Crude oil prices have soared in recent months, lifting to fresh three-year high on Monday.
As seen in the chart below, front-month Brent crude futures — the global benchmark — have jumped by close to 58% from mid-June last year, rising above the $70 a barrel level for the first time since December 2014 last week.
The combination of a stronger global economy, US dollar weakness and ongoing speculation over a further extension of crude production cuts from OPEC and non-OPEC members has proven to be a potent mix.
In Australia, most will notice the surge in crude oil by the price at the petrol pump. Like crude, petrol prices have roared over the past few months, even with the stronger Australian dollar helping to cushion the blow.
However, as pointed out by Commsec in a report this week, it’s not just the higher crude price that is contributing to the recent lift in petrol prices.
Retail margins for unleaded petrol — the difference between wholesale prices and what you pay at the pump — have risen to the highest level on record over the past month.
“Fuel marketing groups have been successful in lifting the gross retail margin,” says Craig James, Chief Economist at Commsec. “The five-week average margin has hit a record high of 15.96 cents a litre.”
James told Business Insider that going back to 2004 when the data was first produced, the gross retail margin was just 3.5 cents a litre.
This chart from Commsec shows the change in gross retail margins over the past year.
According to James, the average Australian family is now spending around $200 a month to fill the car with petrol, up $20 a month compared with January last year.
“In Australia, the petrol price lifted around 10% in the December quarter, the biggest increase in two-and-a-half years,” he says.
Along with steep increases for energy and gas prices for many families in the middle of last year, higher petrol prices present an additional headwind for household spending in discretionary areas, especially at a time when wage growth continues to sit near the lowest level since the early 1990s recession.