Petrol prices in Sydney have spiked to record highs as service stations look to maintain profits during lockdowns across New South Wales.
Sydney’s average bowser prices rose 6.7 per cent to 166.5 cents per litre last week, Australian Institute of Petroleum data revealed on Monday.
It was the highest weekly average price since the days of the Global Financial Crisis in June 2008 – and experts fear the only way is up.
CommSec economist Ryan Felsman said petrol is a “strange market” in Sydney right now as service stations defend their profits from Delta.
He said retailers in more affluent suburbs across Sydney’s east and the Northern Beaches were keeping prices higher amid falling demand.
That’s largely offsetting falling prices in other areas of the city as motorists stay home instead of hitting the roads for work and leisure.
“Servos are leaving their prices quite elevated,” Mr Felsman told TND.
“There’s been an extended period where we’ve seen the difference between the retail and the wholesale price as significant.”
The gap between the wholesale petrol price and the bowser was almost 30 cents a litre last week, Mr Felsman said in a note to clients.
Wholesale prices were about 135.9 cents per litre on Monday, he said.
But Sydney bowser prices were as high as 177.9 cents per litre in some parts of Sydney on Monday, according to MotorMouth data.
Global oil demand rising
The price rises will be surprising to some, because during lockdowns last year, bowser rates fell dramatically as stay-at-home orders reduced demand.
But Mr Felsman said retailers face higher wholesale prices this time around, as global oil demand is rising because larger nations like the United States have reopened their economies.
The US is largely vaccinated now and its citizens are hitting the roads.
“Greater mobility has translated into stronger demand,” he said.
“We’re going to see lifting international oil prices.”
Although most of Australia is in lockdown, we don’t produce our own oil and so falling demand locally does not translate to lower bowser prices.
The benchmark Singapore gasoline price that feeds into Australian cars rose by 4.6 per cent last week to $111.01 a barrel, which was a two-month high.
Australia is a unique market because our major cities operate on pricing cycles in which bowser rates spike and then fall routinely.
The trend line for prices in Australia has risen since January, though, as wholesale prices have increased, which means higher peaks and troughs.
Petrol prices to rise further
Worryingly, Mr Felsman said bowser prices will likely rise further in the coming weeks as wholesale prices paid by retailers continue to rise.
International supply disruptions drove up global oil prices by 11.5 per cent last week to $US72.70 ($99.50).
One contributing factor was the shutting down of US oilfields due to Hurricane Ida, which has reduced oil output in the Gulf of Mexico by 91 per cent.
Oil-producing nations in the OPEC+ cartel are also maintaining caps on supply, which reduces the amount of oil coming from the Middle East.
Hopefully those supply disruptions won’t last, limiting the hip pocket pain for motorists.
The good news is that petrol prices in Brisbane and Melbourne are falling right now as service stations in each city come off their latest price peaks.
That tells us motorists in those cities should fill up their tanks, because prices will begin rising again in a few weeks as the next cycle kicks off.
Prices have also now peaked in Sydney, but because bowser rates are likely to fall slower than in previous cycles, motorists will have to wait longer to reap the biggest discounts.