'GET USED TO IT': Australian motorists should brace for an extended period of high petrol prices

David McNew/Getty ImagesIs it a bird? A plane? No, it’s Australian petrol prices.
  • The average cost for a litre of unleaded petrol in Australia has risen to the highest level since early 2014.
  • Commsec says Australian motorists “should get used to paying $1.50-$1.70 a litre for fuel”.
  • Near-term, petrol prices may weaken a touch in the coming weeks thanks to a pullback in crude oil prices.

The average cost for a litre of unleaded petrol in Australia has risen to the highest level since early 2014, reflecting the impact of soaring crude oil prices and continued weakness in the Australian dollar.

According to analysis from Commsec using data from Australian Institute of Petroleum, the average price for unleaded petrol rose 1.8 cents to 157.6 cents last week, the highest level seen since January 5, 2014.

“The metropolitan petrol price rose by 1.9 cents to 157.2 cents per litre, and the regional price rose by 1.6 cents to 158.5 cents per litre,” said Craig James, Cheif Economist at Commsec.

Commsec

The increase came despite the a decline in the average gross retail margin which fell by 1.1 cents to 10.80 cents a litre from a week earlier.

“The wholesale petrol price is currently around 147 cents a litre. A margin of 10-12 cents has to be added to obtain the retail prices,” James says.

“So motorists can currently expect to pay at least $1.57-1.60 a litre for petrol, abstracting from ‘discounting cycles’.”

And he thinks there’s a risk prices could go even higher in the period ahead, a scenario that could see households cut back on spending in discretionary areas.

“Filling up the car with petrol is the single biggest weekly purchase for most families. So a higher petrol price has the potential to trim spending on discretionary or non-essential items,” he says.

“The average household is spending $30 more a month for petrol than six months ago.

“Motorists should get used to paying $1.50-$1.70 a litre for fuel.”

Earlier this month, the Brent crude price — the global benchmark — hit the highest level in four years, partially reflecting increased concern surrounding the supply outlook from Iran, a major global producer, ahead of the introduction of new US sanctions on the country at the start of next month.

And with crude oil prices surging, the Australian dollar has gone in the other direction, falling to the lowest level against the greenback since February 2016 last week.

In the near-term, downside pressure on petrol prices may be seen in the coming weeks with Singapore gasoline prices — where Australia’s fuel is sourced from — sliding 4.4% last week to $79.55 a litre in Australian dollar terms.

However, with crude oil prices now rebounding on the back of additional supply concerns surrounding Saudi Arabia, the world’s largest crude exporter, any relief for motorists may prove to be fleeting, especially with the Aussie dollar remaining under pressure.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.