Petrol: Today the national average wholesale (terminal gate) unleaded petrol price stands at 107.3 cents a litre, down 0.9 cents a litre over the week after falling by 2.2 cents in the previous week.

Capital cities: MotorMouth records the following retail prices for capital cities today: Sydney 126.2c; Melbourne 107.7c; Brisbane 113.0c; Adelaide 126.8c; Perth 103.7c; Canberra 118.8c; Darwin 110.3c; Hobart 120.7c.

Central West NSW floods: In 2014/15 the gross value of agricultural production was $1.75 billion or around 14.4 per cent of NSW production and 3.3 per cent of Australian production.

What does it all mean?

Motorists have been benefiting from cheap global oil prices for a number of weeks. However there is the risk that petrol prices may lift, largely due to an increase in speculation of global production cuts. In particular the focus of oil markets now shifts to an informal two-day meeting of oil producing nations in Algeria, which kicks off today. And global oil prices have already reacted to speculation ahead of the meeting.

In fact since the meeting was announced in mid-August the Singapore unleaded price has surged by over 20 per cent in Australian dollar terms. As the meeting progresses, 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. In fact, there has been reports that Algeria’s energy minister said that Saudi Arabia, is willing to cut output by around 500,000 barrels per day provided that Iran limits output at current levels. As Commonwealth Bank Commodity Analyst Vivek Dhar has highlighted “If the reports are correct the compromise shows the intent of OPEC’s largest producer to curb out output and work together with Iran… For now, we still believe a deal is unlikely on Wednesday, but the cohesion between OPEC members boosts the probability of a deal over the next 6 months”.

Importantly while there is the risk of higher petrol prices, it is off a relatively low base. In fact the national average petrol price has been holding near 12-year lows. 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 to concerns about a rise in future supply. In short it is likely to be a very fluid situation over the next 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 a fortnight before spiking in the last couple of days. In Melbourne and Brisbane, petrol prices continue to fall, heading into the fourth consecutive week. Interestingly motorists in Adelaide have seen prices holding around $1.27-$1.29 a litre for the past 11 days.

The floods in Forbes and surrounding areas are considered the worst in 25 years. Our thoughts certainly go out to the people and businesses affected by the floods. The Central West is a rich agricultural region so the floods will have potential to impact the broader state and national economies and lift consumer prices for a raft of fruit and vegetables. The Central West NSW accounts for 3.3 per cent of Australian agricultural production and almost 4 per cent of national crop production. The region is a significant producer of cereal crops (especially canola) as well as livestock and horticultural products.

As a share of Australian production, the Central West is a notable producer of melons (14 per cent of the total), oats (11.7 per cent), triticale (9.6 per cent), lucerne hay (7.7 per cent), wool (7.3 per cent) and eggs (7.2 per cent). A table indicating the value of production and the share of NSW and Australian production is attached.

The floodwaters are spreading from Forbes to surrounding areas and more rain is expected in the region. So clearly this is an evolving issue to monitor.

What do the figures show?

Petrol prices

Today the national average wholesale (terminal gate) unleaded petrol price stands at 107.3 cents a litre, down 0.9 cents a litre over the week after falling by 2.2 cents in the previous week. The terminal gate diesel price stands at 103.9 cents a litre, down by 1.1 cents a litre after rising 1.2 cents a litre over the previous week.

Last week the key Singapore gasoline price rose by US15 cents or 0.3 per cent to US$58.60 a barrel. However in Australian dollar terms the Singapore gasoline price fell from 12-week highs, down by $1.09 a barrel or 1.4 per cent to $76.73 a barrel or 48.26 cents a litre.

MotorMouth records the following retail prices for capital cities today: Sydney 126.2c; Melbourne 107.7c; Brisbane 113.0c; Adelaide 126.8c; Perth 103.7c; Canberra 118.8c; Darwin 110.3c; Hobart 120.7c.

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?

Low petrol prices boost consumer purchasing power and also keep a cap on broader price inflation in the economy. Retailers are benefiting from low petrol prices.

In just the past three months, the average motorist is saving around $12 a month on filling up the car with petrol. And if you go back just over 12 months, savings are even more substantial at over $30 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 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 over coming months as oil producing nations attempt to agree on production cuts.

Extracted from The Bull.

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