Petrol prices lift the most in 12 weeks

Weekly Petrol Prices; COVID-19 survey

Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 4.8 cents last week – the biggest increase in 12 weeks – to 103.1 cents a litre.

East Coast petrol prices lift: According to data from MotorMouth, average daily unleaded retail petrol prices in Brisbane, Sydney and Melbourne have risen by between 10 and 30 cents a litre from the lows of the discounting cycle in late April. Petrol prices have hit $1.20 a litre in most suburbs.

COVID-19: Survey of households: According to the Australian Bureau of Statistics (ABS), “One in four people (26 per cent) who had a job in the first week of April worked fewer hours than usual in the previous week, whilst 13 per cent worked more hours than usual.”

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

What does it all mean?

• Petrol prices have hit $1.20 a litre on Australia’s East Coast. And last week average national retail unleaded petrol prices rose by almost 5 per cent – the biggest weekly gain in three months. Of course, it’s not great timing as state governments ease lockdown restrictions to kick-start economies and school runs resume.

• Fuel retailers have lifted prices after discounting cycles ended on April 28 in Sydney and Brisbane and on May 4 in Melbourne. In fact, East Coast pump prices have lifted between 10 and 30 cents a litre after averaging a smidgen below 90 cents a litre in recent weeks – near 17-year lows.

• Adelaide’s peculiar petrol price cycle continues. Average retail unleaded pump prices surged by 33.4 cents to 117.4 cents a litre between April 28 and May 1, before falling back to 91.9 cents a litre on May 8. Prices have since lifted back to 115.8 cents a litre today. So if the Adelaide cycle is any guide, pump prices in Sydney and Brisbane should begin to ease by the weekend, but Melbourne prices will continue to increase this week.

• So can we expect fuel prices to lift over winter? The crude oil market is certainly showing some signs of a tentative recovery with demand expected to pick up as virus lockdown restrictions are eased worldwide.

• In the post COVID-19 lockdown era, Aussie commuters may prefer to drive to work rather than catch public transport, concerned about social distancing and the potential for a second wave of winter virus infections. Bloomberg and Apple Mobility Trends app data for 27 cities in Asia, Europe and the Americas already show that driving is recovering more quickly than public transport usage. Average driving levels are still 44 per cent below ‘normal’ levels as at May 3, but above lows of minus 66 per cent on April 11. But average public transport usage is still 72 per cent below ‘normal’ levels.

• Last week the Brent crude price rose by US$4.53 or 17.1 per cent to US$30.97 a barrel and the US Nymex price rose by US$4.96 or 25.1 per cent to US$24.74 a barrel – posting back-to-back weekly gains for the first time since February. And the Singapore benchmark gasoline price – the largest component of fuel prices paid by Aussie motorists – rose by 22.1 per cent or US$5.30 a barrel to a 2-month high of US$29.30 a barrel last week.

• A reduction in Chinese crude stockpiles, rising US gasoline consumption (up 400,000 barrels a day last week according to US government data), OPEC+ supply cuts and a huge fall in US shale drilling (down 53 per cent in the past 8 weeks, according to Baker Hughes) have all boosted oil market sentiment.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 4.8 cents to 103.1 cents a litre. The metropolitan price lifted by 6.7 cents to 101.6 cents a litre and the regional price was up by 1.2 cents to 106.3 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up 12.5 cents to 104.5 c/l), Melbourne (up by 2.1 cents to 93.6 c/l), Brisbane (up by 17.4 cents to 110.5 c/l), Adelaide (down by 4.6 cents to 99.2 c/l), Perth (up by 1.4 cents to 98.1 c/l), Darwin (down by 2.2 cents to 114.8 c/l), Canberra (down by 8.7 cents to 101.3 c/l) and Hobart (down by 2.9 cents to 121.4 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 24.59 cents a litre to a record high of 24.86 cents (24-month average: 13.9 cents a litre).

• The national average diesel petrol price fell by 1.6 cents to a 3½-year low of 120.2 cents a litre over the past week. The metropolitan price fell by 1.7 cents to 118.9 cents a litre and the regional price was down by 1.5 cents to 121.2 cents a litre.

• Last week the national average wholesale unleaded petrol price (terminal gate or TGP) was up by 4.6 cents to 88.5 cents per litre. Today, the average unleaded TGP stands at 92.1 cents a litre, up by 5.7 cents over the week. The terminal gate diesel price stands at 98.9 cents a litre, up by 5.6 cents over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 114.0c; Melbourne 100.2c; Brisbane 118.3c; Adelaide 115.8c; Perth 90.9c; Canberra 101.1c; Darwin 113.4c; Hobart 121.0c.

• The key Singapore gasoline price rose by 22.1 per cent or US$5.30 a barrel to a 2-month high of US$29.30 a barrel last week. In Australian dollar terms, the Singapore gasoline price rose by $7.71 or 20.8 per cent to a 7-week high of $44.87 a barrel or 28.22 cents a litre.

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.

What are the implications for investors?

• The crude oil market is slowly rebalancing as COVID-19 restrictions are eased ahead of the Northern Hemisphere summer. Americans and Europeans are likely to prefer a road trip holiday with airlines still grounded due to travel bans, potentially boosting gasoline demand. Shares of Camping World lifted by 35 per cent in the US on Friday after the company announced stronger-than-expected online sales of recreational vehicles.

• It appears consumer behaviours are already changing due to the virus pandemic with some consumers already expressing a desire to social distance while commuting to work or going on holiday. Should this materialise, it will be welcomed by beleaguered energy companies, fuel retailers and parking station operators.

• The Aussie labour force survey for April is issued on Thursday. Additional ABS survey data issued today shows that Aussies are working fewer hours or have been stood down with virus restrictions and business shutdowns reducing available work. Also, “the survey found that the proportion of people who had a job fell by 3 percentage points between early March and early April”, according to the ABS.

Published by Ryan Felsman, Senior Economist, CommSec