More petrol price increases on the way but fuel retailer body says long-term price will be tempered
The price of premium petrol in some Australian cities has already surged past $2 per litre, in part as a result of the ongoing Russian-Ukraine conflict.
But in better news for Aussie motorists, speculation that petrol prices could eventually reach $3 per litre have been rubbished by the country’s peak petroleum retailer body.
The Australasian Convenience and Petroleum Marketers Association (ACPMA) expects the price of unleaded petrol to move past 200 cents per litre in the coming weeks, with peaks at around 218 cents – up from the current mark of between 177-190cpl.
The price of wholesale Tapis and Brent Crude oil – the general instrument of the price paid at the bowser locally – recently increased by about 12 per cent in the first four days of March to approximately $US116 per barrel.
ACPMA chief executive Mark McKenzie expects the bowser price to increase moderately in the next two to three weeks as a result, reflecting the typical ‘lag’ period for global events to impact consumers.
“You’ll probably see unleaded prices up where premium unleaded prices are at the moment, at around $2.17 or $2.18 per litre – meaning prices will climb about 15c to 20c per litre,” he said.
McKenzie is adamant that global governments will intervene before the price of fuel escalates much beyond the $2 mark in Australia, moving to allay fears over the long-term price of fuel.
“The $3 per litre price is ludicrous – I think that’s people just trying to gain a headline,” he said.
“Anything is possible but the Australian-US dollar rate would have to fall through the floor, the war would have to significantly escalate and we would need to have another significant COVID-19 outbreak.
“This is all about supply and demand balance. What will likely happen here is that Australia recently joined 30 other countries as part of the International Energy Alliance (IEA).
“If the Organisation of the Petroleum Exporting Countries (OPEC) doesn’t ramp up production, the IEA will likely use 60 million barrels of their own reserves and that will lower the price.”
McKenzie said the only certainty with fuel prices at the moment was volatility, as the market closely scrutinises world events and the ongoing coronavirus pandemic with almost daily movements.
“The movement at the moment is due to the oil price increase, which has happened over a fairly long trajectory as part of a fairly long recovery from COVID-19,” he explained.
“If you cast your mind back to April 2020, fuel was remarkably cheap because no-one was travelling, no-one was flying or driving, and demand collapsed. From April 2020 to October 2021, we saw a 96 per cent increase in the price of wholesale fuel.
“Because you can’t turn a refinery on and off like a light bulb, you have to predict what you think the demand is going to look like in the future and gear up for that. The industry got it wrong pretty consistently around the world, so it might prices began to rise above where you would expect the balance point to be.”
A minor price decrease during November and December has been reversed most recently by the Russia-Ukraine conflict, according to McKenzie.
Russia is the second-largest producer of oil in the world (behind the US) and the second biggest exporter (behind Saudi Arabia). Sanctions on Russia and fears that it would withhold supply from Europe quickly sent jitters through the market.
“Between mid-December and just before the conflict started, we saw a 20 per cent increase in the wholesale price, all due to the movement of oil (which has climbed 40 per cent),” McKenzie said.
“The second important element of this is the exchange rate. While everyone focuses on the global trading price, which is in US dollars, it is the exchange rate which is key for us.”
One silver lining for Australian motorists is the strengthening Aussie dollar, which has slowly climbed to US74c in recent weeks, helping to keep a lid on the price of oil and, consequently, petrol.
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Keyword: Reports of $3/litre petrol prices in Australia ‘ludicrous’