Australian motorists are enjoying the lowest petrol prices in eight months as Brent crude oil price dropped below $US60 for the first time in a year, but pundits are divided as to whether the low prices will last past Christmas.
While there had been fears petrol prices could crack the psychological $2 a litre mark before the end of the year – fuelled by higher international prices and a stronger Australian dollar – a boost in supply from big oil producers has taken the edge off the bowser price, with Sydney, Melbourne and Brisbane price cycles aligning and dipping below $1.30 a litre.
Petrol prices have been on the downward slide for the past month in the east coast capitals, according to the Australian Competition and Consumer Commission petrol price monitoring website, falling from highs close to $1.70 for regular unleaded in October.
But analysts believe the low prices could be short-lived if OPEC, as predicted, announces a production cut at its December 6 meeting. That could force prices back up at the start of the summer holidays.
“We may be seeing OPEC lose some of its relevance in the oil market. Saudi Arabia, Russia and the United States are producing oil at record high rates; they’re the main players adding record levels of supply, which has brought the price down,” RACQ spokeswoman Lucinda Ross said.
Buy now, drivers urged
“But we may see OPEC attempt to reassert its influence by announcing a production cut next month. Unusually Brisbane, Sydney and Melbourne price cycles have aligned and are currently in the cheapest phase of the price cycle. It’s likely as cheap as it’ll get for the next few weeks, so drivers should buy now. If drivers aim for a price at $1.24 per litre or less they’re paying a fair price.”
The Australian Institute of Petroleum said the national average price of unleaded petrol fell by 5.3¢ a litre last week to $1.37 a litre.
Petrol has fallen 22.7¢ over the past four weeks, the biggest equivalent decline in a decade and CommSec chief economist Craig James said prices may continue to drop.
He said the gross retail margin for fuel retailers was 14.5¢ a litre, which was still above the annual average of 13.5¢ a litre.
“Aussie motorists have an early Christmas present. Petrol prices are falling and have scope to fall even further,” he said.
“In fact, compared with the highs for petrol prices in October, capital city motorists are saving as much as $69 on a monthly basis on filling up the car with unleaded petrol, equating to a quarter per cent rate cut on a $450,000 mortgage over a 25-year term. Prices also have a scope to fall markedly for motorists in regional areas and those in smaller capital cities such as Hobart and Canberra.”
The fall in petrol prices in the east coast capitals has taken pressure off the Morrison government which was feeling the heat from consumers who claimed petrol companies were skimming bigger profits than usual in recent months.
But Australian motorists remain captive to fluctuations in the international price and geo-political positioning by the big producers.
Capital Economics chief commodities economist Caroline Bain said preliminary data showed OPEC’s October output reached its highest level since the end of 2016, despite a drop in supply from Iran.
“Elsewhere the US is also raising output and is vying with Russia to be top global oil producer. It is still too early to know what the impact of US sanctions will be on Iran’s exports,” Ms Bain said in a research note.
“But the recent increases in supply underpin our view that the market will remain amply supplied in 2019 and that prices will fall.”