ECO Insights 210920-Western Sydney petrol prices hit $1 a ...

Economics | September 21, 2020

Western Sydney petrol prices hit $1 a litre Singapore gasoline price at 7-month high

Weekly Petrol Prices; Used vehicle prices

Fuel prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 4 cents last week to 120.2 cents a litre. The national average unleaded wholesale or Terminal Gate Price (TGP) fell by 1.8 cents to 14-week lows of 101.1 cents a litre.

East Coast petrol prices: Daily unleaded retail petrol prices are averaging between $1.09 and $1.24 a litre today across our biggest cities ? Sydney, Melbourne and Brisbane ? according to real-time fuel app MotorMouth. Pump prices in Sydney's Inner West and South-West are around $1 a litre today.

Fuel prices to rise: The Singapore benchmark gasoline price ? the largest component of fuel prices paid by motorists ? hit 7-month highs of US$50.40 a barrel last week. In Australian dollar terms, the Singapore gasoline price rose by US$7.60 or 12.4 per cent ? the most in 13 weeks ?to a 10-week high of $68.85 a barrel or 43.30 cents a litre.

Used vehicle prices: Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. In the week to September 18, used vehicle prices fell by 1.2 per cent after lifting 3.4 per cent in the previous week.

China interest rates: China's 1- and 5-year loan prime rates were left unchanged at 3.85 per cent and 4.65 per cent, respectively, as expected by surveyed economists.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers.

What does it all mean? The school holidays have commenced in Queensland and Victoria with the rest of the country to follow next week.

And it's good news for motorists heading off on regional road trips. Pump prices are falling and are approaching the cheapest phase of the retail cycle on Australia's East Coast. Unleaded petrol prices continue to ease from their peaks three weeks ago, averaging between $1.09 and $1.24 a litre today across our biggest cities ? Sydney, Melbourne and Brisbane ? according to real-time fuel app,

Ryan Felsman, Senior Economist (02) 9118 1805; Twitter: @CommSec

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Economic Insights. Western Sydney petrol prices hit $1 a litre

MotorMouth. In fact, bowser prices have declined by up to 28 cents a litre since hitting highs of between $1.37 and $1.45 a litre in late August.

Drivers in Sydney's Inner West and South-West are already enjoying $1 a litre unleaded pump prices. Brisbane, Ipswich and Sunshine Coast bowser prices are lagging the Gold Coast where bowser prices are already around $1.10 a litre. Motorists in `BrisVegas' and on the `Sunny Coast' should fill up later in the week when prices are cheapest.

While Melburnians are still required to limit non-essential travel, the most common fuel price in Melbourne today is around $1.23 a litre. Motorists should top up rather than fill up their cars with pump prices expected to fall further to around $1.10-$1.15 a litre by the weekend.

East Coast motorists should look to take advantage of lower petrol prices over the next week or so with the end of the discounting cycle imminent. In fact, international crude oil prices ? the biggest influence over Aussie bowser prices ? rose by the most last week since June. The global benchmark Brent crude price rose by US$3.32 or 8.3 per cent to US$43.15 a barrel. The US Nymex price was up by US$3.78 or 10.1 per cent to US$41.11 a barrel. And the key Singapore gasoline price rose by US$5.80 a barrel or 13 per cent to a 7-month high of US$50.40 a barrel. So the next peak in Aussie East Coast pump prices in early October could be higher than the last.

So why are crude oil prices higher? Well, one of the world's largest oil producers - Saudi Arabia - last week said that it's prepared to defend the crude oil market by enacting new supply cuts and pressuring other OPEC+ allies to comply with production quotas. That has put a floor under crude prices for now.

What do the reports and figures show?

Petrol prices

According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 4 cents to 120.2 cents a litre. The metropolitan price fell by 5.4 cents to 120.7 cents a litre and the regional price lost 1.4 cents to 119.1 cents a litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 10.6 cents to 113.8 c/l), Melbourne (down by 7.2 cents to 126.8 c/l), Brisbane (down by 9.2 cents to 121.6 c/l), Adelaide (up by 14.4 cents to 125.2 c/l), Perth (down by 0.6 cents to 116.6 c/l), Darwin (steady at 117.6 c/l), Canberra (down by 0.2 cents to 122 c/l) and Hobart (steady at 124.1 c/l).

