Rising petrol prices lift June quarter inflation
Weekly petrol prices

Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 1.8 cents in the past week to 142.8 cents a litre. Prices have lifted for three successive weeks.

Fuel inflation: Auto fuel, including petrol and diesel, is expected to be amongst the largest contributors to inflation in the June quarter. During the quarter, the national price of retail unleaded petrol averaged 145.3 cents a litre, up by 11 per cent. CommSec forecasts the contribution of fuel to the quarterly change in the Consumer Price Index (CPI) to be around +0.4 percentage points.

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

What does it all mean?

• School’s back. Motorists returning home over the weekend and about to re-commence the school run would’ve noticed that petrol prices have begun easing in Brisbane and Sydney.

• Pump prices in both cities had surged by 26-30 cents a litre over a 10-day period to July 16. But the latest retail petrol discounting cycle has commenced in both cities and prices are down around 10 cents a litre from the peak. Prices are still averaging $1.40-$1.50 a litre, so drivers are encouraged to hold-off filling up until next week.

• In Melbourne, unleaded petrol prices fell to $1.30 a litre at the end of last week. Prices are near the lowest point in the current cycle. So now is a good time for motorists to buy petrol as prices are expected to lift this week.

• Global oil prices fell last week. The Brent crude price fell by 6.4 per cent to US$62.47 a barrel and the US Nymex price declined by 7.6 per cent to US$55.63 a barrel. Concerns about weakening crude oil demand largely offset escalating tensions in the Middle East.

• Crude oil prices lifted, however, on Friday after Iran seized a British oil tanker in the Straits of Hormuz. And Libyan oil production fell to the lowest level in five months due to supply disruptions in the Sharara oilfield.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 1.8 cents in the past week to 142.8 cents a litre. The metropolitan price rose by 1.5 cents to 142.8 cents a litre and the regional price lifted by 2.6 cents to 143.0 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 9.2 cents to 149.3 c/l), Melbourne (down by 8.7 cents to 131.5 c/l), Brisbane (up by 13.6 cents to 156.7 c/l), Adelaide (down by 15.1 cents to 130.0 c/l), Perth (up by 1.6 cents to 140.6 c/l), Darwin (down by 0.3 cents to 140.1 c/l), Canberra (up by 0.6 cents to 143.1 c/l) and Hobart (up by 0.3 cents to 152.1 c/l).

• The smoothed gross retail margin for unleaded petrol fell from 14.41 cents a litre to 14.19 cents a litre last week (24-month average: 12 cents a litre).

• The national average diesel petrol price rose by 0.2 cents a litre to 148.0 cents a litre over the week. The metropolitan price was flat at 146.6 cents a litre, while the regional price rose by 0.2 cents a litre to 149.0 cents a litre.

• MotorMouth records the following average retail prices for capital cities today: Sydney 142.8c; Melbourne 133.1c; Brisbane 149.1c; Adelaide 134.8c; Perth 132.3c; Canberra 142.9c; Darwin 140.5c; Hobart 152.9c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 132.8 cents a litre, up by 2.2 cents over the week. The terminal gate diesel price stands at 136.0 cents a litre, up by 1.7 cents over the past week.

• Last week, the key Singapore gasoline price fell by US$4.85 or 6.2 per cent to US$73.50 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $7.88 or 7 per cent last week to $104.03 a barrel or 65.43 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?

• Retail margins for servos are still above ‘normal’, but Aussie drivers remain captive to petrol price cycles, especially in the larger and more competitive retail fuel markets on the East Coast. Motorists should keep an eye on real-time fuel apps on their smartphones – such as MotorMouth – and look for the best deals in their suburbs and towns.

• For fuel observers, growing tensions in the Middle East are worth monitoring. Crude oil prices have broadly traded in a narrow US$50-60 a barrel range so far this year. But any further escalation of geo-political risks or military conflict could disrupt oil supply, pushing-up prices.

• All eyes will be on the June quarter inflation (Consumer Price Index) release next week. Consumer prices remain benign, but petrol prices rose by 11 per cent on average during the quarter.

• Automotive fuel is set to be the biggest contributor to the quarterly lift in consumer prices, with a contribution of around +0.4 percentage points forecast by CommSec.

• The Reserve Bank is expected to assess incoming economic data over the coming months before deciding the next move for the cash rate.

Published by Ryan Felsman, Senior Economist, CommSec