Record petrol price lift; RBA Governor mulls
Weekly petrol price: Reserve Bank Governor remarks
Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 4.1 cents in the past week to 143.9 cents a litre. Record weekly price increases in Brisbane and Adelaide drove the national petrol price higher together with a lift in Sydney prices.
Reserve Bank Governor: Governor Philip Lowe gave remarks to ANU Crawford Australian Leadership Forum in Canberra.
Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers.
What does it all mean?
• At present, the softening of the global economy is putting downward pressure on oil prices. Adding to this downward pressure on prices is solid US oil production. But on the other side of the equation, US-Iran tensions are serving to lift global oil prices. Further, OPEC continues to limit oil production with the aim of supporting prices. As a result, oil prices have provided volatile over recent months.
• Australian motorists can expect unleaded petrol prices to track over a wide range of $1.30-1.60 a litre, but levels near $1.40 a litre are generally defendable based on where wholesale prices sit. The record price increases in Adelaide and Brisbane certainly weren’t justified on fundamentals last week together with the spike in Sydney prices. Perth petrol prices continue to reflect the true situation on global markets.
• Filling up the car with petrol is the single biggest weekly expenses for most Aussie families.
• Global oil prices rose by around 1 per cent on Friday. Traders continue to focus on tensions between the US and Iran. Also US gasoline futures rose 4 per cent following a fire at a large refinery in Philadelphia – the biggest refinery on the East Coast. The Brent crude price rose by US75 cents or 1.2 per cent to US$65.20 a barrel. And the US Nymex rose by US36 cents or 0.6 per cent to US$57.43 a barrel. Over the week Brent rose by 5.1 per cent while Nymex rose by 9.4 per cent.
• Some of the paraphrased wire service comments attributed to Reserve Bank Governor at the ANU Crawford Australian Leadership Forum: “risks to global economy are tilted to downside”; “legitimate to ask how effective monetary easing would be globally”; “if everyone easing, effect on exchange rates is offset”; “more infrastructure investment would benefit Australian economy”; “Australian government can borrow at historic lows, must be projects that can make a return”; “good time for the government to borrow for infrastructure”; it’s legitimate to ask how effective more easing would be”; “global economy has slowed, but still reasonable”.
• The Reserve Bank Governor has previously indicated that a further rate cut will be considered in coming meetings. But in reported comments today, Governor Lowe has seemingly thrown cold water on prospects for multiple rate cuts ahead, raising questions on the effectiveness of rate cuts at current low nominal levels.
What do the figures show?
• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 4.1 cents in the past week to 143.9 cents a litre. The metropolitan price rose by 7.1 cents to 145.4 cents a litre with the regional price down by 1.9 cents to 140.8 cents a litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 14.9 cents to 152.7 c/l), Melbourne (down by 11.6 cents to 130.6 c/l), Brisbane (up by 23.4 cents to 159.5 c/l), Adelaide (down by 24.1 cents to 152.4 c/l), Perth (down by 1.8 cents to 136.1 c/l), Darwin (down by 0.6 cents to 144.5 c/l), Canberra (down by 0.9 cents to 144.0 c/l) and Hobart (down by 1.2 cents to 152.2 c/l).
• The smoothed gross retail margin for unleaded petrol rose from 13.33 cents a litre to 14.64 cents a litre last week (24-month average: 13 cents a litre).
• The national average diesel petrol price fell by 0.9 cents a litre to 148.5 cents a litre over the week. The metropolitan price fell by 0.9 cents to 147.4 cents a litre with the regional price down by 0.9 cents to 149.4 cents a litre.
• MotorMouth records the following average retail prices for capital cities today: Sydney 146.8c; Melbourne 126.4c; Brisbane 153.6c; Adelaide 141.9c; Perth 124.9c; Canberra 143.6c; Darwin 143.9c; Hobart 151.6c.
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 123.5 cents a litre, up 0.2 cents over the week. The terminal gate diesel price stands at 131.8 cents a litre, up by 1.6 cents over the past week.
• Last week, the key Singapore gasoline price rose from a 4½-month low of US$65.75 a barrel, up by US$4.05 or 6.2 per cent to US$69.80 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $5.36 or 5.6 per cent last week to $100.68 a barrel or 63.32 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?
• Motorists in the major capital cities would do well to follow the discounting cycles closely. Petrol has ranged from $1.24-$1.64 a litre in the past week. Perth motorists have a regular discounting cycle where the “cheap” and “dear” days for petrol are precisely defined. Other motorists must rely on apps to find the cheapest places to fill up.
• Petrol prices in Sydney and Brisbane are slowly retracing to more justifiable levels while Adelaide prices are correcting more quickly. Melbourne prices are the lowest across capital cities with Perth. High petrol prices are serving to restrain discretionary spending.
• The Reserve Bank Governor has flagged that another rate cut could be delivered as early as July.
Published by Craig James, Chief Economist, CommSec