Petrol prices hit 5-month low

Brisbane and Sydney pump prices lift
Weekly petrol prices

Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 3.1 cents in the past week to 137.9 cents a litre – the lowest level in almost five months. Pump prices in Adelaide fell by 19.1 cents a litre and Melbourne bowser prices were down by 13.3 cents a litre.

Brisbane and Sydney pump prices: Today, unleaded petrol prices are averaging around $1.49 a litre in Brisbane and $1.43 a litre in Sydney, according to real-time fuel app MotorMouth. Pump prices have increased by 14-19 cents a litre from recent lows and are set to lift further.

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

What does it all mean?

• Aussie unleaded petrol prices were near 5-month lows last week. So why is unleaded petrol so expensive in Brisbane and Sydney today? Certainly the price of crude oil – which represents around 40 per cent of the price of petrol – is down 7 per cent so far in August due to a softening in global demand. And Terminal Gate Prices (TGP) or wholesale prices are averaging just 129.3 cents a litre in both cities. But pump prices in Brisbane are averaging 148.8 cents a litre and 142.9 cents a litre in Sydney today, according to real-time data from MotorMouth.

• So with some retailers already charging around $1.60 a litre in some suburbs, motorists will be baffled by the sudden and sharp lift in prices at the bowser. Still, retailers will argue that petrol discounting became unsustainable last week as the prices they charged motorists were below wholesale prices, squeezing their profit margins.

• While servos ‘make hay while the sun shines’, motorists in Brisbane and Sydney should top up rather than fill up to preserve the family budget. Pump prices will continue to lift over the next week in both cities.
What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 3.1 cents in the past week to 137.9 cents a litre. The metropolitan price fell by 4.1 cents to 136.6 cents a litre and the regional price declined by 1.0 cent to 140.6 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 1.9 cents to 132.0 c/l), Melbourne (down by 13.3 cents to 139.8 c/l), Brisbane (up by 4.4 cents to 135.9 c/l), Adelaide (down by 19.1 cents to 132.9 c/l), Perth (down by 0.4 cents to 139.7 c/l), Darwin (down by 0.2 cents to 139.6 c/l), Canberra (down by 0.4 cents to 141.9 c/l) and Hobart (down by 0.2 cents to 151.5 c/l).

• The smoothed gross retail margin for unleaded petrol fell from 13.72 cents a litre to 12.62 cents a litre last week (24-month average: 12 cents a litre).

• The national average diesel petrol price fell by 0.1 cent a litre to 147.6 cents a litre over the week. The metropolitan price fell by 0.1 cent to 146.2 cents a litre and the regional price fell by 0.1 cent a litre to 148.7 cents a litre.

• MotorMouth records the following average retail prices for capital cities today: Sydney 142.9c; Melbourne 133.5c; Brisbane 148.8c; Adelaide 128.0c; Perth 130.2c; Canberra 141.5c; Darwin 139.4c; Hobart 151.6c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 129.3 cents a litre, down by 0.3 cents over the week. The terminal gate diesel price stands at 135.3 cents a litre, down by 1.1 cents over the past week.

• Last week, the key Singapore gasoline price fell by US35 cents or 0.5 per cent to US$68.75 a barrel. In Australian dollar terms, the Singapore gasoline price fell by 48 cents or 0.5 per cent last week to $100.95 a barrel or 63.49 cents a litre.
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?

• Petrol was a significant contributor to the modest lift in consumer prices in the June quarter. But average unleaded pump prices have since fallen back to levels last seen in March. And crude oil prices are under pressure from a slump in demand. In fact, global oil demand in the year to May grew at the slowest pace since 2008, according to the International Energy Agency.

• That said, Aussie motorists remain captive to the vagaries of the retail petrol price discounting cycle in the more competitive fuel markets of Brisbane, Sydney, Melbourne and Adelaide. Only Perth has a consistent cycle.

• The de-synchronisation of cycles (Brisbane and Sydney prices are lifting, while Melbourne and Adelaide prices are falling) adds to the confusion. But drivers should try to time their fuel purchases to take advantage of price cycle movements by using real-time smartphone fuel apps.

• CommSec expects the Reserve Bank to assess the impact of previous rate cuts before deciding further moves on cash rates.

Published by Craig James, Chief Economist, CommSec