Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 9.0 cents last week to 136.4 cents a litre, reflecting the ending of discounting cycles in Sydney, Melbourne and Brisbane. It was the biggest weekly lift in the national petrol price in 13 years of records.

What does it all mean?

Since the start of September, regional gasoline prices have lifted 4.5 cents a litre while the domestic wholesale (terminal gate) prices has lifted 3 cents a litre. In contrast the retail or pump price has soared by around 10 cents a litre. The lift in the pump price is more an ‘alignment of the planets’ – ending of discounting cycles in Sydney, Melbourne and Brisbane – than a reflection of global oil market changes. The ‘true’ situation nationally is more in line with the Perth petrol price: around $1.30 a litre than $1.38-1.41 a litre on the eastern seaboard.

Petrol prices are coming down in Sydney, Melbourne and Brisbane and motorists can expect relief at the bowser over the next 7-10 days. But so far the price declines are much more tepid than in recent price cycles.
Filling-up the car with petrol is the single biggest purchase for most Aussie households. So the recent lift in petrol prices is something to watch – especially with higher power prices and sluggish wage growth.

On global markets, since January the key oil producers from the Organisation of Petroleum Exporting Countries (OPEC) as well as non-OPEC producers like Russia have restricted oil production in order to support oil prices. And compliance with the agreement has held over the year, meaning that oil prices have held around US$40-60 a barrel.

On Friday, Saudi Arabia and Russia pledged to support the production agreement into 2018. And as a result the key Brent crude benchmark price hit the highest levels for over two years. So while relief lies ahead for east coast motorists, it may not be long-lasting.

What do the figures show?

Petrol prices
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 9.0 cents to 136.4 cents a litre in the past week. The metropolitan petrol price increased by 9.7 cents to 137.1 cents per litre while the regional price rose by 7.3 cents to 134.8 cents per litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 11.4 cents to 137.7 c/l), Melbourne (up by 13.9 cents to 138.7 c/l), Brisbane (up by 17.3 cents to 141.0 c/l), Adelaide (down by 9.4 cents to 131.6 c/l), Perth (up by 0.7 cents to 130.4 c/l), Darwin (up by 2.1 cents to 132.2 c/l), Canberra (up by 8.1 cents to 138.8 c/l) and Hobart (up by 1.6 cents to 136.7 c/l).

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 national pump price is overstating the true situation. The terminal gate price is up 9 cents a litre from mid-year lows whereas the national pump price is up by 16 cents. East coast petrol prices have scope to ease.

Higher oil prices are positive for energy producers but negative for consumer discretionary stocks.

While a higher oil price will serve to boost headline inflation, it may also lead to softer demand for retail goods and thus keep other prices restrained. Official interest rates still look to remain on hold for an extended period.

Extracted from: The Bull