Strange times lead to strange outcomes, and one that we’ve never seen before is benchmark US oil prices falling below zero for the first time in history. Yes, US oil producers now have to pay people to take oil away.
So, will we see pump prices in Australia fall to record lows? Don’t bank on it.
For a start, the less-than-zero oil price applies only to contracts for West Texas Intermediate (WTI), a crude oil produced in the US. The WTI price is an indicator of global oil prices, but Australian fuel prices depend on Dated Brent crude oil contracts. At the time of writing, the price for the oil we buy was around $US25 a barrel (just under $40).
The reason for the dramatic fall in oil prices is, of course, the COVID-19 pandemic. Demand has fallen more than six times further than leading forecasters predicted, resulting in a worldwide glut. Producers are desperately trying to reduce production, but it’s not something they can do overnight. Adding to their woes, the sudden drop in demand has left buyers with no storage capacity.
That means the wholesale price of fuel in Australia is currently about 82 cents per litre, which makes it hard to understand why pump prices in many places are well above $1 a litre.
It’s a pity we can’t bulk buy fuel, but for the time being, fuel prices will remain low and should continue to fall. The only unpredictable element is just how greedy retailers will be and, on past indications, they can be quick to capitalise on any opportunity to gouge motorists.
But that staunch defender of buyers’ rights, the Australian Competition and Consumer Commission (ACCC), will continue its ‘outstanding work’ in holding them to account, by “monitoring the market closely” to keep pressure on petrol retailers at this time. Thanks for nothing, ACCC.
Paul Murrell is a motoring writer and creator of seniordriveraus.com, which specialises in “car advice for people whose age and IQ are both over 50”. This article first appeared on seniordriveraus.com
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