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Petrol poised to fall in coming weeks

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Published on: Tuesday, October 21, 2014

by Savanth Sebastian

Weekly Petrol price

  • Petrol prices rise: According to the Australian Institute of Petroleum, the national average Australian price of petrol rose by 5.2 cents per litre to 149.0 cents a litre in the week to October 19.
  • Regional prices slide: The key Singapore gasoline price has hit a 27-month low of US$100.40 a barrel, down almost 9 per cent in the past three weeks.
  • Today, the national average wholesale (terminal gate) unleaded petrol price stands at 132.9 c/l, a 17-month low and down 5.2 cents over the past week.
  • The petrol figures have implications for retailers, especially petrol marketing groups..

What does it all mean?

The pump price may have risen substantially over the past week and it may be hard to gauge fuel prices given the discounting cycles in many capital cities, but there is good news for motorists with pump prices likely to fall further over coming weeks. The real driver of last week’s lift in the national prices has been the turning point in the discounting cycle. After an unusually long discounting cycle, pump prices in Sydney, Melbourne and Brisbane lifted by 10-15 cents over the past week and inflated the national average price.

Taking out the vagaries of the discounting cycle. The global thematic suggest cheaper fuel prices ahead. The wholesale petrol price remains at levels last seen in early May last year. While in Aussie dollar terms the Singapore gasoline price fell by over $10 in the past three weeks and is now holding at a 27-month low.

The drop in world oil prices reflects more plentiful global supplies in response to only moderately higher demand. In fact last week the International Energy Agency (IEA) cut global oil demand for 2014 and 2015. The IEA cut demand for OPEC oil by 200,000 barrels per day in both years. Also OPEC producers Iran and Kuwait said there was no need to rein in supplies, adding further to the bearish tone for oil. In addition the US Energy Information Administration projected that shale oil output would increase by over 100,000 barrels per day in November.

In just the past six months the average monthly household fuel bill has fallen by $10 with further savings on offer in coming weeks. The fall in petrol prices is likely to support confidence levels over coming months and should be better news for retailers.

Across the Eastern seaboard motorists would be best served by waiting as long as possible to fill up. Pump prices have hit the peak in the cycle and should ease to fresh lows in coming weeks.

What do the figures show?

Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 5.2 cents a litre to 149.0 c/l in the week to October 19. The metropolitan price rose by 7.5 cents to 148.2 c/l, while the regional average price rose by 0.5 cents to 150.6 c/l.

The national average Australian price of diesel petrol fell 0.6 cents to 153.5 c/l in the week to October 19. The metropolitan price fell by 0.5 cents to 150.5 c/l, while the regional average price fell by 0.6 cents to 155.1 c/l.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 10.1 cents to 148.7 c/l), Melbourne (up by 9.9 cents to 147.0 c/l), Brisbane (up by 14.5 cents to 147.0 c/l), Adelaide (down by 5.4 cents to 139.4 c/l), Perth (down by 1.2 cents to 146.0 c/l), Darwin (down by 1.6 cents to 170.7 c/l), Canberra (down by 0.7 c/l to 151.9 c/l) and Hobart (down by 0.6 c/l to 156.0 c/l).

Today, the national average wholesale (terminal gate) unleaded petrol price stands at 132.9 c/l, - a 17-month low and down 5.2 cents over the week.

Last week the key Singapore gasolineprice fell by US$1.50 or 1.5 per cent to US$100.40 a barrel, a 27-month low. In Australian dollar terms the Singapore gasoline price fell by $1.42 a barrel or 1.2per cent last week to $114.74 a barrel or 72.17 cents a litre – a 17-month low.

Figures from MotorMouth show that petrol prices have been mixed across capital cities. In Sydney and Melbourne, prices peaked over the weekend and should start to drift lower in coming days. In Brisbane prices are at a peak. In Adelaide prices peaked on Oct 2 and have eased for 18 days. And the more stable Perth average petrol price is up around a cent a litre over the 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'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?

Motorists certainly have no reason to complain at present. Not only are pump prices likely to fall further than the recent 15-month lows, but the discounting cycle has been more prolonged in recent times.

The world is well supplied with oil and cheaper fuel prices should leave households with additional savings in the household budget.

The economy is showing credible signs of lifting. Confidence levels are healthy, asset classes like share and property are well bid, retail sales is lifting, the labour market is showing signs of improving and the Aussie dollar recently hit a four-year low.

CommSec expects the Reserve Bank to keep interest rates on hold over the rest of 2014 before feeling more comfortable to lift rates in 2015.


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