Australian motorists are paying lower petrol prices before Christmas, but global oil markets face fresh uncertainty as new sanctions on Russian exports could disrupt some fuel supplies.
Australia’s average national petrol price fell 6.1 cents per litre (cpl) to $1.81 in the past week as retailers offered fresh discounts, Australian Institute of Petroleum data shows.
Analysts said motorists are benefiting from lower oil prices and an approaching trough in east coast market cycles, but new Russian oil sanctions have caused further uncertainty.
Australia and G7 nations slapped a $60 price cap on Russian oil last Friday to punish the Kremlin for expanding its invasion of Ukraine.
Russian Deputy Prime Minister Alexander Novak responded over the weekend by raising the possibility of reduced oil supplies, saying Russia would only sell to nations that trade in open and free global markets.
Such a move could compound an earlier decision from oil bloc OPEC to push oil prices higher by reducing output, a tactic that was reiterated when the Middle East-led cartel met on Sunday.
Macquarie University senior lecturer Lurion De Mello said the impact of the sanctions would most likely be felt in diesel markets, which are more exposed than unleaded petrol to the price cap on Russian production.
“Most of Russian oil is produced into diesel,” he said.
“Diesel prices are already elevated, my biggest worry is the price will remain high and might even go up higher.”
Petrol prices ease
Australia’s three biggest cities – Sydney, Melbourne and Brisbane – follow a semi-regular cycle of petrol price declines and hikes, led by peculiar market dynamics that we’ve explored in the past.
That cycle is now approaching a trough (see the chart below), with bowsers falling well below $2 a litre after a spike in October when the federal government fuel tax holiday expired overnight.
This time around the discount cycle has been aided by a downward trend in global oil prices, which have receded from earlier highs as inflation squeezes major markets, reducing demand.
National Road Motorists Association (NRMA) spokesperson Peter Khoury said now is a good time for motorists to fill up the tank, although that still depends on where they live.
“Sydney is heading towards the bottom of the cycle,” Mr Khoury told The New Daily.
“It’s some relief and we’re hoping the trend will continue into Christmas.
“We’ve been exposed to record petrol prices this year and it would be a nice financial relief for families not to have to worry about the burden of extra fuel costs as they’re going on holiday.”
Oil market ructions
Outside of local market cycles, the biggest factor that will influence local petrol and diesel costs over Christmas is the direction of global oil prices.
Oil prices have been bouncing around all year as Russia – the world’s second largest exporter – has come under increasing western sanctions and OPEC has changed its oil supply quotas.
Russia has warned it will reduce global oil sales in response to a new price cap on exports, while it will also cease doing direct business with participating nations, including Australia.
A cessation of business isn’t itself a major issue because Australia sources the vast majority of its petrol from refiners in Singapore.
But the possibility that European and other nations may have reduced access to oil could have ramifications, Dr De Mello said.
“Russian oil might not make it to [diesel] refineries in Germany or the Netherlands where diesel is produced,” he said.
The good news is that petrol prices in Australia shouldn’t be too heavily affected by the sanctions.
“Russian oil is going to find its way into other markets in countries that are not signed up to this price cap,” Dr De Mello said.
Another issue is that the world’s largest oil production cartel OPEC has stuck with an earlier move to reduce oil supplies at a Sunday meeting.
Dr De Mello said the bloc is trying to counter fears that demand for its main export will plunge as economic growth slows in China and the US.
