The imminent ending of the temporary cut to fuel excise comes with global oil prices well below the level they were on March 29, when former Treasurer Josh Frydenberg confirmed the cut in his final budget.
The 22.5 cent cut in the excise in budget will become a rise of 25.3 cents (because of indexation and the federal Government is keeping that little bonus) when the excise rate is made whole again on September 29.
You’d think that all the experts who have been issuing clarion calls warning about the dangers of high oil and petrol prices – and it’s true they have had a big impact on inflation and forced drivers to cut their petrol purchases – would be making just as much if not more noise cheering them on the way down.
But nope, nothing but the sound of crickets on that front.
Thursday US West Texas Intermediate crude (WTI) fell more than 5% at one stake to settle at $US81.94 – that’s a level not seen since January and six weeks before the Russian invasion of Ukraine sent prices rushing to decade or more highs.
The price of Brent the global marker crude fell as well to settle at $US88 a barrel.
On March 29, WTI was trading at $US109.45 (after hitting a peak of $US119.31 earlier in the month) and Brent was at $US115.56 after hitting a peak of $US122.82.
Since the March 29 budget and the temporary cut in excise, the price of crude has fallen by 24% to 25%, depending on the crude type.
The surge in oil prices (and gas for that matter) has seen windfall profits for the likes of refiners, Ampol and Viva and exporters like Woodside and Santos, as well as Beach Energy. But for how long?
The weakness on Wednesday and Thursday in turn had a mixed impact on the ASX yesterday — Woodside Energy was hit hardest with a loss of 5.5% to $US32.10, taking losses in the last three sessions to more than $3 since closing at $35.17 on Monday after announcing two big LNG deals.
Beach Energy shares lost 1.2% to $1.65 but shares in Santos only slipped half a per cent to $7.777 because it is seen as more of a gas company and LNG prices are remaining high for the time being.
But while petrol prices have fallen in line with the drop in global prices, there’s less of a fuss being made about that ‘good’ news as there was about the ‘bad’ news of the sharp rise.
The ACCC said in its latest report on petrol pricing that June quarter average retail petrol prices in the five largest capital cities were 188 cents a litre (cpl), up by 6.1 cpl from the March quarter. This was the sixth consecutive quarter in which prices increased.
“In real terms, prices in the June quarter were the highest since the September quarter in 2008 (when average prices in 2021-22 dollars were 206.9 cpl),” the Commission explained.
But July saw retail prices fall by around 35 cents a litre as international crude oil and refined petrol prices dropped due to an increase in supply from oil stockpiles, lockdowns in parts of China and a worsening global economic outlook.
“Motorists experienced savings because of the fuel excise cut at a time of record and rising wholesale prices. The excise cut prevented even higher prices due to international factors, largely driven by the war in Ukraine,” ACCC Chair Gina Cass-Gottlieb said in the statement.
“Since late June, average retail petrol prices have come down a lot, in line with decreases in international crude oil and refined petrol prices.”
Monday of this week saw OPEC+ announce a 100,000 barrel a day rise in the size of its production cap (instead of the familiar cuts) to try and steady sliding global prices. That saw prices rise for a day but they have since slumped, again.
Wednesday saw falls of 4% to 5% in both WTI and Brent crude prices as traders came to view the small cut by OPEC+ and another decision to allow the group chairman to make calls on the size of the gap between meetings as an admission that the cartel is scared a global recession – triggered by member Russia’s attack on Ukraine – will happen.
The strong US dollar has also helped drive oil prices lower as investors look for safety in the greenback ahead of any slump. The stronger US dollar is helping choke off any rallies in oil prices and investors are using them to quit positions.
“The spectre of a demand-sapping recession across the western world is closer to becoming reality as soaring inflation and rising interest rates dents consumption,” said Stephen Brennock of PVM, a brokerage told the Financial Times.
Some ’normality’ for oil prices will be good for the cost of petrol and eventually Australian inflation and for interest rates – eventually.
