Petrol prices hit 14-week high

Weekly Petrol prices; China inflation

• Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 4.4 cents to a 14-week high of 151.0 cents a litre.
• China consumer prices: Consumer prices rose by 2.3 per cent in the year to August (forecast 2.2 per cent), up from 2.1 per cent in July. Over the year to August, food inflation lifted by 1.7 per cent – the strongest growth rate in five months. Non-food inflation rose by 2.5 per cent over the same period.
• China pork inflation surges: Pork prices rose by 6.5 per cent in August – the strongest monthly increase in three years. But over the year to August, pork inflation is down by 4.9 per cent.
• China business inflation: Producer prices rose by 4.1 per cent in the year to August (forecast 4.0 per cent), down from 4.6 per cent in the year to July.
  The petrol figures have implications for retailers, especially petrol marketing groups. The Chinese data have implications for the currency markets and therefore exporters and importers

What does it all mean?

• Global crude oil prices have lifted since August on increasing concerns about supply, despite lingering concerns about slowing Chinese demand, the strengthening US dollar and the escalating US-China trade war. Instead, traders have focused on expectations for lower Iranian oil exports due to US sanctions. And oil services company Schlumberger has warned that output growth in the Permian Basin in Texas and New Mexico is slowing due to pipeline bottlenecks.
• It is no surprise, therefore, to see retail unleaded petrol prices again averaging $1.50 a litre across Australia. Prices rose 15 cents a litre last week in Melbourne after the discounting cycle ended. Prices are expected to eventually fall as the latest price discounting cycle commences. Prices in some western suburbs have already begun falling towards $1.45 a litre today. Brisbane and Adelaide prices also rose by around 6 cents last week and are near cyclical peaks, and are expected to fall towards the end of this week.
• Inflation in China remains contained for now – well below the Chinese government’s consumer price index target of three per cent for 2018. But pork prices surged by the most in three years as concerns over the spread of African swine fever escalated, pushing up overall food prices. China has the world’s largest pig herd. And two cases of the pig killing disease – in central Henan province and the north-eastern province of Liaoning – have seen thousands of pigs culled by the local authorities, driving up pork prices.
• Business inflation continued to decelerate, down for a third successive month, with producer prices lifting by 4.1 per cent over the year to August. The slowdown in business inflation is not ideal for corporate China as profits can be adversely impacted by falling factory gate prices and rising consumer prices. And raw materials prices have lifted by 7.8 per cent over the year to August, pressured by rising oil and gas prices and an escalation the China-US trade war.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 4.4 cents to 14-week highs of 151.0 cents a litre in the past week.
• The metropolitan petrol price rose by 5.6 cents to 151.1 cents per litre and the regional price rose by 2.2 cents to 150.9 cents per litre. The gross retail margin rose by 1.0 cent to 11.28 cents a litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 0.9 cents to 152.0 c/l), Melbourne (up by 14.7 cents to 155.7 c/l), Brisbane (up by 5.8 cents to 147.0 c/l), Adelaide (up by 5.6 cents to 151.3 c/l), Perth (up by 0.3 cents to 143.8 c/l), Darwin (down by 0.2 cents at 154.5 c/l), Canberra (up by 0.5 cents to 153.2 c/l) and Hobart (up by 0.5 cents to 158.9 c/l).
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 141.0 cents a litre, up by 3.0 cents over the week. The terminal gate diesel price stands at 145.5 cents a litre, up by 3.2 cents over the past week.
• The national average diesel petrol price rose by 1.2 cents to 153.7 cents a litre over the week. The metropolitan price rose by 1.1 cents to 153.9 cents a litre with the regional price up by 1.4 cents to 153.6 cents a litre.
• Last week the key Singapore gasoline price rose by US$1.25 to US$87.15 a barrel. In Australian dollar terms, the Singapore gasoline price rose $3.55 or 3.0 per cent last week to $121.87 a barrel or 76.65 cents a litre – the highest level in 16 weeks.

China Inflation

• Consumer prices rose by 2.3 per cent in the year to August (forecast 2.2 per cent), up from 2.1 per cent in July.
•  Consumer prices rose by 0.7 per cent in August after increasing by 0.5 per cent in July. Food prices rose by 2.4 per cent in August to stand 1.7 per cent higher than a year ago. Pork prices rose by 6.5 per cent in August, but were down 4.9 per cent over the year. Non-food prices rose by 0.2 per cent to stand 2.5 per cent higher than a year ago. Consumer goods lifted by 2.1 per cent and services goods rose by 2.6 per cent over the year to August.
• Over the year, food, tobacco and alcohol prices rose by 1.9 per cent; health care prices rose 4.3 per cent; transportation and communication prices rose 2.7 per cent; rent, fuel and utilities were up 2.5 per cent; education, culture and recreation prices increased by 2.6 per cent; household goods and services prices were up 1.6 per cent; clothing prices rose by 1.3 per cent; and other goods and services increased by 1.2 per cent.
• Producer prices rose by 4.1 per cent in the year to August (forecast 4.0 per cent), down from 4.6 per cent in the year to July.
• Over the year, the prices of raw materials were up by 7.8 per cent; the cost of processing was up 3.5 per cent; the means of production were up 5.2 per cent; extraction costs rose 12.1 per cent; consumer goods were up 0.7 per cent; food production prices lifted 0.7 per cent; clothing prices increased 1.1 per cent; daily use goods increased by 1.2 per cent; consumer durables prices rose 0.2 per cent.

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.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

What are the implications for interest rates and investors?

• Global crude oil prices are on the rise. In fact, the benchmark Singapore gasoline price is now near 3½-year highs, signalling more pump pain for Aussie motorists in the short-term, especially with the Aussie dollar near two-year lows against the greenback.
• The swine flu epidemic is being met with increasing alarm in China. Pork prices lifted in August amid a widespread cull as the disease appeared to spread. While the weighting for food (and more specifically pork) in the overall China consumer price index basket has declined in recent years, it is worth noting that pork prices surged by almost 87 per cent in 2007 as the blue ear porcine epidemic wiped-out large heards, pushing up China’s inflation rate to the highest level since 1996.
• CommSec expects interest rates to be unchanged until late 2019.