Petrol prices near 12-month highs

Petrol prices near 12-month highs
Weekly petrol prices

Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 9.0 cents a litre last week to a near 12-month high of 154.1 cents a litre (highest since week to November 4 2018). The lift in prices was influenced by sharp price increases of 19-22 cents a litre in Sydney, Melbourne and Brisbane, reflecting the end of discounting cycles.

Highs & Lows: Tennant Creek in the Northern Territory has the dearest petrol (192.7 cents a litre); Gunnedah in NSW has the cheapest (138.6 cents). Encouragingly, a number of NSW and Queensland towns that are significantly affected by drought, currently have relatively low petrol prices.

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

What does it all mean?

• Filling up the car with petrol is the single biggest weekly purchase for most families. Abstracting from discounting cycles, underlying pump prices are likely to be little-changed in the short-term. The problem is that it is hard to abstract from discounting cycles in East Coast and Southern mainland capital cities. In short, the cycles make no sense and don’t reflect the realities of global oil markets. The city that best reflects what is truly going on in global oil markets is Perth, the city with a discrete weekly pricing cycle. The Perth pump price fell 1.3 cents last week to 144.6 cents a litre.

• Petrol prices may seem high, but in actual fact, a year ago pump prices were even higher than now. The good news is that prices are slowly easing in Sydney, Melbourne and Brisbane.

• The US Nymex oil price stands at a 1-month high of US$56.66 a barrel. But at home the wholesale (or terminal gate) price actually stands at a 6-week low of 132.6 cents a litre. If you add in a 12 cent gross retail margin, the pump price should be around 145 cents a litre – as is the case in Perth.

• The big picture story on oil prices is mixed. The OPEC+ grouping of oil producing nations (OPEC, plus producers like Russia) are focussed on restricting production to support oil prices. But on the other side of the equation, the global economy has softened, reducing demand for oil. There is also uncertainty on issues like the US-China trade negotiations and Brexit and that uncertainty is keeping a cap on oil prices.

What do the figures show?

Petrol prices

• On Friday, Brent crude rose by US35 cents or 0.6 per cent to US$62.02 a barrel. And the US Nymex price rose by US43 cents or 0.8 per cent to US$56.66 a barrel. Over the week Brent rose by 4.4 per cent with Nymex up 5.4 per cent.

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol rose by 9.0 cents in the past week to a near 12-month high of 154.1 cents a litre. The metropolitan price rose by 12.9 cents to 156.9 cents a litre and the regional price rose by 1.1 cents to 148.2 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 19.3 cents to 158.5 c/l), Melbourne (up by 19.8 cents to 162.6 c/l), Brisbane (up by 21.9 cents to 164.1 c/l), Adelaide (down by 19.6 cents to 140.0 c/l), Perth (down by 1.3 cents to 144.6 c/l), Darwin (down by 0.3 cents to 147.1 c/l), Canberra (down by 0.2 cents to 148.4 c/l) and Hobart (unchanged at 155.9 c/l).

• The smoothed gross retail margin for unleaded petrol rose from 11.75 cents a litre last week to a 2½ month high of 12.96 cents a litre (24-month average: 13.1 cents a litre).

• The national average diesel petrol price was flat at 149.9 cents a litre over the week. The metropolitan price fell by less than 0.1 cent to 148.6 cents a litre and the regional price was unchanged at 150.9 cents a litre.

• The key Singapore gasoline price fell by US$1.90 last week (-2.6 per cent) to US$72.00 a barrel. In Australian dollar terms, the Singapore gasoline price fell by US$2.58 (-2.4 per cent) to $105.60 a barrel or 66.42 cents a litre.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 161.7c; Melbourne 162.4c; Brisbane 165.3c; Adelaide 148.9c; Perth 134.0c; Canberra 148.3c; Darwin 146.9c; Hobart 156.0c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 132.6 cents a litre, down by 3.9 cents over the week. The terminal gate diesel price stands at 136.9 cents a litre, down by 1.3 cents over the past week.

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?

• Fuel prices fell by around 2.3 per cent in the September quarter after a 10.2 per cent lift in the June quarter, keeping a lid on headline inflation. The Consumer Price Index is out on Wednesday and we expect that headline inflation rose by 0.5 per cent in the September quarter to be up 1.7 per cent on the year.

• Commonwealth Bank Group economists expect another interest rate cut in February 2020.

Published by Craig James, Chief Economist, CommSec