Misa Han, 05 January 2016

Sydney drivers are paying $1 a litre for petrol – 20¢ less than Melbourne drivers – this week as Sydney stations are selling petrol at a loss.

On Monday, the pump price in Sydney was near $1.04, below the wholesale price of $1.06 and the Melbourne pump price of $1.24.

On Tuesday, the retail price for unleaded petrol in Sydney increased slightly to $1.07, compared to $1.22 in Melbourne, according to petrol price monitoring website MotorMouth.

Sydney-based Uber driver Ben Philips said he usually spends $60 filling up a full tank for his Volkswagen Polo but this week it costs him about $48. He said the low petrol price saved him about $50 a week and was a boon for his business.

“It’s the main cost for Uber drivers, it’s huge for us. It’s excellent at the moment, I top it up pretty much whenever I can top it up,” Mr Philips said.

The last time Sydney petrol price was this low was around this time in 2015 when petrol prices fell below $1.

Petrol prices move up and down in regular patterns and cycles. Stations sell at a loss in order to stay competitive

SHOP AROUND

But Motoring club NRMA’s Peter Khoury does not expect the $1 petrol price to last long. He said the Sydney petrol price has already started to come back up and he expected the price to go back up to around $1.30 in January.

He said Sydney drivers should fill up their tanks this week to take advantage of the below cost petrol price.

“The best thing to do when there’s volatility is to check their local motoring website to get an idea of when not to fill up and when there are high average prices that’s when we encourage people to stay away from service stations if they can,” Mr Khoury said.

He also said drivers should shop around for cheap petrol and fill up at cheaper stations on their way to work because petrol prices vary by as much as 30¢ within Sydney.

For example, unleaded petrol in Double Bay was $1.27 on Tuesday, compared to $1.03 in Blacktown, according to MotorMouth data.

LOW PETROL PRICE EXPECTED

CommSec chief economist Craig James also said the Sydney petrol price would come back up from $1 because it was below the national wholesale price.

However, Mr James expects the national petrol price to remain low, about $1.20 or even lower, on the back of low global oil price and the resilient Australian dollar.

“OPEC are determined to keep the market well supplied with oil and unless that policy was to change then it’s likely motorists will continue to experience discount,” he said.

Global Brent oil price dropped from $US68 a barrel in May last year to $US37 on Tuesday.

Mr James said the lower cost of petrol will reduce inflation and boost household spending because filling up the car with petrol is the single biggest weekly purchase for most households.

He said the winners of the low petrol price were retailers like Harvey Norman, businesses in the road transport sector and airlines.

CommSec estimates the average household is saving about $17 a month on petrol, compared with three months ago.

However, the low petrol price had not been enough to save electronics retailer Dick Smith, which went into voluntary administration after weak Christmas sales.

“Dick Smith has found retail conditions challenging and the winners you have to say are stores like Harvey Norman and JB Hi-Fi,” Mr James said.

Extracted in full from the Australian Financial Review.

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