Petrol prices jump

Biggest rise since September 2005

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 15, 2013 11:31 am AEDT

Motorists in Australia's capital cities are paying around 10 cents a litre more this week for petrol compared to last week.

It's the biggest one-week lift in more than seven years, according to the Australian Institute of Petroleum (AIP). On average, the national retail price for petrol rose by 6.3 cents to 144.9 cents a litre, the biggest rise in one week since September 2005.

Super cheap petrol in the last couple of weeks, with the daily pump price below cost price, meant the price had to rise at some stage. According to CBA economist Savanth Sebastian, wholesale prices have remained largely steady over the past few months – roughly between 130-135 cents per litre, so the recent spike in prices was likely due to fuel retailers recovering losses incurred over the last few weeks.

Caltex Australia Limited (ASX: CTX) and other petrol importers like Mobil, BP and Shell generally base their wholesale prices on Tapis crude oil, and Singapore refined petrol. Wholesale prices have been dropping, which means retail prices should fall in the coming weeks.

Coles – owned by Wesfarmers Limited (ASX: WES) has an agreement with Shell Australia to operate most of its service stations under the Coles Express banner, while Woolworths Limited (ASX: WOW) has a similar agreement with Caltex.

According to the latest AIP weekly report, Australia has among the lowest petrol and diesel prices in OECD countries, just above New Zealand, Mexico, the US and Canada. Most OECD countries have similar wholesale prices, but in some countries, taxes can make up more than half the retail price. Norway and Turkey charge around 250 Australian cents equivalent for a litre of petrol, with much of that being tax.

Foolish takeaway

Australians may complain about the petrol market in Australia, especially the sudden changes in price, but we're certainly paying much less than many other countries, despite the recent price hike.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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