Motorists benefit from higher $A, lower crude price

Weekly petrol prices; Chinese “Flash” PMI

• Petrol prices fall for second straight week: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.7 cents per litre to 152.3 cents a litre in the week to March 23.
• Yesterday, the national average wholesale (terminal gate) unleaded petrol price stands at 144.9 c/l, down around 1.7 cents over the week. The wholesale price has broadly held between 144-148 cents a litre in 2014.
• In Australian dollar terms the Singapore gasoline price fell by $2.68 last week to $130.28 a barrel or 81.94 cents a litre. Retail prices are expected to ease mildly over the coming fortnight.
• Chinese manufacturing sector contracts. The HSBC Flash Purchasing Managers index for China fell from 48.5 in February to 48.1 in March – an eight month low. A reading below 50 suggests a slowdown in the manufacturing sector.

What does it all mean?

• Petrol prices should have largely been trending sideways over the last few weeks but a large degree of the volatility has been due to the vagaries of the discounting cycle. However there are better days ahead, with motorists set to reap the benefits of world oil prices that are edging lower and an Australian dollar that has lifted – a double whammy, that should lead to savings at the pump.
• It is hard to argue that the petrol discounting cycles on the eastern seaboard are acting in the interests of motorists. Over the past month the national average petrol price has fallen by 3.4 cents, jumped by 5.0 cents a litre, fallen by 3.6 cents and fallen by another 1.6 cents in the past week. Certainly there have been no similar sharp swings in world oil prices – particularly in Australian dollar terms. In fact the extent of the movement in Singapore unleaded prices in Aussie dollar terms has been a fall of around 5.1 cents a litre. The volatility of petrol prices is hardly positive for consumer spending
• In Sydney, Melbourne, and Brisbane, unleaded petrol prices have hit or are nearing their peak (high point) in the discounting cycle. So the Australian average petrol price will hold at elevated levels before easing over the next 7-10 days.
• CommSec expects fuel prices to lift due to the discounting cycle before easing by 1-2 cents a litre over the next fortnight. On balance motorists will need to get used to pump prices holding around $1.50 a litre in most capital cities, around $1.60 a litre in Hobart and around $1.70 in Darwin.

What do the figures show?

Petrol prices:

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.7 cents a litre to 152.3 c/l in the week to March 23. The metropolitan price fell by 2.2 c/l to 150.0 c/l, while the regional average price fell by 0.6 c/l to 157.1 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 2.6 cents to 147.7 c/l), Melbourne (down by 3.0 cents to 146.7 c/l), Brisbane (down 2.3 cents to 151.2 c/l), Adelaide (down 1.1 cents to 151.7 c/l), Perth (down 1.3 cents to 154.1 c/l), Darwin (unchanged at 173.0 c/l), Canberra (down 0.1 cents at 157.9 c/l) and Hobart (down 0.1 cents to 161.4 c/l).
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 144.88 c/l, down around 1.7 cents over the week. The wholesale price has broadly held between 144-148 cents a litre in 2014.
• Last week the key Singapore unleaded petrol price fell by US$1.75 (1.5 per cent) to US$118.05 a barrel. In Australian dollar terms the Singapore gasoline price fell by $2.68 last week to $130.28 a barrel or 81.94 cents a litre.
• Figures from MotorMouth show that petrol prices are at their high point in the cycle in Sydney, Melbourne & Brisbane.
• 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.
• The good news is that petrol prices are more a slave to the domestic discounting cycle rather than any significant shifts in global oil prices. The bad news is that petrol prices are holding in a range close to historically high levels, meaning that consumers will retain conservative spending habits. Petrol is the single biggest weekly purchase for most families.
• CommSec expects fuel prices to lift due to the discounting cycle before easing by 1-2 cents a litre in the next fortnight.
• The latest Chinese manufacturing data further highlights the broader economic slowdown across China. However the slowdown at present is self-engineered. Meanwhile the timing of the Lunar holiday has added to the volatility in the data. Chinese policymakers are in the midst of a broader reform policy that is creating mild structural imbalances. Reining in debt and pollution and cleaning up the banking system, while avoiding a sharper economic slowdown is a balancing act that comes with risks.
  • Traders and investors shouldn’t get too carried away with the latest Chinese data. If the Chinese economy is slowing a little too much, authorities will be more confident to stimulate growth, especially with low inflation.

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?

• The good news is that petrol prices are more a slave to the domestic discounting cycle rather than any significant shifts in global oil prices. The bad news is that petrol prices are holding in a range close to historically high levels, meaning that consumers will retain conservative spending habits. Petrol is the single biggest weekly purchase for most families.
• CommSec expects fuel prices to lift due to the discounting cycle before easing by 1-2 cents a litre in the next fortnight.
• The latest Chinese manufacturing data further highlights the broader economic slowdown across China. However the slowdown at present is self-engineered. Meanwhile the timing of the Lunar holiday has added to the volatility in the data. Chinese policymakers are in the midst of a broader reform policy that is creating mild structural imbalances. Reining in debt and pollution and cleaning up the banking system, while avoiding a sharper economic slowdown is a balancing act that comes with risks.
• Traders and investors shouldn’t get too carried away with the latest Chinese data. If the Chinese economy is slowing a little too much, authorities will be more confident to stimulate growth, especially with low inflation.