Economic Insights
Economics | August 22 2016
Petrol set to rise on regional oil price surge
Weekly petrol prices
 Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of
unleaded petrol rose from a four-month low, up by 0.4 cents per litre to 111.6 cents per litre in the week to
August 21.
 In Australian dollar terms the Singapore gasoline price has risen by 20 per cent in the past three weeks –
the biggest three lift in almost six months.
 MotorMouth records the following retail prices for capital cities today: Sydney 102.2c; Melbourne 102.3c;
Brisbane 103.9c; Adelaide 119.5c; Perth 102.0c; Canberra 118.5c; Darwin 115.5c; Hobart 121.5c.
The petrol figures have implications for retailers, especially petrol marketing groups.
What does it all mean?

Motorists have been benefiting from cheap global oil prices for a number of weeks. Unfortunately it is very likely
that the lows for petrol have been reached for a while. The trend has clearly changed in the past week with a shift
in global sentiment likely to have an impact on domestic pump prices.

In particular the focus of oil markets now shifts to an informal meeting of oil producing nations set for September
26-28 in Algeria. And global oil prices have already started reacting ahead of that meeting. In fact in the past
three weeks the Singapore unleaded price has surged by almost 20 per cent in Australian dollar terms. Leading
up to that meeting it is likely that oil prices will remain volatile on speculation that oil producers may look at
avenues to limit output and thus support prices.

Importantly while petrol prices are set to rise, it is off a very low base. Keep in mind that in Sydney and Adelaide
prices got down to around 92 cents a litre over the past fortnight. In fact in Sydney the average pump price fell to
an 11-year low last week. And from a fundamental standpoint the world is still well supplied with oil. Not only has
there been a lift in US crude oil inventories in the past couple of weeks but an increase in operational US oil rigs
has also added concerns about a rise in future supply. In short it is likely to be a very fluid situation over the next
Savanth Sebastian, Economist (Author)
Twitter: @CommSec
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Economic Insights: Petrol set to rise on regional oil price surge
couple of months.

Importantly motorists should continue to keep an eye on the discounting cycle, because at the low point in the
cycle motorists should still be able to pick up petrol at or below the cost price. In Sydney petrol prices fell for over
a month before spiking in the last couple of days. In Melbourne and Brisbane petrol prices continue to fall,
heading into the fifth consecutive week. Interestingly motorists in Adelaide have seen prices holding at around
$1.20 a litre for the past ten days.
What do the figures show?
Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol
rose by 0.4 cents per litre to 111.6 cents per litre in the week to August 21. The metropolitan petrol price rose by
1.2 cents to 109.8 cents per litre while the regional price fell by 1.1 cents to 115.3 cents per litre.

The national average Australian price of diesel petrol fell by 0.8 cents to 117.7 cents per litre in the week to
August 21. The metropolitan price fell by 0.8 cents to 116.7 c/l, while the regional average price fell by 0.7 cent to
118.6 c/l.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up 12.2
cents to 112.7 c/l), Melbourne (down 6.2 cents to 104.6 c/l), Brisbane (down 4.5 cents to 105.9 c/l), Adelaide (up
9.3 cents to 119.2 c/l), Perth (down 1.2 cents to 111.0 c/l), Darwin (down 1.3 cents to 115.3 c/l), Canberra (down
1 cent to 118.8 c/l) and Hobart (down 0.8 cents to 120.8 c/l).

Today the national average wholesale (terminal gate) unleaded petrol price stands at 103.3 cents a litre, up
3.6 cents a litre over the week. The terminal gate diesel price stands today at 103.5 cents a litre, up 3.7 cents a
litre.

Last week the key Singapore gasoline price rose by US$5.35 or 10.2 per cent to US$58 a barrel. And in
Australian dollar terms the Singapore gasoline price rose by $7.42 a barrel or 10.8 per cent to $75.88 a barrel or
47.72 cents a litre.

MotorMouth records the following retail prices for capital cities today: Sydney 102.2c; Melbourne 102.3c; Brisbane
103.9c; Adelaide 119.5c; Perth 102.0c; Canberra 118.5c; Darwin 115.5c; Hobart 121.5c.
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?

In just the past two months, the average motorist is saving around $20 a month on filling up the car with petrol.
And if you go back just over 12 months, savings are even more substantial at closer to $40 a month. Filling up the
car with petrol is the single largest weekly purchase by most families. And it is clear that families have markedly
more spending money than at the same point a year ago. At present the situation is outlook remains favourable
for consumer-focussed companies but that could change if
petrol prices continue to lift.

There is likely to be more volatility in oil prices in the lead
up to the recently announced informal OPEC meeting in
late September.

Inflation is low across the globe. But if oil prices continue to
lift that could add an inflationary impulse.
Savanth Sebastian, Economist, CommSec
Twitter: @CommSec
August 22 2016
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