Analysts are advising motorists to "fuel up", as petrol prices begin climbing again.
It lasted almost one month. For millions of motorists across Australia, the regular visit to the bowser was made a little sweeter in January and early February, with the national average unleaded petrol price dipping below 110.0 cents a litre and threatening to break the mystical one dollar mark for the first time in six years.
The news was particularly uplifting for motorists in Sydney and Melbourne, with average prices dipping to 100.8 cents a litre and 101.8 cents a litre respectively.
However our dream run at the servo is all but over – or at least the thought of paying double figures per litre is.
Analysts have encouraged motorists to "fuel up" where possible, as the different pricing variables work against the consumer and the dreaded weekly "price cycle" resumes at full speed.
According to the Australian Institute of Petroleum, the national average price rose by 4.0 cents to 112.6 cents last week – the first bump in prices in 10 weeks – causing pump prices in capital cities to rise as much as 20 cents. By Wednesday this week, the Terminal Gate or wholesale price in most states rose seven cents to $1.15, meaning the pump price will likely move back above $1.20 next week once the typical week-long pricing delay has passed.
But why are petrol prices so volatile in the first place?
Commsec economist Savanth Sebastian says there are two major factors at play – the Singapore Mogas 95 price (Australia's international benchmark price) and the strength of the Australian dollar.
"What is clear is that petrol price has bottomed and now lifting," Sebastian says. "Not only has the Singapore unleaded price lifted in the past couple of weeks, but the Aussie dollar continues to depreciate – creating a double whammy effect on lifting petrol prices.
"The Singapore unleaded price is now holding at the highest levels for this year, up almost 25 per cent in the past three weeks.
"Meanwhile, the falling currency has also had a huge impact – had the Australian dollar been holding around parity where it was about 18 months ago, we would have effectively been saving ourselves about 25 cents a litre … but instead it is bouncing at around 77 cents US."
Oil – an international industry
The traditional – and easiest – outlet for Australian motorists to vent their frustration over petrol prices is the humble fuel station attendant, but the truth is that oil prices are heavily dictated beyond our shores.
Today Australia imports 70 per cent of petrol from Asia, 16 per cent from the Middle East, 9 per cent from West Africa and 5 per cent from Russia. Add to that list non-importing Australian markets such as the ambitious US industry, and the global drivers of oil prices are numerous and complex.
Furthermore, according to the Australian Institute of Petroleum, the average oil company profit in Australia over the past 10 years has been 1.8 cents per litre of pump fuel sold – once wholesale and retailing costs are considered.
"All the global oil markets are linked, so if you tend to see a huge oil supply production war between the US and what's going on with Organisation of Petroleum Exporting Countries, you do see that it tends to flow through to the Singapore price, which in turn flows through to Australia," Sebastian says.
According to the National Roads and Motorists Association, Australia's increased reliance on overseas petrol, following the closure of refineries such as Caltex's Kurnell plant near Sydney, is also contributing to increasing prices. All petrol sold in NSW is currently imported (with the exception of some areas near state borders), while two refineries in Victoria (in Altona and Geelong) contribute petrol along with imported sources.
"Our reliance on imported petrol has certainly had an impact," National Roads and Motorists Association president Kyle Loades says. "Fourteen years ago Australia was a net exporter of petrol. We are now at the price-setting mercy of oil-producing nations as we import so much petrol."
Equally as volatile is the strength of the Australian dollar, which is dictated by a vast array of drivers that can be tipped by something as innocuous as an interest rate cut.
What about local retailers?
Despite the influence of international pricing drivers, there is still a notable flow-on effect from the way retailers set their prices in Australia.
A major local pricing consideration is the rigorous discounting cycle controlled by the big oil retailers, as well as independent retailers. The cycle can force pump prices to fluctuate as much as 20 cents a litre – sometimes driving the pump price below the wholesale price, sometimes forcing it well above.
However, there is no exact science behind the fluctuation of the cycle.
"The reason as to why there's a pricing cycle is something that even the ACCC (Australian Competition and Consumer Commission) hasn't been able to answer," Sebastian admits.
"In Perth there's no pricing cycle – just a uniform movement in prices relative to the global oil price. But in all other parts of the country with this price cycle, it tends to distort the real movements in the global oil price."
Caltex Australia says that the international benchmark price and taxes (excise and GST) collectively make up 88 per cent of the petrol price paid by motorists, while the remaining 12 per cent covers the cost of transporting, storing and retailing the fuel, including a profit for the retailer.
"Fuel retailers, whether independently operated or one of the more recognised brands, make their own choices about the price of fuel at a given site," communications adviser Sam Collyer says.
"They would all have their individual approaches and business strategies. Where Caltex has responsibility, prices are regularly reviewed to make sure our sites are selling fuel competitively."
In recent weeks, oil retailers have been under intense pressure over their pricing of regional fuel, which has continued to be set well above cheaper metropolitan prices.
