Petrol lifts, but cheap fuel around the corner

Weekly Petrol price

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  Petrol prices rise slightly.

  Petrol prices rise: According to the Australian Institute of Petroleum, the national average Australian price of petrol rose by 0.6 cents per litre to 149.6 cents a litre in the week to October 26.

• Regional prices slide: The key Singapore gasoline price has hit a 28-month low of US$97.55 a barrel, down almost 12 per cent in the past month.
• Cheaper petrol ahead: Today, the national average wholesale (terminal gate) unleaded petrol price stands at 130.6 cents per litre – a 17-month low and down 2.3 cents over the week. In fact the terminal gate price has fallen by almost 10 cents a litre in just over three weeks.

What does it all mean?

• The pump price may have risen substantially over the past fortnight and it may be hard to gauge fuel prices given the varying discounting cycles in many capital cities, but there is good news for motorists with pump prices likely to fall sharply over the coming fortnight. In fact petrol signs boards showing the low $1.30s per litre will become the norm rather than the outlier across major capital cities in the next couple of weeks.
• And if it wasn’t for the shifts in the discounting cycle, cheap fuel would already be on offer. In fact the real driver of the last fortnight’s lift in the national petrol price was the turning point in the discounting cycle and resulting peak. After an unusually long discounting cycle, pump prices in Sydney, Melbourne and Brisbane lifted by 10-15 cents and peaked on October 18/19, inflating the national average price.
• Taking out the vagaries of the discounting cycle, and the global factors suggest cheaper fuel prices lie ahead. The wholesale petrol price remains at levels last seen in early May last year. Similarly the Singapore gasoline price fell by almost $13 in the past month, and is now holding at a 28-month low. Whichever way you cut it cheaper fuel is around the corner.
• The drop in world oil prices reflects more plentiful global supplies in response to only moderately higher demand. It was only a fortnight ago that the International Energy Agency (IEA) cut forecasts of global oil demand for 2014 and 2015. The IEA cut its forecast of demand for OPEC oil by 200,000 barrels per day in both years. In addition the US Energy Information Administration projected a lift in shale oil output with an additional 100,000 barrels per day increase in November. The next crucial junction for oil will be the OPEC meeting on November 27.
• 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 0.6 cents a litre to 149.6 c/l in the week to October 26. The metropolitan price rose by 0.8 cents to 149.0 c/l, while the regional average price rose by 0.1 cents to 150.7 c/l.
• The national average Australian price of diesel petrol fell 1.2 cents to 152.3 c/l in the week to October 26. The metropolitan price fell by 1.3 cents to 150.3 c/l, while the regional average price fell by 1.2 cents to 153.9 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 2.6 cents to 151.3 c/l), Melbourne (up by 2.9 cents to 149.9 c/l), Brisbane (up by 1.4 cents to 154.3 c/l), Adelaide (down by 5.5 cents to 133.9 c/l), Perth (down by 3.0 cents to 143.0 c/l), Darwin (down by 9.0 cents to 161.7 c/l), Canberra (down by 0.3 c/l to 151.6 c/l) and Hobart (down by 0.6 c/l to 155.4 c/l).
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 130.6 c/l, – a 17-month low and down 2.3 cents over the week. In fact the terminal gate price has fallen by almost 10 cents a litre in just over three weeks.
• Last week the key Singapore gasoline price fell by US$2.85 or 2.8 per cent to US$97.55 a barrel, a 28-month low. In Australian dollar terms the Singapore gasoline price fell by $3.36 a barrel or 2.9 per cent last week to $111.38 a barrel or 70.05 cents a litre – an 18-month low.
• Figures from MotorMouth show that petrol prices have been mixed across capital cities. In Sydney, Melbourne and Brisbane prices peaked on October 18/19 and have been drifting lower. In Adelaide prices peaked on Oct 1, and have eased for 27 days. And the more stable Perth average petrol price is down around 3 cents a litre over the week.
• 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.
• 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 the second half of 2015.

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 the second half of 2015.