Weak dollar drives fuel prices higher

Weak dollar drives fuel prices to four-year highs


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Petrol prices in the five biggest capital city markets averaged 141.2 cents a litre in 2018-19.

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The annual average retail petrol price in 2018-19 was the highest in real terms in four years, according to the Australian Competition and Consumer Commission.

In the five biggest capital city markets it averaged 141.2 cents a litre.

Despite ongoing oil market tension in the Persian Gulf and oil export price rises in the Middle East, Australia's depreciating dollar proved the big price driver behind a 4.9 per cent lift in major market fuel costs, as the falling Australian-US exchange rate made imports more expensive.

The exchange rate was the lowest annual average $A-$US relationship in the 15 years, according to ACCC chairman, Rod Sims.

The ACCC's latest report on fuel costs shows in the five largest cities, Sydney, Melbourne, Brisbane, Adelaide and Perth, the average annual petrol price last financial year was nearly seven cents/litre above 2017-18.

Brisbane prices were the highest of the large cities.

The exchange rate is a significant determinant of Australia's retail petrol prices because international refined petrol is bought and sold in US dollars in global markets - Rod Sims, Australian Competition and Consumer Commission

The city-country petrol price differential shrank in the June quarter to 1.5c/litre.

Average prices for diesel in the five largest city markets grew notably more than petrol last financial year, rising 14c/litre from 137.8c in 2018-19 to 151.8c/litre, while automotive LPG increased 3.7c to 84.4c/litre.

The ACCC's ongoing specific analysis of regional prices in Darwin and three eastern Australian centres found petrol in Launceston in Tasmania, Armidale in NSW and Cairns in North Queensland were all above the long term competitive cost-base price, after calculating for freight and the size of the local marketplace.

Launceston's June quarter average price was significantly above the long term competitive benchmark, at 156.1c/litre, or 10c above the five capital city prices.

In Armidale the 149.5c average was still above the long term competitive cost-base price, but the difference had reduced slightly during the quarter and the price was 1c lower than the big state capitals, while at 149.5, Cairns was 4.2c higher than the five capitals.

In nominal terms (prices not adjusted for inflation) the national petrol price was the highest annual average price in five years.

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However, the ACCC's report noted in the first half of 2019 there were periods when prices in Darwin and Canberra were below prices in the five big cities.

Monthly average retail prices in Darwin were lower between February and May 2019, and monthly average retail prices in Canberra were lower in both April and May 2019.

"The most significant contributor to cost was the US6c decline in the Australian dollar to US72c," said Mr Sims.

Rod Sims

Rod Sims

"The Australian-US exchange rate is a significant determinant of Australia's retail petrol prices because international refined petrol is bought and sold in US dollars in global markets."

However, by the final quarter of 2018-19 the principal driver was rising international crude oil and refined petrol prices.

These prices continue to be influenced by the agreements made since late-2016 by the Organisation of Petroleum Exporting Countries (OPEC) cartel, and some other crude oil producing countries, including Russia, to cut production.

Meanwhile, a significant development in the petrol industry in the first half of 2019 had seen changes at both Coles Express and Woolworths service stations.

Early this year Viva Energy signed up to pay $137m, renewing its fuel partnership with Coles and gaining the right to set fuel prices.

The ACCC said compared with market average prices, Coles Express prices were lower in most capital cities after Viva Energy began setting prices.

However, they remained above the market average price in all eight capital cities.

At Woolworths, prices were higher in most capital cities after EG Group took over the retail sites, although in the majority of cities, prices were still below the market average price.

"The ACCC will monitor prices at these retail sites very closely," Mr Sims said.

He said it was important for motorists to shop around for cheap fuel by using the available fuel price websites and apps.

Retail petrol prices in the three smaller capital cities; Canberra, Hobart and Darwin, are typically higher than prices in the five largest cities.

"The reduction in prices in the Darwin and Canberra is good news for motorists in those locations," Mr Sims said.

It was the first time since April 2012 that monthly average prices in Canberra were below the average price in the five largest cities

The lower prices in Canberra may have been influenced by the possibility of greater regulation of the petroleum industry arising from the current ACT Legislative Assembly petrol inquiry. The situation in Canberra was similar to Darwin in 2015, when a decrease in petrol prices coincided with increased local scrutiny of petrol prices by the NT Government.

In the June quarter, average retail petrol prices across the five largest cities were 145.3c/litre, up 15c from the three months to March.

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