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Economics | March 16, 2020

Petrol prices set to fall further Weekly Petrol Prices; Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded

petrol fell by 2.2 cents to a 12-month low of 129.4 cents a litre last week. The metropolitan price fell by 1.6 cents to 125.6 cents a litre and the regional price fell by 3.3 cents to 137.1 cents a litre.

Wholesale prices: The terminal gate price is down by over 10 cents a litre on a week ago, and this decline is still to be passed through to pump prices.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers

What does it all mean? In response to the oil price war between Saudi Arabia and Russia, last week Brent lost US$11.42 a barrel or 25.2

per cent with Nymex down US$9.55 or 23.1 per cent. These were the biggest weekly declines in crude prices since October 2008.

Last week we noted that – provided the Aussie dollar was reasonably stable – motorists may be able to look forward to filling up for near $1 a litre. Of course there is also the discounting cycle to contend with in southern and eastern capital cities. And there is also the 7-10 day delay between changes in Asian regional prices and domestic pump prices. But we have been surprised to see Adelaide bowser prices already as low as $1.08 a litre and pump prices near $1.10 a litre across Melbourne, Brisbane and Sydney (Speedway Auburn in Sydney today selling unleaded petrol at 108.9 cents a litre.)

The factor that is working against motorists is the Aussie dollar. Today the Aussie is near US61.40 cents, down from levels near US67 cents last week. The lower dollar increases the price of imported gasoline.

What do the figures show? Petrol prices

According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 2.2 cents to 129.4 cents a litre last week. The metropolitan price fell by 1.6 cents to 125.6 cents a litre and the regional price fell by 3.3 cents to 137.1 cents a litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up 1.8 cents to 127.2 c/l), Melbourne (down by 5.5 cents to 120.6 c/l), Brisbane (down by 3.3 cents to 121.8 c/l), Adelaide (up by 7.5 cents to 130.0 c/l), Perth (down by 3.7 cents to 129.0 c/l), Darwin (down by 0.8 cents to 135.2 c/l), Canberra (down by 1.1 cents to 142.9 c/l) and Hobart (down by 1.0 cents to 153.0 c/l).

The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 15.6 cents a litre to 14.5 cents (24-month average: 13.2 cents a litre).

The national average diesel petrol price fell by 2.1 cents

March 16, 2020 2

Economic Insights. Petrol prices set to fall further

to 144.4 cents a litre over the past week. The metropolitan price fell by 2.3 cents to 143.0 cents a litre and the regional price was down by 2.0 cents to 145.4 cents a litre.

Today, the national average wholesale (terminal gate) unleaded petrol price stands at 110.5 cents a litre, down by 10.1 cents over the week. The terminal gate diesel price stands at 113.1 cents a litre, down by 9.3 cents over the past week.

MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 130.8c; Melbourne 121.1c; Brisbane 124.6c; Adelaide 123.4c; Perth 118.3c; Canberra 142.3c; Darwin 134.3c; Hobart 152.5c.

The key Singapore gasoline price closed last week at US$38.10 a barrel, down US$18.30 or 32.5 per cent on the week. In Australian dollar terms, the Singapore gasoline price fell by $25.02 or 29.3 per cent to a 4-year low of $60.41 a barrel or 37.99 cents a litre.

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 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? The Singapore gasoline price has fallen 31 cents a

litre since the start of 2020 in local currency terms. The wholesale (terminal gate) price stands near 110 cents a litre, down 25 cents a litre – the lowest since August 2017. But local pump prices (using Perth prices to abstract from discounting cycles) are only down by 16 cents a litre.

Over the past nine weeks the average monthly petrol bill for Aussie families has fallen by $40 – equivalent to a quarter cent rate cut on a $275,000 mortgage. Petrol prices are set to fall further, meaning good news for motorists and retailers.

Craig James, Chief Economist, CommSec Twitter: @CommSec