[CommSec Research]Motorists rescued by high Aussie dollar

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Important Information The summary and attached report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. In the case of certain securities Commonwealth Bank of Australia is or may be the only market maker. Motorists rescued by high Aussie dollar Weekly petrol prices According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.5 cents per litre to 144.6 cents a litre in the week to May 1 – equalling the highest level in 30 months. If the Aussie dollar had remained at parity with the greenback as it was at the start of 2011, Aussie motorists would now be paying more than 11 cents more per litre for petrol, thus forking out around an extra $8 to fill up the car with petrol. Global oil prices continued to rise over the past week. In Australia the terminal gate (wholesale) price hit fresh 30-month highs. Despite the strong Aussie dollar, local pump prices look set to lift by 1-2 cents a litre over the coming week and by 3-5 cents a litre over the next 2-3 weeks. What does it all mean? Exporters and investors may not like our soaring currency, but the Aussie dollar is clearly the motorist’s friend. If the Aussie dollar had remained at parity with the greenback as it was at the start of the year, then motorists would be paying more than 11 cents more per litre to fill up the car with petrol. The bad news is that the Aussie dollar can only do so much to protect Aussie motorists. The global oil price continues to soar in response to stronger Asian demand and geopolitical jitters in North Africa and the Middle East. Over the past week alone, the Singapore gasoline price rose by over $5 a barrel in local currency terms, translating to around 5 cents more per litre. The local petrol price will keep ticking higher in the short-term, keeping consumers cautious about their spending habits and enticing them to scour for bargains. Retailers will remain under pressure in this environment. Spare a thought for those motorists that have to fill up with diesel, rather than unleaded petrol. Over the past three months the diesel price has risen by 18 cents a litre while unleaded fuel has gone up by around 10 cents a litre. What do the figures show? Petrol prices: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.5 cents a litre to 144.6 cents a litre in the week to May 1. The metropolitan price rose by 0.6 c/l to 144.0 c/l, while the regional average price rose by 0.1 c/l to 145.6 c/l. Average petrol prices across states over the past week were: Sydney (up 0.5 cents to 145.4 c/l), Melbourne (unchanged at 143.1 c/l), Brisbane (down 2.7 cents to 144.9 c/l), Adelaide (up 0.8 cents to 138.1 c/l), Perth (up 0.4 cents to 144.8 c/l), Darwin (up 1.2 cents to 150.7 c/l), Canberra (down 0.7 cents to 145.6 c/l) and Hobart (up 0.6 cents to 149.8 c/l). The national average wholesale (terminal gate) rose to a fresh 30-month high of 137.6 cents a litre today, up by 0.9 cents a litre over the past week. Last week, the key Singapore unleaded petrol price rose by US$7.11 (5.4 per cent) to US$138.35 a barrel. In Australian dollar terms the Singapore gasoline price rose by a $5.06 (4.2 per cent) over the week to $126.93 a barrel. What is the importance of the economic data? Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum. National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. What are the implications for interest rates and investors? The Reserve Bank will have to ‘look through’ the higher petrol price as it is doing with fruit and vegetable prices. In short, there is nothing the Reserve Bank can do about rising world oil prices. But while higher petrol prices boost inflation, they also take dollars out of consumer pockets, entrenching the discounting mentality of retailers. We don’t expect the Reserve Bank to lift rates until later in the year. The RBA must disentangle a variety of influences such as retailer discounting, a stronger currency, flood-induced increases in food prices and higher world oil prices. At present, underlying inflation is under control at the bottom-end of the RBA 2-3 per cent target zone.
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