FED: Want cheap petrol? Drive to Sydney

AAP General News (Australia)
04-19-2010
FED: Want cheap petrol? Drive to Sydney

By Colin Brinsden

CANBERRA, April 19 AAP - Sydney is by far the cheapest Australian city to buy petrol,
with pump prices dropping by 4.2 cents per litre in the past week.

The national average for unleaded petrol eased 0.8 cents per litre to 128 cents, the
Australian Institute of Petroleum said in its latest weekly report released on Monday.

The metropolitan average fell 1.2 cents per litre to 127.3 cents, led by the sharp
fall in Sydney, while the regional average eased 0.2 cents per litre to 129.3 cents.

Commonwealth Securities chief economist Craig James said a "petrol price war" was heating
up in Sydney with some motorists able to buy petrol at below cost price.

The terminal gate price, or wholesale price, held around $1.22 a litre compared with
$1.18-$1.20 a litre commonly seen across Sydney, he said.

The average Sydney petrol price last week (122.3 cents) was nearly seven cents below
that of the next placed Perth (128.9) and just over seven cents cheaper than Melbourne
(129.4).

"We can only speculate about the reasons for the petrol price war and about which companies
are driving the moves at the pump," Mr James said in a research note.

Generally price wars break out across industries if a stronger, established operator
wants to exert pressure on the rest of the market with the aim of squeezing out weaker
operators.

"For motorists, the petrol price war is clearly good news in the short term," Mr James said.

"But if competition is reduced as a consequence then it could potentially lead to higher
prices in the future," he said.

In the near term, a fall in the wholesale petrol price to 121.7 cents last week from
a 17-month high of 122.5 cents should deliver lower pump prices across the nation for
the next seven to 10 days, he said.

AAP cb/rl/apm

KEYWORD: PETROL

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