By Stephen Cauchi, 15 July 2015

Petrol prices have just enjoyed their largest slide in five months, giving drivers some welcome reprieve after posting the biggest quarterly jump in almost 25 years.

According to the Australian Institute of Petroleum, the national average Australian price of petrol fell by 4.4 cents last week to 138.6 cents per litre. Sydney bowser prices fell 3.1 cents to 138 cents per litre and Melbourne’s dipped 7.3 cents to 137.7 cents per litre.

While the landmark deal with Iran over its nuclear program is unlikely to have contributed to the recent slide in prices at the bowser, it could well lead to falling oil and petrol prices over coming months once the country start ramping up crude oil exports.

Commsec economist Savanth Sebastian said the fall was the largest in five months and was the result of a “perfect storm” between the regular discounting cycle and the Singapore unleaded petrol price, which had just reached an eight-week low.

“Motorists were due for a reprieve,” said Mr Sebastian. “The main driver of the slide in fuel prices was the volatility in the euro zone which dampened global oil demand.”

But, he added, today is the best time to fill up the family car. “The bottom line is that over the week, the discounting cycle across most capital cities will reverse direction. The cheap fuel that is on offer will cease and prices are likely to spike.”

Mr Sebastian said that between the peak and trough of the discounting cycle, motorists could save as much as 20 cents per litre.

The weaker Australian dollar would also boost the Singapore price, he said. “Movements in the Aussie dollar will play a key part in determining what savings flow through to petrol prices in coming weeks.”

But last week’s slide in petrol prices is too late to have an impact in next week’s inflation figures. High petrol prices will make up about half of the June quarter inflation figure, expected to be 0.9 per cent.

Mr Sebastian said he expected fuel prices would add around 0.5 percentage points to June quarter inflation, which he forecast to come in at 0.9 per cent.

“After falling by 12.2 per cent in the March quarter, the petrol price lifted by around 14 per cent in the June quarter – marking the biggest quarterly increase in almost 25 years.”

Despite the higher rate of inflation, Commsec’s view was that the Reserve Bank would keep interest rates on hold for the rest of 2015.

Extracted in full from the Sydney Morning Herald.