Petrol price updrift; Air passenger numbers lift

Weekly petrol prices; Air traffic data

• Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 3.9 cents per litre to 118.9 cents per litre in the week to May 15.
• Regional petrol: In Australian dollar terms the Singapore gasoline price rose by $5.35 a barrel (7.1 per cent) to a 6-month high of $80.41 a barrel or 50.57 cents a litre. Regional prices have lifted by 13 cents a litre in Australian dollar terms since mid-February lows.
• Air traffic: The Sydney-Melbourne route is a key indicator of business activity. Passenger numbers in the year to March hit a record 8.7 million. But smoothed annual growth slowed from a 29-month high of 4.1 per cent to 3.6 per cent in March.
• Domestic air traffic: In the year to March, 58.0 million passengers were carried on domestic air routes, up 1.2 per cent over the year and the strongest growth in 22 months.

What does it all mean?

• Motorists should start noticing an upward drift in the price of petrol. The Aussie dollar has softened from levels near US77 cents to US72.5 cents in the past fortnight. Given Australia increasingly imports oil from Asia, the lower Aussie dollar means higher fuel prices. At the same time, global benchmark crude prices have zig-zagged their way higher over the past six weeks. The national average petrol price will continue to drift higher from near the 115-120 cents a litre range to 120-125 cents a litre, but prices are still low in historical terms.
• As usual, discounting cycles in capital cities complicate analysis of petrol price trends. Double-digit price movements occurred last week: Sydney prices fell while prices in Melbourne, Adelaide and Brisbane rose.
• Airlines are seen as good economic barometers. If forward bookings soften, then airlines trim the number of flights to support the load factor of planes. On the key Sydney-Melbourne route, the load factor of planes hit a 28-month low in October. The number of flights on the route were trimmed as were airfares and passenger numbers lifted as did load factors. The good news is that passenger numbers on the Sydney-Melbourne route continue to grow, but with growth slightly off the fastest pace in 29 months. And the annual growth rate of overall passenger numbers on domestic routes has lifted to near 2-year highs.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 3.9 cents per litre to 118.9 cents per litre in the week to May 15. The metropolitan petrol price rose by 5.4 cents to 119.0 cents per litre while the regional price rose by 0.9 cents to 118.7 cents per litre.
• The national average Australian price of diesel petrol rose by 1.2 cents to 114.1 cents per litre in the week to May 15. Last week the metropolitan price rose by 1.7 cents to 112.8 c/l, while the regional average price rose by 0.9 cents to 115.2 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down 7.5 cents to 110.8 c/l), Melbourne (up 13.0 cents to 123.2 c/l), Brisbane (up 12.1 cents to 128.2 c/l), Adelaide (up 12.7 cents to 121.4 c/l), Perth (up 1.2 cents to 111.8 c/l), Darwin (down by 0.1 cents to 113.2 c/l), Canberra (unchanged at 115.3 c/l) and Hobart (up 0.8 cents to 117.6 c/l).
• Today the national average wholesale (terminal gate) unleaded petrol price stands at 106.9 cents a litre, down 0.2 cents a litre over the week but up 5.5 cents on the recent lows a week ago. The terminal gate diesel price stands today at 103.8 cents a litre, up 0.4 cents a litre over the week.
• Last week the key Singapore gasoline price rose by US$3.20 or 5.8 per cent to US$58.70 a barrel. In Australian dollar terms the Singapore gasoline price rose by $5.35 a barrel (7.1 per cent) to a 6-month high of $80.41 a barrel or 50.57 cents a litre. Regional prices have lifted by 13 cents a litre in Australian dollar terms since mid-February lows.
• MotorMouth records the following retail prices for capital cities today: Sydney 108.0c; Melbourne 120.9c; Brisbane 127.7c; Adelaide 118.5c; Perth 106.2c; Canberra 110.1c; Darwin 113.0c; Hobart 118.0c

Sydney-Melbourne air traffic:

• The Sydney-Melbourne route is the third busiest air route in the world. The Sydney-Melbourne route is also a key measure of business activity. In the year to March 2016, the number of flights between Sydney and Melbourne eased from a record high of 60,155 to 59,943. The annual growth rate of the number of Sydney-Melbourne flights eased further from the 33-month high of 7.3 per cent in December to 4.6 per cent in March, but this was still above the decade average growth of 4.2 per cent.
• Late last year the increase in the number of flights between Sydney and Melbourne led to an easing in the moving annual load factor to 81.15 per cent in October – a 28-month low. But the average load factor has since lifted in the following four months to 81.71 per cent in March in line with the slower growth in the number of flights and a continued lift in passenger numbers.
• In March, the number of passengers on the Sydney-Melbourne route was up by 0.9 per cent on a year ago to 775.148. In the year to February a record 8.7 million passengers were carried between Sydney and Melbourne. Smoothed annual growth in passenger numbers eased from a 29-month high of 4.1 per cent to 3.6 per cent.

All domestic air routes

• Across all domestic air routes (not just Sydney-Melbourne) the rolling average load factor (proportion of seats occupied by passengers) lifted from 76.6 per cent to a 29-month high of 76.7 per cent in March.
• In the year to March, 58.0 million passengers were carried on domestic air routes, up 1.2 per cent over the year and the strongest growth in 22 months.

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.
• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases regular aviation data. The BITRE releases the Australian Domestic Airline Activity publication each month as well as the Domestic Air Fares publication. The data provides insights on airline activity as well as trends in the broader Australian economy. If more people are flying, then it suggests businesses are more active and/or consumers are more confident.

What are the implications for interest rates and investors?

• Filling up the car with petrol is the single biggest weekly purchase for most families. So the upward drift in petrol prices needs to be watched closely.
• More passengers are flying, but the evidence is that it is being achieved by airlines modestly trimming prices. Trends in passenger numbers, the number of flights operating on routes and load factors are important as guides on the underlying health of the economy.
• The lift in passenger numbers and load factors on planes is positive for airlines.