(Australian Associated Press)
Petrol prices are expected to keep falling as the major oil producing countries fight for market share by increasing production.
Oil prices have almost halved this year, falling to an 11-year low below $US40 a barrel as the market gets flooded with more supply in order to push high cost producers out of the market by making prices lower.
That’s sent petrol prices down to an 11 month low below $A1.10 a litre, from its recent high above $A1.50 a litre early in 2014.
CommSec chief economist Craig James said as long as countries like Saudi Arabia are determined to shore up market share, Australian bowser prices will fall.
“While the low global oil price is putting pressure on the profitability of producers, it is clearly good news for consumers,” he said.
“Lower global oil prices have potential to boost economic activity provided that businesses and consumers spend the extra savings reaped at the petrol pump.”
However, Mr James said the variation in petrol prices around Australian remains a concern.
“The issue for Australian motorists is getting some consistency on price,” he said.
“(Petrol price website) MotorMouth records a difference of around 25 cents a litre across Australian capital cities.”
Mr James said while motorists in Sydney and Adelaide can fill up near the cost price, elsewhere petrol prices can be much higher.
CMC Markets chief market analyst Ric Spooner said the return of Iran as a major oil producing nation will also put downward pressure on petrol prices.
“Iran’s statement that it plans to increase exports by 500,000 barrels a day within weeks of sanctions being lifted is not good news for oil,” he said.
“Iran has also made it clear that it plans to cut prices to restore export market share promptly.”
Sanctions related to Iran’s nuclear program will be lifted in early 2016 in line with a July 14 deal between Tehran and six world powers led by the US.