The national average petrol price rose last week but only because discounting cycles ended in Melbourne and Brisbane. Prices fell in the other capital cities and both Asian regional prices and domestic wholesale prices were at or near 5-month lows.
Adelaide petrol prices were below $1 a litre last week and other capital cities look set to share the experience. Certainly a small number of Sydney petrol stations dropped prices to around a $1 a litre last week.
Simply the supply of oil on global markets is plentiful in relation to demand. And global crude oil prices slumped 67 per cent over the past week in reflection of the excess supply situation. At home, a firmer Aussie dollar near US76 cents is helping the cause of motorists.
Motorists will need to keep pressure on retailers to pass on savings at the petrol pump. The retail price averaged 120.2 cents a litre last week while the wholesale (terminal gate) price was 101.6 cents. The gross retail margin of 18.6 cents a litre was the highest on record. By comparison the average margin was 12.4 cents over the past year and the 5-year average was just over 10 cents a litre.
With the wholesale price near $1 a litre, the national retail price should ease to around 110 cents a litre. Motorists in Sydney, Melbourne and Brisbane could experience pump prices near $1 a litre like Adelaide motorists at the low points of the discounting cycle.
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.
