Despite a near 10% rally in the crude oil price last week, low petrol prices in Australia are here to stay.
That’s the view of Craig James, chief economist at Commsec, who notes that national average wholesale unleaded petrol price fell to a 11-month low of 107.1 cents per litre last week.
“There are no signs of an end to low global oil prices,” wrote James in a research note released earlier today.
“Saudi Arabia is determined to shore up its market share and force the higher-cost oil and – broader – energy producers out of the market. While low oil prices are taking their toll on budgets and foreign exchange reserves in the Middle East, the OPEC oil cartel is content with producing more oil than is required on the global market.”
The decision by OPEC, and others, to sacrifice profitability in order to buttress market share continues to weigh on global energy prices.
According to James, the key Singapore gasoline price fell by a further US90c or 1.6% to US$55.50 a barrel last week.
When priced in Australian dollar terms, it fell by $2.56, or 3.2%, to $76.50, taking it back to levels last seen in the week ending January 30 this year.
James admits that while the continued slide in the crude price is pressuring the profitability of producers, it is potentially good news for retailers presuming that the savings are spent, not saved.
The chart below, supplied by Commsec, reveals thatthe estimated average monthly spend by households on fuel has fallen steadily in the second half of 2015.
Although volumes are well below normal thanks to holiday-thinned trade, consumer-related stocks are currently the best performing sectors on the ASX 200 today.
Consumer staples are up 1.84%, narrowly shading a 1.12% bounce in consumer discretionary.