Petrol prices to dip back below $2/litre

Australian motorists could see good news at the bowser as early as next week, with the price of unleaded petrol tipped to fall back below $2 per litre on average.

Businesses and families have gone into a head spin since the beginning of March as the price at the pump surged well past the $2 mark on the back of a spike in wholesale Tapis and Crude oil, concerns over the Russia-Ukraine conflict, plus lingering supply and demand effects stemming from the COVID-19 pandemic.

Food price inflation is already predicted to hit 6.8 per cent this year as the flow-on effect of fuel prices takes hold.

In better news for motorists, the Australasian Convenience and Petroleum Marketers Association (ACPMA) expects a levelling off of petrol prices based on current trends.

ACPMA chief executive Mark McKenzie said as the price of Crude oil dropped closer to $US100 a barrel again, consumers could expect relief at the bowser.

“What we’ve seen in the past week is a levelling off, so we’ve got to a situation where oil prices have come down a bit. They are up and down but they’re not reaching the peaks of a few weeks ago,” he said.

“As a result of the changes in the oil market in the last week, we’re reverting back to the longer two-year trend as we recover from the pandemic. That should mean we see prices recover to the $1.90 to $2.00 mark in the next couple of weeks – for regular unleaded.

“What you’ll see with the premium is that should come off about 20 cents from the mid-$2.40s if the current trend continues.

“Both of those predictions are based on a continuation of the stabilisation of oil prices that we’ve seen in the past seven days.”

McKenzie noted the volatility of the market meant the peaks and troughs of the current price cycle would continue – albeit in smaller fluctuations than recent weeks.

While the Russain-Ukraine unfolds, threatening to increase prices, new COVID-19 outbreaks in China stand to create downward pressure as parts of the world’s most populous nation go into lockdown.

McKenzie recommended consumers to maintain their regular patterns of purchasing fuel, as trying to predict the best time to buy was near-impossible.

“What I’m personally doing at the moment is I’m buying what I need,” he said.

“There’s no real sense in rushing in to buy, nor is there any sense in holding off; I think the sense would be to maintain your normal patterns because in a period of volatility, the risk of getting it wrong is very high.”

Service stations reporting a lot of “grade downshifting” in recent weeks – whereby motorists who would normally use 98 RON fuel revert to RON 95 or an even lower octane rating in a bid to save money – and as much as a 25 per cent decline in the purchase of non-fuel products at service stations, which today tend resemble a supermarket with their stocked shelves.

It comes as the outgoing chair of the Australian Competition and Consumer Commission (ACCC), Rod Simms, defended retail businesses who had endured a “pile on” from the public over prices. Even federal treasurer Josh Frydenberg has warned businesses against opportunistic price hikes.

“There’s an obvious range of reasons why you have price raises and people trying to find a business scapegoat is giving the public the wrong understanding,” Sims told the Australian Financial Review.

“There’s no doubt that in the petrol market this is 100 per cent due to international factors beyond Australia’s control. It’s focusing the public’s mind on business behaving badly when that is not what we are seeing here.”

McKenzie insisted that service stations were in fact making less profit from higher prices than normal too – a challenge of public opinion.

“Retailers are making less,” he said.

“The truth is that 86 per cent of the price you and I pay at the pump are costs associated with getting the product to the servo. Fourteen per cent is the cost of retailing the product.

“What we’ve seen at the moment, the take (excluding the petrol price cycle) is at 11 per cent, which is below the longer-term product at 15 per cent. That’s expected, because what we’re seeing is the wholesale price increasing at a much faster rate than the retail cost.

“What we’re hoping for as an industry is for the price to continue to stabilise and even fall so that from our perspective we can pass on lower costs to the pump.”

The question remains, will we ever get back to the days of paying $1.50 a litre? McKenzie believes it’s plausible, but again will depend on the oil price.

“The prospect of us getting to the pre-Christmas mark – about $1.60 per litre – certainly isn’t out of the question, but it’s probably not likely to be the next couple of months,” he said.

“But to say we’ll never get there again would be an incorrect assumption as well.”

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