COMMSEC: Crude prices are surging and it looks like Australian petrol prices will be next

Photo by Scott Barbour/Getty Images

If you’re driving home this evening and think that petrol prices are looking cheap, perhaps it’s time to fill up the tank. According to analysis from Commsec, prices are unlikely to stay this low for long.

“Motorists have been benefiting from cheap global oil prices for a number of weeks. Unfortunately it is very likely that the lows for petrol have been reached for a while,” says Craig James, chief economist at Commsec. “The trend has clearly changed in the past week with a shift in global sentiment likely to have an impact on domestic pump prices.”

James suggests that petrol prices look set to increase on the back of higher crude oil prices, noting that in Australian dollar terms the Singapore gasoline price has risen by 20% in the past three weeks, the biggest lift seen in almost six months.

This increase already appears to be flowing through to wholesale prices with the average price for unleaded petrol in Australia rising 3.6 cents last week to 103.3 cents per litre.

The chart below from Commsec looks at the relationship between Singapore gasoline prices to Australian wholesale prices.

Retail prices also moved higher over the past week, increasing by an average of 0.4 cents to 111.6 cents per litre in the week to August 21, according to the Australian Institute of Petroleum.

While prices look set to gain in the period ahead, James suggests the increase needs to be put into perspective, noting that retail prices, on average, still remain near four-month lows.

“Keep in mind that in Sydney and Adelaide prices got down to around 92 cents a litre over the past fortnight,” he says. “In fact, in Sydney, the average pump price fell to an 11-year low last week.”

For those looking for a bargain amidst rising prices, or for those who tend to use a lot of petrol, James believes that motorists should continue to keep an eye on the discounting cycle because at the low point “motorists should still be able to pick up petrol at or below the cost price”.

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