Petrol market caught in ‘Twilight Zone’

Weekly petrol prices

Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.9 cents per litre to 121.8 cents per litre in the week to October 23. Prices rose in all capital cities except Melbourne and Brisbane last week.

Lowest price in six years: Despite the lift in prices last week, the national average petrol price is the lowest for an equivalent time in an October month since 2009.

What does it all mean?

On the one hand, the world is well supplied with oil. On the other side of the equation, major producers are talking about constraining oil production to support prices. The hard part is coming up with a deal. And we’ll only know the outcome of the negotiations at the end of November when OPEC oil producers next meet.

So oil markets are caught in the ‘Twilight Zone’ with oil users across the globe waiting to see whether prices move higher or lower from here. The good news for Aussie motorists is that petrol prices remain cheaper than a year ago. In fact petrol is the cheapest for this time of year since 2009.

Petrol prices are expected to consolidate at current levels until news of any production agreement is received. In most capital cities the wholesale price is near $1.12 a litre ($1.16-$1.17 in Hobart and Darwin). So if you can fill up below these prices, clearly you are doing well.

What do the figures show?

Petrol prices

According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.9 cents per litre to 121.8 cents per litre in the week to October 23. The metropolitan petrol price rose by 1.2 cents to 120.8 cents per litre while the regional price rose by 0.3 cents to 123.7 cents per litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 4.7 cents to 122.7 c/l), Melbourne (down by 2.8 cents to 118.0 c/l), Brisbane (down by 4.4 cents to 122.0 c/l), Adelaide (up by 12.3 cents to 127.8 c/l), Perth (up by 2.4 cents to 114.5 c/l), Darwin (up by 8.1 cents to 122.2 c/l), Canberra (up by 5.2 cents to 128.9 c/l) and Hobart (up by 1.9 cents to 123.9 c/l).

The national average Australian price of diesel petrol was up by 1.4 cents to 121.3 cents per litre in the week to October 23. The metropolitan price rose by 1.5 cents to 121.2 c/l, while the regional average price was up by 1.3 cents to 121.4 c/l.

Today the national average wholesale (terminal gate) unleaded petrol price stands at 111.9 cents a litre, up 1.1 cents a litre over the week. The terminal gate diesel price stands at 110.2 cents a litre, down by 0.2 cents a litre over the previous week.

Last week the key Singapore gasoline price rose by US10 cents or 0.2 per cent to a 12-month high of US$63.90 a barrel. In Australian dollar terms the Singapore gasoline price fell by 40 cents a barrel or 0.5 per cent to $83.75 a barrel or 52.67 cents a litre.

MotorMouth records the following retail prices for capital cities today: Sydney 117.5c; Melbourne 116.7c; Brisbane 118.7c; Adelaide 122.0c; Perth 110.7c; Canberra 128.8c; Darwin 117.1c; Hobart 123.2c.

In the September quarter Australian petrol prices fell by between 2-3 per cent after lifting 5.9 per cent in the June quarter. As such, lower petrol prices are keeping downward pressure on the overall inflation rate.

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?

The oil price could provide an inflationary pulse for the global economy. If oil producers are indeed successful in limiting production and driving up prices, the higher prices could flow through to higher transport costs and prices of goods more generally. And rising inflation would mean higher interest rates.

The oil price is always a key influence on the fortunes of consumer-focused businesses.

Originally published by Craig James, Chief Economist, CommSec.

Extracted from The Bull.

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