56.20 a barrel. In Australian dollar terms, the Singapore gasoline price fell by US$1.02 or 1.4 per cent to $72.97 a barrel or 45.89 cents a litre.

Weekly used vehicle market – January 4, 2021

• Over the week to January 4, Datium Insights reported:

“Prices were down in the last week of 2020 (-3 per cent) with repossessions (-11.2 per cent) seeing the largest falls

Supply was also down (-51.4 per cent) due to the holiday period

Clearance rates were also down (-10.7 per cent)

Prices for top 15 traded vehicles were mostly negative with the Holden Commodore (-3.7 per cent) and Toyota Hiace (-5.5 per cent) seeing the largest declines

Stock still remains considerably low.”

• Over the year to November 2020, used vehicle prices were up by 33 per cent on a year earlier – the fastest annual growth rate in 21 years. Car prices rose 28.8 per cent, while truck prices increased 45.8 per cent. Vehicle retention value, measured as price/manufacturer suggested retail price, rose 32.5 per cent compared with a year earlier, with the car component increasing 26.5 per cent and the truck component rising 43.7 per cent. The December data is expected on Tuesday.

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 compile a monthly wholesale used car price series. 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.

What are the implications for investors?

• The higher Australian dollar and low world crude prices are keeping domestic fuel prices restrained. Aussie consumers are not being distracted by movements in petrol prices, allowing them to continue with their retail therapy.

Published by Craig James, Chief Economist, CommSec