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.