A 20-CENT petrol price gap has opened up between metropolitan and Western District service stations with international oil prices tumbling.

The average unleaded price across Melbourne hovered around the $1.18 mark on Monday while many Warrnambool service stations sold the same fuel at $1.35 with standard prices in other locations over $1.40 a litre.

International oil prices have dropped below US$40 a barrel for the first time in six years with American, British and Asian market indicators all at the lowest point since the 2008-09 stock market slump.

Oil traders have pointed to an oversupply of American fuel coupled with weakness in the mammoth Chinese manufacturing sector as factors behind the marked decline.

RACV fuel spokesman Nick Platt said while the international oil price drop was significant, it was not a reliable indicator of how much Australian motorists will pay at the bowser.

He said the decline of the Australian dollar relative to the American greenback had hit domestic fuel prices.

“It should be remembered that earlier this year when petrol prices declined to one dollar a litre in some parts of Melbourne that the exchange rate was quite different to what it is now,” Mr Platt said.

“Back in January and February, the Australian dollar was worth more than 80 American cents but now it’s down into the low 70s. That is having some impact.”

Mr Platt said Melbourne service stations were operating at the nadir of the price cycle with a steep rise in the cost of unleaded on the horizon.

“A few weeks ago, unleaded was selling for $1.45 in Melbourne and Geelong whereas it was $1.37 to $1.35 in Warrnambool,” he said.

“As the petrol price cycle moved on, outlets steadily reduced that figure and now we’re down below $1.20. The price cycle in Warrnambool and other regional centres is far more static.

“The price that south-west motorists are paying at the moment is roughly the same, maybe a little cheaper, than it was a fortnight ago.”

Unleaded petrol sold for $1.35 a litre in Portland and Port Fairy on Monday while the same product sold for $1.40 in Hamilton and $1.36 in Colac.

Some south west outlets sold unleaded for as low as $1.20 a litre in February although the retail price steadily increased in early March.

Extracted in full from:  standard.net.au