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Petrol prices set to lift on vaccine optimism

Petrol Prices; Used car prices

Fuel prices: The national average price of unleaded petrol rose by 3.1 cents to 119.9 cents a litre (c/l) last week according to the Australian Institute of Petroleum. Metropolitan prices rose by 5.2 cents to 121.3c/l with regional prices down by 1.2 cents to 117.0c/l.

Used car prices: Datium Insights reported that wholesale used car prices fell by 1.2 per cent in the past week after falling 1.9 per cent in the prior week.

Household impacts of COVID-19: The Australian Bureau of Statistics (ABS) has released the latest survey. Amongst the findings: Fewer people (46 per cent) intend to travel from November 2020 to February 2021 compared with 77 per cent who usually travel.

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. ABS surveys provide insights into how COVID-19 is affecting the economy.

What does it all mean?

• It’s good news that an effective vaccine is being developed for the COVID-19 virus. However the prospect that we may be travelling again has seen the oil price spike higher. And that means there is the potential for higher pump prices for Aussie motorists. The Singapore gasoline price has risen by around 16 per cent from lows or around US$6 a barrel, which means an extra 6c a litre at the pump.

• Looking across capital cities, Sydney pump prices have risen for 16 days and are about to peak. Melbourne prices have fallen for 22 days but still look remain relatively high compared with past cycles and other capital cities. The Brisbane discounting cycle ended nine days ago and the Adelaide cycle ended five days ago. While the usual weekly discounting cycle is ending in Perth.

• Interestingly, Adelaide, Darwin and Perth have had consistently lower unleaded petrol prices over the past four months than other capital cities.

• After rising by a record 32 per cent over the past year, there are signs that wholesale used vehicle prices may have peaked. Prices have fallen for two straight weeks – down 3.1 per cent – the first back-to-back declines for around eight months. Prices had lifted during the COVID-19 in response to supply shortages and higher demand.

What do the figures show?

Weekly petrol prices

• The national average price of unleaded petrol rose by 3.1 cents to 119.9 cents a litre (c/l) last week according to the Australian Institute of Petroleum. Metropolitan prices rose by 5.2 cents to 121.3c/l with regional prices down by 1.2 cents to 117.0c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 14.4 cents to 125.6 c/l), Melbourne (down by 8.3 cents to 121.1 c/l), Brisbane (down by 8.0 cents to 117.3 c/l), Adelaide (up by 26.4 cents to 126.3 c/l), Perth (down by 0.5 cents to 116.1 c/l), Darwin (down by 0.7 cents to 116.0 c/l), Canberra (up 0.1 c/l to 121.1 c/l) and Hobart (unchanged at 123.0 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 16.28 cents to 16.34 cents (24-month average: 15.0 cents a litre).

• The national average diesel petrol price fell by 0.2 cents to 118.0 cents a litre over the past week. The metropolitan price fell by 0.2 cents to 116.7 cents a litre and the regional price was down 0.3 cents to 119.1 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was flat at 100.3 cents a litre. The terminal gate diesel price rose by 0.7 cents to 99.3 cents a litre.

• Today, the average unleaded TGP stands at 102.0 cents a litre, up by 2.4 cents over the week. The terminal gate diesel price stands at 101.2 cents a litre, up 2.8 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 135.2c/l; Melbourne 117.7c/l; Brisbane 125.0c/l; Adelaide 120.5c/l; Perth 109.2c/l; Hobart 123.1c/l; Darwin 115.4c/l; and Canberra 121.1c/l.

• Last week the key Singapore gasoline price rose by US$1.65 or 3.7 per cent to US$46.10 a barrel after rising by 5.8 per cent in the previous week. In Australian dollar terms, the Singapore gasoline price rose by US$2.55 or 4.2 per cent to $63.76 a barrel or 40.1 cents a litre after rising by 2.7 per cent in the prior week.

Used vehicle market

• Over the week to November 16, Datium Insights reported:

• “Prices were down again this past week (-1.2 per cent) with repossessions leading the decline (-11.3 per cent).

• Light commercial (-2.1 per cent) and SUV’s (-1.2 per cent) led the decreases.

• Supply was up (+8.2 per cent) with ex-leases (+29.1 per cent) and ex-councils (+36.7 per cent) leading the increases.

• Clearance rates were also up (+4.1 per cent) and remain at historic highs.

• Prices for top 15 traded vehicles were mixed with the Mitsubishi Triton (+8.8 per cent) seeing the largest increase and the Volkswagen Amarok (-4 per cent) seeing the largest decrease.

• Stock still remains considerably low.”

Household impacts of COVID-19 – October

• The Bureau of Statistics (ABS) monthly Household Impacts of COVID-19 Survey was run between October 16-26. The October 2020 survey collected information on:

domestic and international travel intentions

experience with COVID-19 symptoms and health precautions

individual and household stressors

household financial arrangements and payment relief

early access to superannuation

participation in selected activities

job status

• Amongst the findings:

Fewer people (46 per cent) intend to travel November 2020 to February 2021 compared with 77 per cent who usually travel.

One in seven (14 per cent) people living in a home owned with a mortgage had their mortgage repayment deferred or reduced (includes mortgages on a current dwelling or an investment property).

One in eight (12 per cent) Australians with superannuation reported they had applied for early access to their superannuation.

Paying household bills (58 per cent) was the most commonly reported use or planned use of super funds, followed by purchasing household supplies, including groceries (49 per cent).

Australians aged 18 years and over who had a job working paid hours remained stable between mid-September (61 per cent) and mid-October (62 per cent). The proportion of people who had a job and were not working paid hours was 7 per cent in mid-September and 6 per cent in mid-October.

One in 13 people (8 per cent) living in a rented home had their rent payment for the dwelling deferred or reduced.

One in 20 Australians (5 per cent) had a bill or rate payment deferred or reduced.
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.

• The Australian Bureau of Statistics (ABS) is providing updates on the coronavirus impacts on job situation, health services, health precautions, social distancing, household stressors, support network, lifestyle changes.

What are the implications for investors?

• Filling up the car with petrol is the single biggest weekly purchase by most Aussie families. Petrol prices are still well down for this time of the year compared with previous years, but pump prices are set to lift. World crude oil prices have lifted on optimism about the potential for an effective vaccine to be rolled out, potentially boosting demand. But putting a cap on prices is the rising number of coronavirus cases across Europe and the US.

• The ABS continue to prove valuable survey information showing how Aussies are deal with COVID-19. And in good news for tourism operators, more people expect to travel within their state or territory over the peak summer holiday season. Understandably fewer people will travel overseas. This may end up being positive for retailers and local stores if Aussies decide on retail therapy instead.

Published by Craig James, Chief Economist, CommSec