Petrol

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Significant land banking and value are set to be unlocked due to the major changes to Sydney's public transport and road network system.
Opportunities are likely to be added along major arterials across the city.
CBRE's Victor Sheu told SMH that the new WestConnex tunnel project would divert traffic flow and commuters from the M4, unlocking greater commercial opportunities in the city’s Inner West.
“Service stations are already among the most sought after commercial assets, with properties secured by five – ten year leases achieving record tight yields," Sheu said.
"This is further exemplified by the severe shortage of commercial investment properties readily available to satisfy the growing investment mandate across Sydney at present."
“With 16 service stations located along Parramatta Road, the current changes to the city’s infrastructure network present attractive investment and land banking opportunities – with these properties underpinned by strong underlying land values as well as long term leases for immediate income.”
Sheu said changes in the city’s transport network – coupled with the rise of sustainable energy – could prompt further changes in the service station sector.
“With more leading vehicle manufacturers taking a step towards alternate energy sources, introducing both hybrid and fuel-free models, there is likely to be decreased demand on petrol – and subsequently the stations that service them."
“Given service stations are currently trading at a market peak, we expect owners to look at reassessing the use of these assets – either looking at alternative commercial uses or expanding the service station model to incorporate more of a food and beverage element.”
Caltex has already expanded its service beyond the traditional service station offering, having recently partnered with breakfast cafe ‘The Foodary’.
“With service stations traditionally located on high exposure sites, there is a huge opportunity to expand the service station model to capitalise on the shifting business environment with a food and beverage component,” Sheu said.
“We’re likely to see more service stations adopt this strategy, in addition to some owners looking at re-evaluating their assets all together to maximize value.”
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Sydney’s changing road network fuels major changes to service station market

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MAB Corporation has sold a state-of-the-art service station and convenience store complex on Melbourne's West Gate Freeway for $22.5 million, the largest sale of a petrol station anywhere in Australia for more than 10 years.
The sale reflects a 5.5 percent yield.
The property was sold by Savills Chris Jones, Clinton Baxter and Ben Hegarty, in conjunction with Dawkins Occhiuto's Andrew Dawkins and Walter Occhiuto.
They said the marketing campaign generated strong international and local interest, with the purchaser a Melbourne based private investor.
 
"In addition to numerous local bids, we also generated multiple offers from Asia and Europe, with purchasers particularly driven by the property’s enviable and unique position on the West Gate Freeway, one of Australia’s busiest roads," Chris said.
"It was an opportunity that rarely comes to market and unlikely to be repeated given the dearth of similar sites and properties offering such strong locational advantages."
Clinton said investor interest was also driven by the state-of-the-art facility and the first rate tenancy profile offering stable long-term cash flow.
"The property offered investors a brand new state-of-the-art facility with maximum depreciation benefits to complement the strong income from A-grade tenants Shell, Hungry Jacks and Red Rooster."
"It really ticked all the boxes of a superb commercial investment,’’ he said.
The property at 62 Cook Street, Port Melbourne was constructed and opened earlier this year.
Walter Occhiuto said the property was sold subject to leases to Viva Energy Australia (Shell/Coles Express), Hungry Jack’s and Red Rooster on 15 year terms, for a total net income of $1.41 million.
The brand new complex comprises nearly 700 sqm of buildings, 1200 sqm of canopy and 57 parking spaces on a large 10,000 sqm site.
 
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MAB’s West Gate sells for $22.5 million

