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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Monday, 15 August 2016

Sydney petrol prices at 11 year low

Fuel prices falling

This seems significant.

The Australian Institute of Petroleum (AIP) has previously reported in its annual data that petrol prices have declined significantly over the past two financial years.

The below chart is for the average unleaded petrol retail price by financial year (cents per litre).

Nationally the average price of unleaded fuel fell from 152.5 cents in financial year 2014 to 123.2 cents in financial year 2016, a decline of more than 19 per cent. 

Commsec reported today that this week the weekly average unleaded petrol price has continued to slide, down 3.2 cents to just 111.2 cents.

The price tends to be higher in Tasmania and the Northern Territory, due to their respective locations. 

Meanwhile, Sydney's average fuel price fell to just 95.7 cents, with the weekly average price at an 11 year low of just 100.5 cents.

Diesel prices have also fallen substantially, down by more than 23 per cent over the last two financial years.

Double-edged sword

Low oil prices are a double-edged sword for Australia.

Lower oil prices are good for consumers but a negative for LNG prices - our exports are produced under long term contracts, which are broadly linked to the price of oil.

This is particularly important given that more than $200 billion has been invested in Australian LNG projects over the past decade, with a massive ramp up in production now to follow over the next five years, which will in turn be a significant boost both real and nominal GDP growth.

Indeed, LNG exports are forecast to triple between 2015 and 2021. 

So weaker oil prices would not be good for income, were they to persist. 

On the other hand, motorists and consumers do benefit from low petrol prices, as petrol is the single largest weekly purchase for most families. 

In fact, over the past year mototists are saving up to $40 per month on average according to Commsec. 

This represents a substantial boost for household budgets.

Furthermore, lower fuel prices will act as a drag on inflation - and not only in Australia, but globally - potentially pulling down the rate of inflation further below the target range (which in turn should keep interest rates lower).