Over the past few months, petrol prices in Australia have fallen to record lows. Some motorists have been paying as little as 99 cents per litre; a price not seen in this country in more than half a decade. So what’s causing petrol prices to plummet so dramatically? We take a look at where the situation currently stands, along with some ways it could save you money beyond the bowser.
Picture: Getty Images/Scott Barbour
Why prices have fallen
Naturally, the sharp drop in the cost of petrol at the bowser is linked to the price of crude oil globally. Over the past six months, prices have fallen from around $US100 per barrel to below $US50.
This is due to a range of industry factors, including a sharp increase in US oil production, stable supply chains in the middle east and lighter demand from formerly large importers due to their struggling economies. In addition to this, the Petroleum Exporting Countries (OPEC) which make up several of the world’s largest oil-producing nations has instigated a price war in a bid to recover market share. This has caused a glut of available oil, with supply essentially outstripping demand.
While this has caused havoc for fuel exporters, ordinary consumers have been enjoying cheaper petrol prices worldwide; including Australia. According to the Australia Institute of Petroleum, the 2014 national average retail petrol price was 149 cents a litre. Now it’s 114 cents, a fall of around 25 per cent. This is the reason petrol prices have been so pleasantly cheap.
How much are Australians actually saving?
According to data released by Deutsche Bank, Australian households will be almost $7 billion better off in 2015 if petrol prices stay this low. For individual motorists, this works out to a saving of around $19 per week, based on an average weekly fuel expenditure of $62.
This is a decent amount of extra disposable income to be carrying around in your pocket – about $1000 over the year, in fact. Of course, this is entirely dependent on fuel prices staying where they are.
How long is it going to last?
Unfortunately, the latest terminal gate prices supplied by the Australia Institute of Petroleum shows that petrol prices have been creeping upward since the beginning of February. For example, the average price in Sydney has risen from 107.8 cents on February 5 to 114.1 cents on February 11. Similar price-hikes have occurred across each state and territory.
With that said, this is still considerably cheaper than the average price throughout 2014. Most industry experts agree that while the cheapest prices are now behind us, the climb upwards will happen more slowly and gradually than is typical.
The aforementioned price war instigated by the OPEC isn’t expected to go away anytime soon. As reported elsewhere, most OPEC nations are capable of sustaining sizable deficits for at least the next five years, which means they can continue to short-sell oil without ruining their economies. If oil production continues at its current rate, prices will take a lot longer to bounce back to their previous levels.
Mind you, the price we pay for petrol in the future will also depend on the performance of the Australian dollar. Refined petrol on the world market is priced in US dollars: this means the price of imported petrol rises whenever the Australian dollar drops in value against the US dollar.
How you can save beyond the bowser
The obvious advantage of cheap petrol prices is more money in your pocket to spend elsewhere. But it could also result in cheaper prices for a range of consumer goods due to cheaper transportation costs and a boost in retail spending. Airfares could also receive a price drop (indeed, I’ve been seeing more and more specials pop up on OzBargain in recent months; a trend no doubt buoyed by lower fuel costs.)
On the other hand, Deutsche Bank cautioned in a note to clients that the price of petrol may not be a driver of growth in retail trade.
“Our economists believe the reason for the lack of improvement in sentiment is because petrol price declines have been more than offset by other factors.”
Whatever the future holds, the best way to get cheap petrol prices is to do your research and fill up during one of the regular troughs. This guide contains plenty of tips to ensure you always pay the lowest amount possible at the bowser — even when prices are sky-high.
Comments
13 responses to “Why Petrol Prices Have Fallen (And How That Saves Money Elsewhere)”
Oh, I see how it is. Canberra just doesn’t exist according to the table/infographic. We didn’t want to appear there anyways.
…no we’re fine.
When I went back to canberra for Christmas I filled up before leaving melbourne at 112.7 then filled up at canberra for 147.9 hell even gundagai was cheaper 136.5
So much information has not being given in this article.
For example, the US and middle eastern nations driving down prices globally on purpose….. why are they doing this? Hello Russia!
Also, should be more info on regional AUS. For example, I drove from Sydney to Newcastle a few weeks ago. Sydney, most prices for E10 were around 99 cent mark. Got to Newcastle (hardly regional I know) and average prices there were still $1.19 to 1.29. I was up there a week and the price didnt move from that higher price all week long.
Even in Western Sydney it’s gone up to $1.20 for 91
Yep. Same in Brisbane.
About 2 weeks ago you could get normal unleaded for 98c, it’s back up to $1.20 now.
I was hoping the fall would last a little longer :S
And it quite literally went up by 20 cents overnight. One day it was 98/99, the next day it was 1.19.
But yeah the whole thing with US and Saudis working together to bring the oil prices down in a bid to kill Russia’s economy (cause they want Putin gone) wasn’t mentioned anywhere. Once they get what they want they’ll need to recoup their losses which likely means the price will skyrocket to around $2 a litre.
exactly right.
its very easy to get political. Chris almost certainly avoided the politics, which is a smart move.
There’s a lot of difference between ignorance and avoiding unnecessary.
Good job Chris!
Each to their own, but I disagree. Politics plays a big part in this volatility. By better understanding politics, we become a more informed community. It doesn’t mean you take sides – it means showing the statements/actions of each stakeholder.
Very well said. The actions of some of the oil producing nations to drive down costs per barrel was politically motivated but also intrinsically linked to the entire context of this article. It is poor reporting to not include one of the biggest factors driving down crude oil prices.
if you have lived in a regional area ( ie anywhere outside of a capital citys area) you would know that we havent had prices this low in OVER a decade, id go as far as to say that prices havent been this low since 2000
Here in Adelaide, the prices have a wide variance still. The servo at the end of my street (Caltex) is 96.7c/L with 8c/L off if you have a voucher. Meanwhile, my colleague filled up at his place today at 114.9c/L
Even though petrol prices seem to be moving downwards, it’s such a volatile commodity affected by so many factors. I don’t foresee that prices will stay low for very long.