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GUEST OBSERVER
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell 3 cents per litre to 113.9 cents per litre in the week to April 24.
The national average wholesale (terminal gate) unleaded petrol price stands at 102.4 cents per litre, down 1.5 cents per litre on a week ago and still up 6.7 cents a litre on the lows set in mid-February.
The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?
The latest data on petrol prices confirms that - contrary to popular belief and media reports – pump prices do not tend to rise ahead of a long weekend. Motorists enjoyed the cheapest petrol ahead of ANZAC Day in 11 years, with the national average price falling by 3 cents a litre.
As always, competitive factors, the discounting cycles and variable lags between wholesale and retail prices determine how capital cities and regional centres fare. But at present the key driver of pump prices is the variations in the discounting cycle across the capital cities. In Sydney, prices have been falling for 18 days and in
Melbourne prices have been falling for almost four weeks, with petrol at around $1.08 a litre in both capital cities.
Brisbane prices have been falling for a fortnight and are closer to $1.14 a litre. Adelaide prices spiked a week ago and have started to drift lower. Adelaide motorists would benefit by holding off from filling up the family vehicle.
Not only have global oil prices eased in the past week but the Aussie dollar has held up relatively well – ensuring that any saving in regional oil prices should get passed through to the bowser within the next fortnight.
In the short term, oil production disruptions in Kuwait and speculation of a further lift in potential supply by major oil producers will keep oil markets volatile. CBA commodity analysts expect oil to potentially drift to US$30-35 a barrel in the near term.
Importantly cheap fuel continues to keep inflation contained and the Reserve Bank will keep an implicit easing bias in play over the next six months.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%209.57.20%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%209.57.20%20AM.png" alt="">
What do the figures show?
Petrol prices
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell 3 cents per litre to 113.9 cents per litre in the week to April 24. The metropolitan petrol price fell by 4.9 cents to 113.6 cents per litre while the regional price rose by 0.9 cents to 114.5 cents per litre.
The national average Australian price of diesel petrol fell by 0.2 cents to 111.8 cents per litre in the week to April 24. Last week the metropolitan price fell by 0.3 cents to 110.6 c/l, while the regional average price was down 0.1 cents to 112.8 c/l.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down 9.3 cents to 108.5 c/l), Melbourne (down 6.2 cents to 111.5 c/l), Brisbane (down 7.8 cents to 118.9 c/l), Adelaide (up 6.7 cents to 124.4 c/l), Perth (up 1.2 cents to 111.5 c/l), Darwin (down by 0.3 cents to 115 c/l), Canberra (down 0.7 cents to 115.9 c/l) and Hobart (unchanged at 117.4 c/l).
Today the national average wholesale (terminal gate) unleaded petrol price stands at 102.4 cents per litre, down 1.5 cents per litre on a week ago and still up 6.7 cents a litre on the lows set in mid-February. The terminal gate diesel price stands today at 98.5 cents a litre, up 0.2 cents a litre over the week.
Last week the key Singapore gasoline price rose by US$1.75 or 3.2 per cent to US$56.10 a barrel. However prices eased yesterday to US$55.30 a barrel. In Australian dollar terms the Singapore gasoline price rose by $2.13 a barrel (0.2 per cent) to $72.61 a barrel or 45.7 cents a litre. Yesterday prices eased to $71.73 a barrel or 45.1 cents a litre.
MotorMouth records the following retail prices for capital cities today: Sydney 108.1c; Melbourne 107.5c; Brisbane 113.7c; Adelaide 119.4c; Perth 120.5c; Canberra 107.5c; Darwin 113.8c; Hobart 117.8c.
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.
<a href="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%209.59.05%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/27/Screen%20Shot%202016-04-27%20at%209.59.05%20AM.png" alt="">
What are the implications for interest rates and investors?
Lower oil prices may add further downward pressure on energy stocks and increase volatility across sharemarkets. However cheap fuel is a positive for a number of sectors including transport and logistics.
Filling up the car with petrol is the single biggest weekly purchase for most families. So the savings being reaped at the petrol bowser are serving to boost discretionary spending in areas such as cafes, restaurants and takeaway outlets.
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Cheapest ANZAC Day petrol in 11 years: CommSec's Savanth Sebastian

