Crude oil prices are soaring and the Australian dollar is sliding, and don’t Australian motorists know it.
According to data from the Australian Institute of Petroleum (AIP), the national average price of unleaded petrol jumped by 4.5 cents to 137.1 cents a litre last week, leaving it at the highest level August 2015.
This chart from Commsec tells the story, showing the near 20 cents per litre increase seen over the past few months.
“The metropolitan petrol price rose by 6.4 cents to 137.7 cents per litre while the regional price rose a more moderate 0.7 cents to 135.9 cents per litre,” said Commsec.
Prices in Sydney and Brisbane surged during the week, lifting by 14.4 cents and 16.8 cents respectively to 143.7 and 145.9 cents per litre.
Elsewhere, prices rose in Perth, Darwin, Canberra and Hobart, lifting by 3.3 cents, 0.3 cents, 4.5 cents and 2.1 cents respectively, offsetting declines of 0.8 cents and 11.8 cents in Melbourne and Adelaide.
The National average is calculated as a weighted average using price movements against the number of registered petrol vehicles in each state and territory, helping to explain the scale of the increase over the week.
With the average unleaded petrol price now at the highest level in 27 months, Ryan Felsman, Senior Economist at Commsec, says motorists are unlikely to receive a reprieve in the short-to-medium term.
“Motorists may need to get used to paying higher prices for petrol as global oil producers attempt to rebalance markets after a period of excess supply,” he sayd.
“Commodity traders expect that OPEC and Russian oil ministers will agree at the end of November to extend oil production cuts past the current expiry date in March 2018.”
Since November 2016, OPEC and non-OPEC crude producers have agreed to limit production to 32.5 million barrels per day in an attempt to help rebalance the market and boost prices. Given a further extension is likely when OPEC members meet in Vienna next week, this could help to keep crude prices elevated compared to levels seen earlier this year.
“The Brent crude oil price is expected to remain above US$60 per barrel in the short-term if the Organisation of Petroleum Exporting Countries (OPEC) and Russia decide to extend their agreement to reduce oil output beyond March 2018,” says Felsman.
If that does eventuate, he says it will further pressure “already stretched Aussie household budgets in the lead up to the busy Christmas holiday period”.
Australian retail sales have weakened sharply since June, coinciding with the bounce in global crude prices and higher gas and electricity bills for many Australian households that kicked in at the start of July.
Accounting for around a third of household consumption, the recent weakness in retail sales has raised concerns about the health of household finances, and with it the outlook for Australian economic growth.