- The average unleaded petrol price in Australia soared last week despite lower wholesale prices.
- The spike in prices paid at the pump saw gross retail profit margins rise to the highest level on record.
- Average pump prices jumped by more than 13 cents in Sydney, Melbourne and Brisbane, offsetting modest declines in all other capitals and in regional areas.
- Global crude oil prices were slammed on Monday, pointing to the potential for lower pump prices in the weeks ahead. Unless retail margins lift again, of course.
Unleaded petrol prices in Australia soared last week, logging the largest weekly average increase in four months.
However, rather than being driven by higher wholesale petrol prices, Ryan Felsman, Senior Economist at Commsec, says there was another factor behind the sharp and sudden increase: average gross retail profit margins spiked to the highest level on record.
“The Australian Institute of Petroleum (AiP) has indicated that the average retail petrol price was 139.9 cents and the average wholesale petrol price was 115.2 cents last week. Therefore, the difference — the gross retail margin — rose by 10.6 cents to a record-high 24.7 cents a litre,” Felsman said.
The average wholesale price actually fell by 1.2 cent per litre from a week earlier.
While average gross profits are volatile from week to week — reflecting a number of factors such as movements in wholesale prices, lag times in sourcing fuel from Asia and differing retail price cycles in individual capital city markets — as seen in the chart below, the spike last week was unusually large, arriving just before the summer holidays begin for many Australians.
“Prices are now back above $1.40 a litre in most capital cities,” Felsman said. “Prices of $1.20-$1.30 a litre appear to be in the rear vision mirror for most motorists in the near term.”
The AiP said the average unleaded metropolitan price jumped by 9.8 cents to 138.9 cents per litre last week, a substantial divergence compared to regional areas where the average price slipped 2.3 cents to 141.9 cents per litre.
By individual capital, average prices in Sydney, Melbourne and Brisbane spiked by 13.1 cents, 15 cents and 16.7 cents per litre respectively, masking small declines in all other capital city markets.
While gasoline prices in Singapore rose by 2.3% last week in Australian dollar terms to 53.54 cents per litre, a move likely driven by anticipation of a production cut from OPEC members and its allies which was subsequently delivered, crude oil prices were slammed again on Monday, shedding around 3%.
Should crude prices remain under pressure, it points to the likelihood of lower wholesale petrol prices, and potentially lower prices for motorists at the pump should retail margins not spike again.
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