Aussie drivers approach petrol stations with trepidation: CommSec's Ryan Felsman
EXPERT OBSERVATION
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.4 cents last week to 143.8 cents per litre.
The Singapore gasoline benchmark price is holding at 31⁄2-year highs, pointing to higher pump prices in Australia in coming weeks.
The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?
Aussie drivers continue to approach petrol stations with trepidation. And with good reason. Pump prices are above $1.40 across large swathes of the country and likely to stay there.
Global oil prices are on the march. The Singapore price of unleaded petrol is the key petrol benchmark for Australia. Last week the Singapore gasoline price surged to a fresh 31⁄2-year high of US$91.70 a barrel. And Brent crude oil futures, considered the international price benchmark, breached US$80 per barrel last Thursday, its highest level since November 2014.
Oil prices have risen for six consecutive weeks and are anticipated to increase in the short-term due to supply disruptions. The potential for additional US sanctions on Venezuela following yesterday’s disputed presidential election could crimp OPEC output even further. OPEC oil producers have successfully limited market supplies, supporting prices.
Strengthening global economic activity has also been an important factor pushing up oil prices. But elevated prices could eventually reduce appetite for oil, despite record US shale output.
The International Energy Agency last week revised down its global oil demand forecast by 40,000 barrels per day to 1.4 million barrels per day to average 99.2 million barrels in 2018.
And for good reason. Oil prices have surged by nearly 20% so far this year and around 75% since mid-2017. Soaring petrol and diesel prices are stoking inflationary pressures across the globe at a time when interest rates are rising in countries like the US, UK and Canada.
Developing nations are particularly sensitive to rising oil prices after many countries phased out fuel subsidies when prices were much lower. Therefore, an overall dampening in global oil consumption is likely in the coming months.
Suburban motorists aren’t the only Aussies feeling the petrol and diesel bowser pain at present.
Our farmers are seeing their profits eroded by rising diesel prices. Diesel fuel is necessary for planting, harvesting and shipping crops to market.
In the US, farmers are estimated to spend US$15.3 billion on fuel and oil in 2018, up 8% according to the US Department of Agriculture.
And jet fuel prices have climbed by 15% so far this year according to S&P Global Platts, pushing up airline fuel bills. Fuel costs are second only to labour costs.
What do the figures show?
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.4 cents to 143.8 cents a litre in the past week.
The metropolitan petrol price fell by 2.2 cents to 142.0 cents per litre, but the regional price rose by 0.3 cents to 147.5 cents per litre. The gross retail margin fell from 13.82 cents to 12.82 cents.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 1.7 cents to 140.2 c/l), Melbourne (down by 1.9 cents to 139.5 c/l), Brisbane (down by 0.8 cents to 143.5 c/l), Adelaide (down by 14.7 cents to 140.7 c/l), Perth (up by 1.8 cents to 146.9 c/l), Darwin (up by 0.1 cents to 151.0 c/l), Canberra (up by 0.1 cents at 148.3 c/l) and Hobart (up by 1.2 cents to 153.3c/l).
The national average Australian price of diesel petrol rose by 2.1 cents to 150.2 cents per litre. The metropolitan price rose by 2.3 cents to 151.1 c/l and the regional average price rose by 2.0 cents to 149.5 c/l.
Today, the national average wholesale (terminal gate) unleaded petrol price stands at a 31⁄2-year high of 135.2 cents a litre, up by 2.5 cents over the week. The terminal gate diesel price stands at 138.7 cents a litre, up by 2.7 cents over the past week.
Last week the key Singapore gasoline price rose by US$4.50 or 5.2% to US$91.70 a barrel. In Australian dollar terms the Singapore gasoline price rose by $6.22 or 5.4% to a 31⁄2-year high of $121.96 a barrel or 76.70 cents a litre.
MotorMouth records the following average retail prices for capital cities today: Sydney 152.1c; Melbourne 151.7c; Brisbane 155.3c; Adelaide 136.8c; Perth 139.0c; Canberra 148.8c; Darwin 151.0c; Hobart 149.6c.
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's 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?
Petrol prices have fallen a smidgen over the past two weeks, but remain elevated.
Developments in global oil markets together with a weaker Aussie dollar are supporting domestic petrol prices weighing on household budgets.
Aussie farmers are feeling the pain too. Rising diesel prices are pushing up their input costs. Food could become more expensive if these costs are passed on to the consumer.
And airline travel may become dearer as jet fuel prices surge. Fuel prices are up by 60% over the past year. That summer holiday in Europe or the US could become more expensive.
CommSec expects interest rates to be unchanged for the foreseeable future.
Ryan Felsman is a senior economist at CommSec.