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GUEST OBSERVER
The headline CPI lifted 0.4 percent in Q4 compared to Westpac’s and the market’s 0.3 percent forecast. The annual rate is reported as 1.7 percent/yr compared to 1.5 percent/yr in Q3.
The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.5 percent/qtr on par with the market’s expectation (Westpac was slightly higher at 0.6 percent/qtr). In the quarter, the trimmed mean gained 0.57 percent while the weighted median lifted 0.47 percent. The annual pace of the average of the core inflation measures is now 2.0 percent from 2.1 percent in Q3 (Q3 was revised from 2.2 percent).
<a href="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.51.51%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.51.51%20PM.png" alt="">
Of note in Q4 was some signs of pass through from a weaker AUD in the stronger than expected rise in clothing &amp; footwear (1.6 percent/qtr). However, in the quarter this was more than offset by the weaker than expected print from housing (0.1 percent/qtr). 
The March quarter brings solid “knowns” but many ‘unknowns’ linger.
 The March quarter will bring the usual inflationary pressure from health and education. We also see meaningful seasonal increases in tobacco. Another solid known is the significant offset from the fall in automotive fuel prices. But, as always, a large number of unknowns remain. We don’t have access to a lot of the data the ABS uses and, in many cases, it is not possible to replicate the survey process the ABS uses causing many small errors along the way. We use many alternative sources and surveys to guide our forecasts but in the end a large part of the forecast remains a judgement call.
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Automotive fuels are again a significant negative.
One of the most obvious events in the last few quarters has been the extreme volatility in the pump price of automotive fuels. From a peak at the start of the quarter of $1.20/l, the pump price fell to a low of $1.04/l by the end of February before finishing the quarter around $1.12/l. In terms of the quarterly averages, we forecast that the price of automotive fuels will fall around 11percent producing a significant —0.39ppt drag on the CPI. Fuel is again the most significant negative we have found for the December quarter CPI.
<a href="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.57.22%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.57.22%20PM.png" alt="">
We have noted before that the fall in Australian pump prices has lagged behind the Australian dollar price of Singapore gasoline. But at the end of the March quarter there was a lift in the AUD value of Singapore gasoline that was not reflected in the pump price. We previously had wondered if Australian prices had room to fall further, even with no additional fall in Singapore prices, as the spread returned to more normal levels. For now, at least, that spread has been normalised by rising Singapore prices.
Fruit &amp; vegetables set to be a modest drag.
This quarter our forecast for a 3 percent rise in vegetable prices is more than offset by the 7 percent fall in fruit prices. All up the 2.4 percent fall in fruit &amp; vegetable prices will provide a 0.07ppt drag on the CPI.
There are the usual seasonal rises in cereal products, pork and food additives. However, we are careful to contrast the ongoing price discounting we are seeing in the very competitive groceries space against the ongoing pass through of the weaker AUD to import foodstuffs. Our forecasts see food &amp; non-alcoholic beverages contribute less than 0.1ppt to the CPI.
<a href="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.58.30%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%202.58.30%20PM.png" alt="">
Seasonal rise in tobacco prices.
There is no indexing of tobacco in the March quarter but historically this quarter has tended to see strong rises anyway. We have taken the view that there is a clear risk of a strong rise in tobacco prices again this March quarter. We also note that the Inflation Gauge also reported solid price rises for tobacco in Q1.
Holiday travel costs will be reversed in Q3.
Holiday travel was a touch stronger than expected in Q4 following on from a weaker than expected print in Q3. So it would be tempting to put in a softer than usual forecast for Q1 but BITRE (Bureau of Infrastructure, Transport &amp; Regional Economics) data on best price economy airfares is pointing to just a modest decline, as good as flat. So with the Inflation Gauge highlighting some modest gains in domestic holiday travel we have pencilled in a 2percent rise in domestic holiday costs, added to the small 0.5percent rise in international holidays. The rise in international holidays is due to the trickle through impact of the depreciation of the AUD offsetting the usual out of season discounting.
Dwelling prices have moderated.
Dwelling prices have been very volatile of late. Melbourne dwelling prices were particularly volatile in 2015 but as the year ended we were surprised by a 0.2percent decline in Sydney dwelling prices - the softest print since Q4 2011. Just as we saw in Melbourne in 2014, we don’t expect this to be repeated and, in fact, a bit of a bounce 
Sydney dwelling prices is very likely.
Westpac is expecting dwelling prices to hold their more modest pace in Melbourne and Brisbane with the mix of outcomes in the other cities pointing to a 0.6percent gain in Q4.
Housing overall makes a positive contribution of 0.11ppts.
Rents are expected to remain on a very benign path with a gain of just 0.3percent (was 0.2percent in Q1 so there are downside risks to this forecast) with modest gains in other housing costs and utilities.
AUD depreciation will have a modest impact.
We also expect to see more, if still modest, pass through of the inflationary impact of the AUD depreciation. This will appear as a moderation to the usual seasonal discounting of household contents and services; our forecast for a 0.7percent fall follows on from a 0.6 percent rise in Q4 and an average fall of 1.1 percent in the previous three March quarters. We also expect to see more modest than usual discounting for clothing &amp; footwear, –1.1 percent/qtr compared to –2.5 percent/qtr in the last three March quarters.
Overall seasonality tends to be negative in Q1.
Despite the usual seasonal rise in pharmaceutical, heath services and education in Q1, the ABS now reports Q1 with a seasonal negative as our seasonally adjusted estimate, using the current ABS seasonal factors for March 2016, is 0.1ppt stronger at 0.5 percent than our headline CPI forecast. In fact rounding hides the full impact of the seasonal adjustment, 0.15ppts at two decimal places. Seasonal discounting in clothing &amp; footwear and household contents are now having a greater impact on seasonality in the survey than the annual price resetting in administrative prices.
There is an important caveat however: the ABS conducts concurrent seasonal re-analysis and the revisions to the seasonal factors can sometimes be quite significant. As such, we caution that we can’t be sure what the ABS will estimate as the seasonal impact in Q1. This matters as the components of the CPI are seasonally adjusted before they are trimmed for the core measures. As such, revisions to the seasonal factors can impact not just the current estimate of core inflation but also historical estimates.
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<img src="/images/2016/04/19/Screen%20Shot%202016-04-19%20at%203.04.07%20PM.png" alt="">
Core inflation to remain at the bottom of the band, just.
Westpac is forecasting the average of the core measures to rise 0.6percent in Q4 with the annual pace holding flat at 2.0percentyr.
Traded goods &amp; services are forecast to fall 1.3 percent/qtr moderating the annual pace to 0.7 percent/yr from 0.8percentyr; non-traded prices are also forecast to rise 1.2 percent/qtr lifting the annual pace to 2.5 percent/yr from 2.3 percent/yr. Non-traded prices remain the key source of inflationary pressures with the focus still on housing and recreation.
Risks balaced for headline, downside for core.
A seasonally soft March quarter is a recent phenomena that emerged during the time of a very robust AUD which appears to have inspired greater post-Christmas sales discounting. This March, we are expecting some modest pass through from the weaker AUD but falling petrol prices and modest gains in housing costs will keep the lid on both headline and core inflation. While the Melbourne Institute Inflation Gauge points to a robust Q1 CPI print, we acknowledge downside risks to our core inflation forecast as core inflation has recently tended to surprise us on the soft side. 
 
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Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.\
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