The petrol price is still 25 cents a litre lower than a year ago, but the days of super-cheap prices look to have ended – at least for now. The Singapore gasoline price rose sharply last week in line with world marker crudes in response to instability in Yemen and a weaker US dollar. Investors are worried that the conflict in Yemen could lead to a disruption of oil supplies in the Middle East. And a weaker greenback tends to improve the purchasing power of buyers in Europe and Asia. Still, the world remains well supplied with oil and that will constrain how high crude prices are likely to rise.
The Singapore gasoline price rose by over 11 per cent in Australian dollar terms last week, the second biggest weekly lift in prices behind the gain recorded in the week to February 8 this year.
So far the wholesale petrol price in Australia has only risen by around 2.5 cents a litre. But if the lift in the Singapore gasoline price is sustained, then Australian motorists may need to find an extra $4.50 every time they fill their tanks with petrol.
Filling up the car with petrol is the single biggest weekly purchase made by most families…
Retailers will be disappointed at the potential for petrol prices to spike higher. The imperative will be to constrain costs and thus selling prices in order to maintain custom of shoppers.
Lower petrol prices should deliver a weak inflation result on Wednesday. But the risk is that the petrol price will rebound in the June quarter. Clearly investors must stay on top of the petrol price vagaries and therefore the implications for consumer spending, inflation and interest rates.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
