Petrol prices to rise

From CommSec:

According to the official data, the national petrol price has now lifted by 2.5 cent a litre in the past fornight. And unfortunately for motorists there will be further price hikes ahead. Motorists will be hit by the double-whammy of higher crude prices and a weaker Aussie dollar – pushing up the cost of imported fuel.

In short motorists should brace for more pain at the petrol pump. The regional Singapore gasoline price has surged to a near three-month high in Australian dollar terms, and already the wholesale (terminal gate) price is reacting lifting by over 2 cents a litre in the past week. A further lift in the wholesale price is expected – all of which will eventually filtering through to domestic pump prices. Around a further 3 cents is likely to be added to the pump price over the next 7-10 days.

Interestingly the discounting cycle is nearing the trough (low point) across most capital cities. At present motorists in Sydney, Melbourne, Brisbane and Adelaide can buy fuel, with the help of shopper dockets at or below cost price. However prices are set to spike sharply higher over the next couple of days, particularly across the Eastern Seaboard. The bottom line is motorists would be best served filling up the vehicle now, before prices spike higher.

On a positive note, news of the interim Iranian nuclear pact signed with the Western world powers may help to alleviate significant price pressures over the medium-term. As political risk in the Middle East is reduced and potential oil supply lifts.

The current average petrol price of just under $1.49 a litre is still well below the all-time high of $1.634 a litre in July 2008. While the rising petrol price is bad news for retailers, wages have lifted around 14 per cent over the past four years while the petrol price is actually lower. But it is a situation that retailers and policymakers need to watch. Petrol is the single biggest purchase for many Aussie households.