Pain at the pump as fuel prices soar again

Petrol prices back above $2 a litre is the latest financial blow to families struggling to manage their budgets, as analysts warned there was little relief in sight for motorists.

Climbing global oil prices, a weak Australian dollar and widening refining margins have sent the average weekly unleaded fuel price up 30c over the past two months to $2.02 a litre. Picture: Brett Costello

Petrol prices have jumped back above $2 a litre and are near the punishing peaks of last year, the latest financial blow to families struggling to manage budgets amid a once-in-a-generation cost-of-living crunch.

Climbing global oil prices, a weak Australian dollar and widening refining margins have sent the average weekly unleaded fuel price up 30c over the past two months to $2.02/litre, the Australian Institute of Petroleum says.

Prices were even higher in Sydney, where motorists were paying more than $2.20/litre for unleaded fuel in Parramatta on Tuesday, according to Motormouth, and an average of $2.15 across the city.

Fuel was more reasonable in Brisbane, where a litre of unleaded cost $2.05 on average, and in Melbourne, at $1.96/litre. Perth drivers were paying $1.89.

Analysts say there is little relief in sight, with high fuel bills likely to extend into Christmas and 2024 after Saudi Arabia on Tuesday night roiled global energy markets with a decision to extend sizeable oil supply cuts until the end of the year.

Brent crude, the international oil benchmark, pushed above $US92 a barrel, its highest since November, as supply cuts by the Saudi-led global cartel OPEC were projected to create the tightest market in a decade.

CBA commodity analyst Vivek Dhar said “oil markets have to consider whether $US100 a barrel is a possibility given the extended Saudi supply cuts, and it’s likely to stay in the 90s for a while yet”.

The Aussie dollar has dropped US5c since July to recently trade around US64c, and Mr Dhar said further weakness in the currency, potentially as the iron ore price pulled back from its recent highs, would “add to the pressure point for petrol” over coming months.

AMP chief economist Shane Oliver said based on a typical family using 35 litres of petrol a week, a price of just over $2 suggested an average weekly household fuel bill of $70.60 – up nearly $10 from two months earlier.

With consumption growth grinding to a halt in the three months to June, Dr Oliver said the extra $10 would act as a “tax on spending”.

Households would feel the extra impost even more than last year, when Russia’s invasion of Ukraine sent the average petrol price as high as $2.12 in March and July 2022, he said.

“A year ago, people wore it (higher petrol prices). They didn’t like it, but it was a time of reopening after the pandemic lockdowns, and people had big savings buffers. This time, household finances are in far worse shape after multiple rate hikes and with the reopening boom behind us.”

Reflecting the essential nature of fuel costs, the 9 per cent jump in petrol prices in August drove a nearly 10 per cent increase in spending at service stations in the month, according to the CBA’s latest household spending insights report.

Dr Oliver estimated higher fuel prices would add 0.2 percentage points to inflation through the September quarter.

This could complicate Reserve Bank efforts to bring consumer price growth under control without the need for further hikes, he said, although the RBA would likely balance higher fuel prices against the drag on spending they caused.

Dr Oliver said the impact on fuel bills from the recent jump in oil prices had been turbocharged by widening refinery margins: “If it wasn’t for refinery margins, the petrol price wouldn’t be anywhere near last year’s highs.”