The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 16-weeks highs of 19.41 cents to 19.01 cents (24-month average: 14.8 cents a litre).

The national average diesel petrol price fell by 0.3 cents to 119.5 cents a litre over the past week. The metropolitan price fell by 0.3 cents to 118 cents a litre and the regional price was also down 0.3 cents to 120.7 cents a litre.

Last week, the national average unleaded Terminal Gate Price (TGP) fell by 1.8 cents to 14-week lows of 101.1 cents a litre. The terminal gate diesel price fell by 3.4 cents to 98.4 cents a litre.

Today, the average unleaded TGP stands at 101.2 cents a litre, down 0.5 cents over the week. The terminal gate diesel price stands at 97.9 cents a litre, down 1.5 cents a litre over the week.

MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 109.4c; Melbourne 123.4c; Brisbane 116.5c; Adelaide 104.2c; Perth 105.3c; Canberra 121.7c; Darwin 117.6c; Hobart 123.9c.

Last week the key Singapore gasoline price rose by US$5.80 a barrel or 13 per cent - the most in 13 weeks - to a 7-month high of US$50.40 a barrel. In Australian dollar terms, the Singapore gasoline price rose by US$7.60 or 12.4 per cent also the most in 13 weeks - to a 10-week high of $68.85 a barrel or 43.30 cents a litre.

Used vehicle market ? Week ended September 18

Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. In the week to September 18, used vehicle prices fell by 1.2 per cent after lifting 3.4 per cent in the previous week.

In the latest week supply rose 3.9 per cent with prices of Light Commercials (-1.5 per cent) and Passenger vehicles (-0.2 per cent) both lower. Corporations (-4.7 per cent) and ex-Leases (-

September 21, 2020 2

Economic Insights. Western Sydney petrol prices hit $1 a litre

0.8 per cent) also weighed on used vehicle prices. But Council (+4.8 per cent) and SUV (+1 per cent) prices lifted. By vehicle, Datium reported, "Prices for top 15 traded vehicles were mixed with the Toyota Hiace (+6.5 per cent) and Isuzu D-MAX (+4.4 per cent) leading increases. But, Volkswagen Golf (-5.4 per cent), Ford Mondeo (-4.4 per cent) and Holden Commodore (-3.6 per cent) prices were all down."

What is the importance of the economic data? Weekly petrol prices data are compiled by ORIMA Research

on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory metropolitan and nonmetropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth. Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. The data assists in gauging the strength of a key component of consumer spending and provides insights on the Autos and components sector of the sharemarket.

What are the implications for investors? OPEC and its allies are doing their best to stabilise crude oil prices at US$40-43 a barrel. The Saudis have been

flexing considerable muscle at recent OPEC ministerial and compliance meetings. But will it be enough to support prices? OPEC+ production cuts, supply disruptions from a bevy of tropical storms in the US Gulf of Mexico and falling US inventories have put a temporary floor under crude oil prices. That said, crude oil prices have eased in early Asian trading today as rising COVID-19 cases in Europe and the UK make oil traders jittery about the potential for renewed government restrictions to slow infection rates. And supply worries re-intensified after Libya's National Oil Corporation (NOC) lifted force majeure on its ports and facilities, enabling the potential resumption of crude exports after 8 months. With petrol prices remaining low during the pandemic recession, Aussies have shunned public transport due to health concerns. Instead, Australians are increasingly choosing to take advantage of record low interest rates and increased personal savings - courtesy of government payments, instant asset write-off incentives and super withdrawals - to buy second hand cars. Data from Pickles, Moody's Analytics and Datium Insights showed that used motor vehicle prices lifted by 25 per cent over the year to August ? the strongest annual growth rate on record. But prices eased last week by 1.2 per cent - perhaps an early sign that increased mobility in the `virus free' regions of Australia are tempering demand for second hand cars.

Ryan Felsman, Senior Economist, CommSec Twitter: @CommSec

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