√Opinion: Relax. Fuel prices will come down, and we’ve got the data to prove it.
Pump prices are about to spike, but with global oil prices dropping, local fuel costs will soon follow suit – we go down a data hole to show you what to expect
Our six-month cost of living holiday is at an end, with the full 46 cent-per-litre fuel excise back in effect from midnight tonight (note that the excise has risen from 44.2 cents due to CPI).
If implemented by your local service station, this will push the national average price for 91RON unleaded from $1.69 per litre today, to $1.95 per litre tomorrow. Give or take.
It will hurt. This is an additional $15 per 50-litre fill or about $100 per month for households with two cars.
According to our data though, the immediate pain should be short-lived, with declining global oil prices the key factor to our local pump costs.
Crude oil prices can be quite volatile, but have generally been in decline since June. But how can we use these to predict what our local price per litre will be?
Overlaying a basic national average pump price for 91RON unleaded (cents-per-litre) against global crude oil prices (US$ per barrel) over the past 12-months shows a close but not overly useful pattern. Adding in an understanding of the Australian dollar compared to the USD standard shows some changes too, with the Aussie dollarydoo dropping around 10 per cent in value against the greenback in the past year.
Cool charts, sure, but not super helpful.
What happens when we put both commodities on the same scale – $AU per litre?
To calculate this, we applied the AUD-to-USD exchange conversion to oil prices at the time of price reporting, then divided the barrel by the 158.987 litres of crude within, to calculate a comparable Australian price per litre.
On face value this also doesn’t seem to tell a story, but when we allow time for oil purchased to reach our retail market, things line up far more accurately.
The data shows a clear four-week phase shift between an oil price rise (or fall) and an impact at the local servo, which means we’ve got a lens that can predict approximate prices one month ahead.
Looking at the purple line above, the phase-shifted oil prices, shows a continual decline, therefore driving an even low pump price than we have today.
How will the excise impact this?
We’ve taken the data above, and added the full excise to the 91RON price since it was ‘removed’ at the end of March.
Further, by adding in the full excise level throughout the time scale, you can see the ratio between local and global prices is largely aligned to where it was before the Russian invasion of Ukraine.
To keep the pattern going, we added some estimated average pump prices that follow the trend of oil, to the position where we believe the rise tomorrow will halve within the next four weeks.
This means, if we tip up to $1.93 per litre on average tomorrow, by mid-late October, this should be back around the $1.80 mark.
If oil continues to track down, the price at the pump should be back where it is today well before Christmas.
Sadly, we can’t predict that, but we’ll continue to keep this data tracking, so as to help provide a four-week future estimate of pump prices, so you know when to hold off, or fill up, to best manage the pricing variation.
Does our maths check out? Have we missed anything?
Let us know in the comments below.
The post Opinion: Relax. Fuel prices will come down, and we’ve got the data to prove it. appeared first on Drive.
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