A preliminary deal to slash oil production by 14 of the world’s biggest producers is looking shaky, which means Australian petrol may continue to get cheaper.
In September, the Organisation of the Petroleum Exporting Countries (OPEC) agreed in principle to curb output, but set November 30 as the deadline for a final deal.
Ahead of the meeting in Vienna (9pm AEDT Wednesday), OPEC officials have tried, and failed, to rescue the deal, a source told Reuters on Tuesday.
Its chance of success plummeted after Iraqi, Iranian and Saudi Arabian politicians recently signalled their reluctance to agree to the deal.
“Obviously from the motorists’ perspective, the hope is that OPEC arguing among themselves will continue,” National Roads and Motorists’ Association (NRMA) spokesman Peter Khoury told The New Daily.
“If a deal to cut production is passed, then obviously the flow-on effect will be more expensive prices here at home. However, they have not had much success at getting to that deal for the last 12 months.”
Australia’s competition regulator, the ACCC, confirmed this week that the oil glut has benefitted motorists.
Unleaded petrol sold for an average of 114.2 cents per litre in the capital cities between July and September, down 14 per cent from the same time last year, the ACCC reported.
Petrol prices: five major cities
“International factors continue to strongly influence the price at the bowser. A drop in refiner margins in the last quarter has helped to push prices down locally,” ACCC chairman Rod Sims said in a statement.
“Australian motorists have benefited as prices have fallen, which will be especially welcome as we move into the busy holiday period.”
Of the capitals, Adelaide had the cheapest fuel (113.1 cents) and Brisbane the priciest (115.2 cents), with Sydney, Melbourne and Perth all close to 114 cents over the three-month period, according to the ACCC.
Why the OPEC glut is helping us
OPEC is a permanent council (often called a “cartel”) made up of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, Angola, Ecuador, Gabon, Indonesia, Libya, Nigeria, Qatar and the United Arab Emirates.
These nations, which supply about 40 per cent of the world’s oil, have been oversupplying the market for more than two years, in an effort to drive their main competitors (US shale oil and gas producers) out of business.
As a result, their economies have been suffering from glut-induced low oil prices, especially Venezuela and Nigeria, which explains the willingness of some to back the preliminary deal.
About 50 per cent of the Australian pump price is determined by the Singaporean price of unleaded petrol (MOPS95 Petrol), which in turn is influenced by crude oil, as reported by the ACCC.
The rest of the price reflects taxes, which the ACCC estimated at 44 per cent of the retail price in its latest report, as well as shipping costs, insurance premiums and profit margins.
Fuel price analyst Alan Cadd told The New Daily last year that the “rough rule of thumb” is that a dollar change in the barrel price of US crude oil (driven lower by the OPEC glut) will eventually impact the pump price by one cent a litre.
Changes in the Singaporean benchmark usually take about two weeks to be reflected in Australian cities, and longer for regional areas, according to the ACCC.
How to get an even better deal
- The ACCC advised motorists to “shop around” by using the FuelCheck website for NSW motorists, and mobile applications such as those offered by the NRMA, Motormouth and GasBuddy;
The ACCC report also revealed that premium fuel accounted for 54 per cent of petrol sales in Sydney, and 23 per cent in other states. The NRMA spokesman said there was no need to buy premium unless you’re driving a high-performance vehicle or a vehicle built before 1986.