• Aussie motorists have an early Christmas present. Petrol prices are falling and have scope to fall even further. 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. Retailers have reason to cheer the fact that motorists have extra dollars for Christmas purchases.
• The regional Singapore benchmark gasoline price has fallen by around 27 cents a litre from recent highs and Australia’s wholesale petrol price has also fallen by around 25.5 cents. But the national pump price has only fallen by just under 23 cents, implying a further fall of around 3-5 cents a litre over the next fortnight, subject to the vagaries of the retail petrol price discounting cycle.
• Motorists should expect pump prices to fall further. The gross retail margin for fuel retailers is 14.5 cents a litre, still above the annual average of 13.5 cents a litre. Prices have scope to fall markedly for motorists in regional areas and those in smaller capital cities such as Hobart and Canberra. According to MotorMouth, Sydney unleaded petrol has fallen 34 cents a litre since the start of October versus 3.9 cents in Darwin, 3.2 cents in Canberra and no change in Hobart.
Why is it “extra spending”? It’s ‘extra income’ very likely to be saved or used to pay off the mortgage amid deteriorating living standards and wealth for households.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
