Crude oil has been in free fall over the past few months and even though prices at the pump in Australia have felt like they are a little more sticky than the big falls in wholesale markets, consumers are getting a massive positive jolt to the cash left in their pockets after expenses each week.
The most recent ABS data shows that in 2012 “passenger vehicles consumed 18,510 million litres of fuel in 2012, of which 84.8% (15,696 million litres) was petrol”. Combine this with data from the Australian Institute of Petroleum, which shows retail petrol is down around 14 cents a litre, with diesel down around 11 cents a litre. The fall in fuel prices equates to delivering Australian households an annualised $2.5 billion reduction in expenses since October.
That acts like a tax cut as it puts more money in people’s pockets and Craig James, Commsec Chief Economist, told Business Insider that, “families are saving $32 a month compared with a year ago.”
That’s good news for the economy heading into 2015 and hopefully great news for consumer confidence.