As the dollar plumbs 91 cents, on its way to the mid to low 80 cent range, one could be forgiven for worrying that petrol prices are about to rise. Here is the petrol price in Australian dollars over the past six months up until yesterday:
However, it may not be as bad as it appears. One of the forces driving own the Australian dollar is the pending removal of stimulus in the US and that also has the effect of driving down oil prices via a stronger US dollar and likely weaker growth. For instance, last night, the dollar fell one percent:
But oil fell 3 per cent:
I would expect oil to find a new trading range some 10% below its current level as “tapering” reprices commodity markets.
Moreover, to date, the local petrol price is not breaching new highs:
Other factors such as Middle East tensions can’t be controlled and will cause volatility whatever happens in our currency.
Over the long term the trend will be higher – given I expect the dollar to fall back to the low 70 cent range – but for now at least consumers may get a decent run.
