Petrol prices surge to an 18-month high

Petrol price; Tourist arrivals

• Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 6 cents to 134.3 cents a litre in the week to January 15 – marking the biggest rise in almost two years but only the second rise in a month.
• A reprieve on hand: The terminal gate (wholesale) price eased from 17-month highs, to 119.40 cents a litre, down by 2.4 cents a litre over the week.
• MotorMouth records the following retail prices for capital cities today: Sydney 137.4c; Melbourne 139.6c; Brisbane 125.6c; Adelaide 137.4c; Perth 130.2c; Canberra 143.4c; Darwin 142.8c; Hobart 143.4c.
• Filling up the car with petrol is the single biggest weekly purchase for most families. The average household fuel bill has lifted by $27 in the past 5 months to $161 a month – an 18-month high.
• Tourist arrivals/departures: Tourist arrivals fell by 0.7 per cent in November. And departures fell by 3.5 per cent. Arrivals are up 8.7 per cent on the year with departures up 3.3 per cent. Tourists from the US have surged by 18 per cent in smoothed terms in the past year – the fastest pace of growth in records going back 26 years.
• The petrol figures have implications for retailers, especially petrol marketing groups. The tourism data is important for airlines, travel groups, transport companies and retailers.

What does it all mean?

• Petrol prices surged in the past week. In fact the six cent lift in prices was the largest weekly lift in two years. However it should be noted that lift in prices were driven largely by the lift in global oil prices, in addition to the vagaries in the discounting cycle. On a positive note for motorists there may be a reprieve on hand in coming weeks. In Australian dollar terms, the Singapore unleaded price – which we derive our fuel from – fell by almost $2.50 a barrel in the past two weeks and this should flow through to pump prices in around a fortnight’s time.
• Motorists should also keep a close watch on the petrol discounting cycle. After falling for almost 54 days, and with petrol prices essentially in line with wholesale prices, Melbourne prices have finally surged higher to around $1.40 a litre. Interestingly in Brisbane, prices have drifted lower over the past fortnight and are now holding at around $1.25 a lire. In Sydney and Adelaide, prices are closer to $1.37 a litre.
• The production cuts announced by OPEC and non-OPEC nations are now being enforced. The early indications are that producers are already notifying customers in Asia, Europe and the US of cuts to oil deliveries from January. Importantly for motorists it means higher pump prices in the medium-term.
• Overseas travellers love Australia. In trend terms, tourist arrivals are up almost 10 per cent on a year ago and just shy of the fastest annual pace in 20 years (12.5 per cent, July 2016). Greater China is leading the way in tourism numbers with annual growth rates in recent months around 20 per cent. Interestingly tourists from the US have surged by 18 per cent in the past year. No doubt the weaker Aussie dollar is making Australia a cheaper holiday destination.
• More tourists means more spending at retail and services outlets, cafes & restaurants and on transport services. And these extra dollars are, in turn, spent elsewhere in the economy, providing important momentum to the economy.

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 cents to 134.3 cents a litre in the past week. The metropolitan petrol price rose by 5.2 cents to 134.5 cents per litre while the regional price rose by 7.9 cent to 135.5 cents per litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 8.1 cents to 139.0 c/l), Melbourne (up 4.9 cents to 128.2 c/l), Brisbane (down by 2.0 cents to 127.9 c/l), Adelaide (up by 11.3 cents to 141.9 c/l), Perth (up by 3.4 cents to 135.5 c/l), Darwin (up by 6.3 cents to 136.5 c/l), Canberra (up by 14.1 cents to 143.0 c/l) and Hobart (up by 13.5 cents to 142.7 c/l).
• The national average Australian price of diesel petrol was up by 2 cents to 130.6 cents per litre in the week to January 15. The metropolitan price rose by 1.2 cents to 131.2 c/l, while the regional average price was up by 2.7 cents to 130.1 c/l.
• The national average wholesale (terminal gate) unleaded petrol price eased from 17-month highs, and today stands at 119.40 cents a litre, down by 2.4 cents a litre over the week. The terminal gate diesel price stands at 116.6 cents a litre, down by 1.8 cents a litre over the previous week.
• Last week the key Singapore gasoline price rose by US55 cents or 0.8 per cent to US$70.65 a barrel. In Australian dollar terms the Singapore gasoline price fell by $1.40 a barrel or 1.5 per cent to $94.39 a barrel or 59.36 cents a litre.
• MotorMouth records the following retail prices for capital cities today: Sydney 137.4c; Melbourne 139.6c; Brisbane 125.6c; Adelaide 137.4c; Perth 130.2c; Canberra 143.4c; Darwin 142.8c; Hobart 143.4c

Overseas arrivals & departures

• Tourist arrivals fell by 0.7 per cent in November. And departures fell by 3.5 per cent. Arrivals are up 8.7 per cent on the year with departures up 3.3 per cent.
• In November, tourists from Greater China (China and Hong Kong) totalled 127,300 (mainland China 106,400, Hong Kong, 20,900), ahead of New Zealand (111,200). Greater China passed NZ for the first time in September 2015.
• Over the past year a record 1,210,500 tourists came to Australia from China, up 19 per cent over the year. Tourists from China and Hong Kong rose to a record 1,453,100 over the past year, up 17.5 per cent over the year. Tourists from New Zealand totalled 1,338,600 visitors over the past year, but were up just 2.5 per cent.
• Net permanent and long-term arrivals to Australia totalled 260,400 in the year to November, down from 260,490 in the year to October.

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 Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.

What are the implications for interest rates and investors?

• Petrol prices are well and truly higher than a year ago. Given that petrol is the single biggest purchase made by households on a weekly basis, the lift in petrol prices may lead to less household activity – a potential concern for retailers. The average household fuel bill has lifted by $27 in the past five months to $161 a month – an 18-month high.
• CommSec expects no change to interest rates in the foreseeable future.