Download Rising petrol price poses risk to household budgets

Economics | January 9 2017
Rising petrol price poses risk to household budgets
Petrol price
 Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of
unleaded petrol rose by 2.2 cents to 128.3 cents a litre in the week to January 8.
 Higher petrol prices ahead: The terminal gate (wholesale) price rose by 3.4 cents a litre last week to a 17month high of $121.8 cents a litre. In Australian dollar terms the Singapore gasoline price fell by $1.03 a
barrel in the last week, but it is still up almost $10 a barrel in the past month.
 MotorMouth records the following retail prices for capital cities today: Sydney 140.1c; Melbourne 122.0c;
Brisbane 128.0c; Adelaide 141.3c; Perth 126.4c; Canberra 131.7c; Darwin 130.8c; Hobart 129.5c.
 Filling up the car with petrol is the single biggest weekly purchase for most families. The average
household fuel bill has lifted by $20 in the past 5 months to $154 a month.
The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?

Global oil prices have risen steeply over the past couple of months, and unfortunately for motorists it is translating
to higher prices at the bowser. However motorists in Melbourne are still enjoying petrol at or below the cost price
(terminal gate price). In Melbourne, pump prices are around $1.22 a litre – in line with wholesale prices.
Essentially Melbourne motorists using fuel discount dockets will be buying petrol below cost. The low petrol prices
are not sustainable and prices are likely to lift markedly in coming days. Interestingly in Sydney, prices have
surged in the past few days and are now above $1.40 a litre.

The production cuts announced by OPEC and non-OPEC nations were the first in 15 years and highlight the
underlying concern about over-supplied oil markets. The focus now shifts to see if oil producers comply with the
stated production cuts. 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.
Savanth Sebastian, Senior Economist, CommSec
Twitter: @CommSec
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Economic Insights: Rising petrol price poses risk to household budgets

Petrol prices are now 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.
What do the figures show?
Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol
rose by 2.2 cents to 128.3 cents a litre in the past week. The metropolitan petrol price rose by 2.7 cents to 128.6
cents per litre while the regional price rose by 1 cent to 127.8 cents per litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 9
cents to 130.9 c/l), Melbourne (down 0.8 cents to 123.3 c/l), Brisbane (down by 1.6 cents to 129.9 c/l), Adelaide
(up by 8.1 cents to 130.6 c/l), Perth (up by 1.6 cents to 132.1 c/l), Darwin (up by 0.7 cents to 130.2 c/l), Canberra
(up by 0.7 cents to 128.9 c/l) and Hobart (up by 0.9 cents to 129.2 c/l).

The national average Australian price of diesel petrol was up by 0.8 cents to 128.6 cents per litre in the week
to January 8. The metropolitan price rose by 0.7 cents to 130.0 c/l, while the regional average price was up by 0.9
cents to 127.4 c/l.

Today the national average wholesale (terminal gate) unleaded petrol price stands at near a 17-month high
of 121.76 cents a litre, up by 3.4 cents a litre over the week. The terminal gate diesel price stands at 118.5
cents a litre, up by 3.3 cents a litre over the previous week.

Last week the key Singapore gasoline price rose by US34 cents or 0.5 per cent to US$70.10 a barrel. In
Australian dollar terms the Singapore gasoline price fell by $1.03 a barrel or 1.1 per cent to $95.79 a barrel or
60.25 cents a litre.

MotorMouth records the following retail prices for capital cities today: Sydney 140.1c; Melbourne 122.0c;
Brisbane 128.0c; Adelaide 141.3c; Perth 126.4c; Canberra 131.7c; Darwin 130.8c; Hobart 129.5c.
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?

Petrol prices are poised to lift further in coming weeks, with the potential to curb consumer spending power.

CommSec expects no change to interest rates in the foreseeable future.
Savanth Sebastian, Senior Economist, CommSec
Twitter: @CommSec
January 9 2017
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