Petrol prices & Coronavirus

Weekly Petrol Prices; China inflation

Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 0.6 cents to a 5-month low of 139.7 cents a litre last week.

China inflation: Consumer prices rose 5.4 per cent in the year to January (forecast 4.9 per cent). Excluding food, prices were up 1.6 per cent on the year. Producer prices rose 0.1 per cent over the year as expected.

The petrol price data have implications for retailers, especially petrol marketing groups. Chinese economic data provides insights into Australia’s largest trading partner and can influence the dollar and equity markets.

What does it all mean?

• The main factor weighing on global oil prices is coronavirus. The concern is that Chinese oil demand may fall due to the impact of the coronavirus in reducing travel demand and overall economic activity. On Friday, Brent crude fell by US46 cents or 0.8 per cent to US$54.47 a barrel. The US Nymex price fell by US63 cents or 1.2 per cent to US$50.32 a barrel. Over the week Brent fell by 6.3 per cent and Nymex lost 2.4 per cent – the fifth straight weekly declines.

• The recent high for the Nymex price was US$63.27 a barrel on January 6. In the period since, Nymex has fallen almost US$13 a barrel or 20 per cent.

• The Singapore gasoline price has fallen by around 9 cents a litre from recent highs (in late December). The Australian terminal gate price has fallen around 10 cents a litre. The pump price appears to have fallen further – down by around 15 cents a litre – but the data is distorted by the vagaries of eastern and southern capital city discounting cycles. The better guide is the Perth pump price that has fallen around 7.5 cents a litre. Petrol prices can fall another 2-3 cents a litre.

• With the wholesale price now at 125.6 cents a litre, motorists shouldn’t be paying more than 140 cents a litre at the pump. The only factor holding back motorists from enjoying even cheaper petrol prices is the weaker Aussie dollar (lifting the cost of imported oil).

What do the figures show?

Petrol prices
• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 0.6 cents to 139.7 cents a litre last week. The metropolitan price rose by 0.3 cents to 137.4 cents a litre and the regional price fell by 2.4 cents to 144.3 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up 1.2 cents to 134.3 c/l), Melbourne (down by 5.0 cents to 133.4 c/l), Brisbane (up by 2.3 cents to 137.3 c/l), Adelaide (up by 14.7 cents to 152.9 c/l), Perth (down by 2.3 cents to 137.7 c/l), Darwin (down by 0.9 cents to 137.9 c/l), Canberra (relatively unchanged to 146.3 c/l) and Hobart (down by 0.4 cents to 155.1 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from a 7½-month high of 15.29 cents a litre to 14.41 cents (24-month average: 13.2 cents a litre).

• The national average diesel petrol price fell by 0.6 cents to 149.2 cents a litre over the past week. The metropolitan price fell by 0.6 cents to 147.8 cents a litre and the regional price was down by 0.7 cents to 150.3 cents a litre.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 126.5 cents a litre, down 1.9 cents over the week. The terminal gate diesel price stands at 128.3 cents a litre, down by 3.2 cents over the past week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 139.2c; Melbourne 139.1c; Brisbane 145.4c; Adelaide 145.3c; Perth 127.7c; Canberra 145.9c; Darwin 137.6c; Hobart 155.1c.

• The key Singapore gasoline price fell by US$1.15 or 1.7 per cent last week to 12-month lows of US$65.10 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $1.62 or 1.7 per cent to $96.90 a barrel or 60.95 cents a litre – an 8-month low.

China inflation

• Consumer prices rose 5.4 per cent in the year to January (forecast 4.9 per cent) – the highest in eight years (October 2011). Urban inflation was 5.1 per cent with rural prices up 6.3 per cent. Food, tobacco and alcohol prices rose 15.2 per cent on the year. Excluding food, prices were up 1.6 per cent on the year – the fastest pace in eight months. Producer prices rose 0.1 per cent over the year as expected.

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.

What are the implications for interest rates and investors?

• There is downward pressure on petrol prices in response to global worries about the impact of coronavirus. If global travel demand weakens (especially to and from China) that means less demand for crude oil and its products.

• Lower petrol prices would serve to support consumer spending. Filling the car with petrol is the single biggest purchase made by most Australian families.

• Inflation is up in China largely due to higher pork prices. But non-food inflation has also ticked higher. Inflation is tipped to ease in the wake of the coronavirus.

Published by Craig James, Chief Economist, CommSec