The ongoing surge in petrol prices is causing significant concerns for businesses and households across Australia, with Sea Legs Brewery’s general manager, Declan Roche, highlighting the increasing costs of delivering their beer to customers in Brisbane.
Over the past fortnight, petrol prices have soared to more than $2 a litre in various parts of Australia, straining the budgets of consumers and adding to inflationary pressures. This surge has raised speculation about the Reserve Bank potentially raising interest rates once again.
Initially, when petrol prices spiked last year in the wake of the conflict in Ukraine, many believed the surge would be temporary. However, the sustained high prices, coupled with surges in electricity and gas prices, are now affecting companies like Sea Legs, which operates under the Story Bridge in Brisbane’s CBD.
Roche explained that while a third-party operator handles most of their beer deliveries, they have seen a 30 percent increase in supplier costs over the past year, including the cost of petrol for their sales team.
“The price of everything has just gone through the roof,” Roche stated, adding, “We now try to pick up our supplies ourselves rather than having them delivered.”
According to the weekly report by the National Roads and Motorists’ Association (NRMA), the average price for regular unleaded fuel in Sydney stood at $1.95 per litre this week, with expectations of it falling to $1.90 per litre next week. In Sydney, the average diesel price hovers around $2.15 per litre. Meanwhile, Fuel Price Australia reported that average unleaded prices have exceeded $2 a litre in several capital cities, including Brisbane, Perth, and Canberra.
High petrol prices continue to exert inflationary pressure, though perhaps not as intensely as last year when economic growth was more robust. AMP’s chief economist, Shane Oliver, noted, “At this stage, we’re running at around $2.20 a litre, and that’s where we were a year ago.” He added that production cutbacks and expanding refining margins were contributing factors to the high petrol prices.
Global oil prices, despite hitting 10-month highs recently, experienced a slight decline. Benchmark Brent crude futures were down 0.5 percent to $US89.41 a barrel, while lighter-grade US WTI oil futures dipped 0.7 percent to $US86.28 a barrel. The retreat in oil prices followed risk-off movements in the US, including weaker equity markets and declines in US 10-year treasury yields.
However, the selling in oil was offset by stronger-than-expected trade data from China, revealing a 21 percent increase in crude imports in August compared to July. Total crude imports for the year to date are up 14.7 percent compared to 2022, reflecting China’s robust recovery from COVID-19 lockdowns.
Unfortunately, the outlook for petrol prices in Australia for the remainder of the year appears bleak. The Australian Institute of Petroleum reported a 5.4 percent increase in petrol prices to $1.79, which is expected to add 0.2 percentage points to headline inflation.
The recent decision by Saudi Arabia and Russia to extend supply cuts by 1 million and 300,000 barrels a day, respectively, until the end of 2023, pushed Brent crude prices above $90 a barrel, further tightening the global crude market.
This continued surge in petrol prices presents a challenge for Prime Minister Anthony Albanese and Treasurer Jim Chalmers, who are already grappling with a cost of living crisis. Commonwealth Bank economist Belinda Allen warned that rising petrol prices could put upward pressure on consumer price inflation data, potentially impacting retail sales in the month.
As Australians brace themselves for more financial strain due to the escalating petrol costs, the impact on businesses and households remains a matter of concern, with a watchful eye on any potential further interest rate hikes by the Reserve Bank.