Petrol prices head higher; Record bank shares

What does it all mean?

• 

  Petrol prices on the increase.

  The bad news for motorists is that the petrol price is headed higher. The Singapore gasoline price is only just below the highest levels seen in the past nine months. And the Aussie dollar has also backed away from US94 cents, adding more upward pressure on the price of imported fuel. At this stage, the potential pain is still contained with the local price of Singapore fuel up only 2 cents a litre from recent lows.

• A higher petrol price is potentially bad news for retailers and other consumer-focussed businesses.
• In three capital cities in the past week the petrol price was unchanged. In four other capital cities the petrol price lifted by over 10 cents a litre in the space of a week. It is clear that the ACCC needs to re-visit petrol pricing in Australia to ensure that it is adequately and efficiently serving the general public. Not only does the average petrol price vary significantly from week to week and city to city but so does the gross retail margin where it has been below 6 cents in Melbourne over April but above 27 cents in Darwin.
• Firmer economic conditions in the global economy are likely to support world oil prices and keep the average price of petrol in Australia above $1.50 a litre.
• Many investors probably believe that residential property has been the best performing asset over the past year. But quietly in the background, bank share prices have been going up over the past year and recording better returns than home prices. Bank share prices have lifted around 15 per cent over the past year and total returns have lifted 20 per cent. The bottom line is that investors must always be alert to the trends and opportunities in financial assets.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 6.3 cents a litre to 155.4 c/l in the week to April 20. The metropolitan price rose by 9.0 c/l to 155.0 c/l, while the regional average price rose by just 0.8 cents per litre to 156.2 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (rose by 10.4 cents to 155.9 c/l), Melbourne (up by 10.8 cents to 152.9 c/l), Brisbane (up by 11.6 cents to 157.6 c/l), Adelaide (up by 10.9 cents to 154.6 c/l), Perth (up by 0.4 cents to 151.9 c/l), Darwin (unchanged at 173.0 c/l), Canberra (unchanged at 157.6 c/l) and Hobart (unchanged at 160.8 c/l).
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 143.0 c/l, up around 0.6 cents over the week to a 3-week high.
• Since the start of April the gross retail margin (retail pump prices less the terminal gate price) has averaged 8.2 cents per litre. But the average margin ranged from 5.8 cents a litre in Melbourne to 14.2 cents in Hobart and 27.2 cents in Darwin.
• Last week the key Singapore gasoline price rose by US$2.05 (1.7 per cent) to a 7-week high of US$123.45 a barrel. The Singapore gasoline price is only 10c away from the highest levels in nine months.
• In Australian dollar terms the Singapore gasoline price rose by US$2.86 or 2.2 per cent last week to $131.82 a barrel or 82.91 cents a litre.
• Figures from MotorMouth show that petrol prices in Sydney, Melbourne, Brisbane, Adelaide and Perth trended lower last week. Based on a gross retail margin around 9 cents a litre, the national petrol price should average around $1.52 a litre.

Sharemarket update

• The banking sharemarket sub-index hit record highs last on April 10. But based on current strength in the broader financials index, the banks index was headed for fresh highs today. The broader Financials index was up 0.5 per cent in afternoon trade while shares in ANZ and Westpac both hit intra-day record highs today. The banking index has lifted around 15 per cent over the past year with total returns up by around 20 per cent.
• 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.
• Filling up the car with petrol is the single biggest purchase made by most families. (While the weekly grocery bill can be higher, it is made up of a raft of different items and the composition of the average shopping trolley can vary enormously from household to household.)
• The petrol price is headed higher and this should put retailers on alert to the possible consequences, especially for items that are at the far end of the discretionary section of the essential-discretionary purchasing line.
• Investors remain hungry for safe investments yielding relatively high returns. As a result, returns on bank shares have outperformed residential property over the past year.

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?

• Filling up the car with petrol is the single biggest purchase made by most families. (While the weekly grocery bill can be higher, it is made up of a raft of different items and the composition of the average shopping trolley can vary enormously from household to household.)
• The petrol price is headed higher and this should put retailers on alert to the possible consequences, especially for items that are at the far end of the discretionary section of the essential-discretionary purchasing line.
• Investors remain hungry for safe investments yielding relatively high returns. As a result, returns on bank shares have outperformed residential property over the past year.