The price of crude oil fell another 5% last night with the US benchmark, Nymex crude, trading under the GFC low. Nymex crude is sitting at $31.40 a barrel, the lowest price since 2004.
Likewise the price of Tapis crude, the benchmark for Australian pricing, has also fallen to its lowest level since 2004. At the same time, and even with the Aussie dollar under 70 cents, Tapis crude in Australian dollar terms is back at GFC lows.
That means petrol prices should be falling.
But against this backdrop of falling prices on wholesale markets, the price of petrol at the bowser is on the rise again in Australia.
CommSec chief economist Craig James said prices rose 2.1 cents last week to an average 121.9 cents per litre. That’s because retailers are expanding their gross margin.
“The difference between the weekly average retail unleaded petrol price and the weekly average wholesale terminal gate price was 15.6 cents a litre last week, up from 13.1 cents in the week before (annual average 11.3 cents),” James wrote.
To put that rise in perspective, the increase of 4.3 cents in margin, to 15.6, over the one-year average of 11.3 is an increase of 38% in margin to the retailer. But the current margin is a whopping 59% above the 5-year average margin of 9.8 cents.
In economic terms, that margin expansion screams price inelasticity, because consumers are buying petrol regardless of price.
James says it has important economic impacts because, “filling up the car with petrol is the biggest outlay by families each week. As a result the petrol price has a major impact on household budgets, consumer confidence and actual spending.”
Complacency has crept in James says because petrol prices seem “relatively low”. That means there has been “less comparison shopping and thus allowing gross retail margins of petrol marketing groups to drift higher.”
Time to shop around.