A “historic” deal struck by 25 global oil producers is likely to worsen the pain for Australian motorists, a fuel price expert has warned.
News reached the world on Monday that OPEC and non-OPEC producers had agreed over the weekend to jointly cut production – an act of solidarity that had not occurred since 2001.
Saudi energy minister Khalid al-Falih told reporters it was an “historic” deal that “prepares us for long-term cooperation”.
The price of crude oil skyrocketed, as markets priced-in expectations that the two-year glut of supply would abate.
Sydney petrol prices had already risen by about four cents a litre since an earlier deal by OPEC alone, and will likely rise a further two to three cents in coming weeks because of the joint cut, National Roads and Motorists’ Association (NRMA) spokesman Peter Khoury told The New Daily.
This would bring Sydney to about 120 cents per litre, thankfully nowhere near the 2014 high of 150 cents. And motorists may get some holiday relief.
“We’re hoping that will get passed on after Christmas.”
Prices may fall over the holiday long weekend, but then start to rise again in Sydney between Christmas and New Year, Mr Khoury said. The rise may hurt motorists in other capital cities as well, depending on local cycles.
About 50 per cent of the petrol price paid by Australian motorists 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 remainder reflects government taxes (about 45 per cent), the costs and profit margins of local sellers, the exchange rate, and other factors.
Russia was crucial to the new deal. Earlier this month, the 13 members of OPEC agreed to cut production, but to affect global prices the organisation needed outside help.
“Today’s deal will speed up the oil market stabilisation, reduce volatility, attract new investments,” Russian energy minister Alexander Novak told reporters.
Fifteen years ago, Russia failed to deliver on promises of cuts, but the devastation that low prices have wrought on the oil-dependent economies of Nigeria, Libya and Venezuela are thought to be a powerful motivator for compliance.
OPEC’s initial deal was to reduce output by 1.2 million barrels from January 1 next year. A further 558,000 barrels will be cut by Russia, Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan, if the second agreement holds.
In its most recent fuel price report, Australia’s competition regulator, the ACCC, confirmed 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.
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.
Many country towns continued to suffer prices higher than the capital city average, the report found.
Petrol prices: five major cities
How to get an even better deal
The ACCC report 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 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 has told motorists there is no need to buy premium unless you’re driving a high-performance vehicle or a vehicle built before 1986.