Caltex, which supplies one-third of the country's
transport fuel, says oil retailers do not hold back savings to regional consumers – instead pointing to the impact of lower volumes of fuel and convenience products being sold, slower turnover of inventories, the lower number of customers and service stations and the higher transport and storage costs outside metropolitan areas.
"Regional prices have fallen in line with the terminal gate price when taking into account a lag that often occurs (both up and down)," Collyer says.
"For example, in NSW the terminal gate price dropped about 29 cents per litre between 10 November and 20 January.
"Regional NSW prices dropped 25.6 cents per litre over the same period. The terminal gate price then jumped 9 cents per litre, but regional NSW prices still fell another 3.3 cents by February 8."
Why haven't diesel prices fallen as much as petrol?
In many ways, there is no need for oil retailers to discount diesel prices as aggressively as petrol.
With most diesel sold in Australia used for commercial industries such as mining, agriculture and transport, pricing isn't as sensitive as the consumer-driven petrol segment. That's despite diesel outselling petrol at the bowser by 15 per cent, and consumption of diesel rising 36 per cent between 2003 and 2013.
"The diesel market is framed very differently to the unleaded market," Loades says. "Firstly, there is no price cycle in the capital cities for diesel fuel meaning the market is much less competitive.
"Secondly, there is less demand with only 30 per cent of fuel sold to the motoring public being diesel. The rest of imported diesel is sold at contract prices by the agriculture and mining sectors often six months in advance reducing the variability of prices."
Caltex, meanwhile, says that diesel prices have fallen in line with the international benchmark price.
"The terminal gate price for diesel has dropped 20.4 cents per litre in the past three months (November 10, 2014 to February 8, 2015). The national average diesel price has fallen 24.5 cents per litre over the same period," Collyer says.
How do petrol prices affect the car industry?
Anecdotally, visiting the local servo has been a happier experience in recent weeks, however there is still no visible proof of a turnaround in new car sales or in fuel-sensitive markets such as the performance genre as a result of recent price reductions.
The weekly ANZ-Roy Morgan consumer confidence index recently suggested that lower petrol prices hadn't boosted local confidence in any significant manner. That's despite a recent statement from Deutsche Bank that said households had received a $7 billion boost from cheaper petrol.
"That's equivalent to more than 50 basis points of interest rate cuts, or roughly 2 per cent of retail trade and one-third the size of the Rudd government stimulus payments," the bank said.
But Deutsche conceded that Australians were unlikely to spend the extra money on big-ticket items as consumer confidence remained stubbornly weak and the estimated $15 benefit per family per week was too small.
By the same token, the temporary fall in petrol prices hasn't affected car manufacturers' increasing investment in fuel efficient technology. As the industry succumbs to tightening emission and fuel restrictions internationally, fluctuating petrol prices have had little bearing on upcoming models.
BMW is among the leading car companies investing in hybrid and electric technology, with new models such as a plug-in hybrid X5 SUV due to grace Australian showrooms this year. BMW board member for marketing and sales, Ian Robertson, says a momentary lapse in petrol prices isn't a catalyst of car companies to halt their green technology investments.
"You should not be distracted from a strategic direction as an industry and where we as a company are going by an oil price that no one expected, even a couple of months ago, and no one can tell me it's not going to move in another direction over a period of time," he says.
"We have to separate what might happen with the oil price at a particular time with the strategic direction of where we are going as a company, and where all of the legislation is going as an industry.
"From that point of view, yes there might be a buyer who decides to change their mind on something, but at the end of the day we know the miles per gallon has to improve, we know the CO2 has to come down and we know that zero emissions are going to play an increasing role in the industry, and that's not about to change."
What will happen to petrol prices in the coming weeks?
The immediate outlook for Australian motorists is both good or bad, depending on perspective.
Commsec analysts believe that the national average unleaded price will continue to hover around recent levels in the short term, reflecting an international benchmark Brent crude oil price of between $50 and $60 US per barrel. While those price points aren't as favourable as January prices, they're still a far cry from the peak national average of 163.4 cents in July 2008 – a figure that was pushed towards $2 a litre once the pricing cycle took effect.
Plenty of good can also be taken from the long-term outlook, too, though there are no guarantees.
"At the moment if you look at that global perspective, the world is well supplied with oil," Sebastian says.
"You look at US oil inventories, they're holding something like 430 billion barrels of oil, which is the highest reading they've had on record, as of last week.
"The recent shale oil spike in the US is a big find, and will mean the global oil pressure will certainly remain. It's going to be a long time before we see it getting back to $100 a barrel.
"As a result of that, paying between $1.10 and $1.30 a litre will probably be what we see for fuel for some time."
Happier times at the bowser: how much you've saved during the recent petrol reprieve
2015 HSV Senator
Claimed fuel consumption: 12.9L/100km combined
Annual fuel bill at $1.60 a litre - $3096.5
Annual fuel bill at $1 a litre - $1935