A little while ago I wrote about the relationship between crude oil prices and the price Sydney motorists are paying for petrol at the pump. The Australian Automobile Association (AAA) has now released their price data for June and, not surprisingly, prices continued to track moves implied by rising crude oil prices. The simple regression model suggested that average prices would be up 8 cents/litre. The AAA data shows a rise of 10 cents/litre in the average Sydney price.
Sydney Petrol Price Model (Brent Crude)
What is also evident in this chart is the rapid fall in crude oil prices over the last week. One explanation for this fall was an unexpected rise in US inventories. Other commentators have pointed to a self-correction mechanism with higher prices leading to changes in consumer behaviour which are anticipated to be reducing demand. These developments should mean that Sydney drivers will see prices stabilising after several months of steep price rises. That is, of course, unless the price falls are short-lived.
My original post was syndicated on the Oil Drum, where it has attracted a number of comments. One commenter, Anawhata, mentioned comparisons with Tapis (Asia) crude oil prices as opposed to Brent (Europe/Africa) prices. I chose Brent because it is the most widely quoted in our media, but using Tapis prices in the regression does give a very slight improvement to the model (R2 is 97% rather than 96%), For completeness, here is the chart for the Tapis model, although it is hard to see much of a difference.
Of course, an even better model can be obtained by using refined rather than crude oil prices. The chart below shows the result of modelling Sydney petrol prices in terms of Singapore 97 Octane gasoline (the R2 is 98%)
UPDATE: Maybe I spoke too soon about crude oil prices! The lastest news is that a tropical storm heading towards Mexico and more difficulties with Iran on the nuclear question have started pushing prices up again.