Petrol prices are up. As predicted by CommSec, the national average retail petrol price rose by 3.1 cents to 146 cents a litre in the past week – the highest since late October 2011. The ending of the discounting cycle in Melbourne and Adelaide served to push the national price higher over the week.
Prices will rise further. The retail price has lifted 3.8 cents a litre from recent lows while the wholesale price has increased by around five cents a litre. As a result, CommSec tips a one to two cent rise in pump prices over the next fortnight. Asian regional prices also continue to creep higher, putting upward pressure on domestic pump prices.
What does it all mean?
Prices at the petrol pump will continue to creep higher over the next week or so, adding to pressure on consumer finances and spelling further problems for retailers. The national average petrol price is within sight of the highest levels seen in almost 3.5 years.
The average Australian household is forking out around $175 a month to fill up the car with fuel, around $7 more than at the start of the year. But clearly it could have been far worse for motorists had the Aussie dollar remained near parity with the greenback as it was late last year. Had it not been for the stronger currency, motorists would be paying around 10 cents more per litre for fuel.
Petrol is the single biggest weekly purchase for most households and as such it plays an important role in directing spending, especially on discretionary purchases.
What are the implications for interest rates and investors?
The Reserve Bank will keep a close eye on the price of petrol. Not only does it have a major impact on consumer spending, it also is a key factor in inflation calculations. Generally inflation pressures are contained, so the Reserve Bank will ‘look through’ the inflationary impact of higher petrol prices. The Bank is more likely to focus on the influence of higher petrol prices in constraining consumer spending.