What does the falling oil price mean for Aussies?

The Australian consumer watchdog expects plummeting international oil prices to begin driving down the cost of fuel nationally in the coming weeks.

Overnight, US crude oil traded at negative prices for the first time in history, as traders sought to avoid owning barrels with nowhere to store them. The benchmark price for US crude plummeted to negative $US35.20 a barrel, down from nearly $US60 a barrel at the beginning of the year – before the coronavirus really took effect.

"It's a historic day," Bob Yawger, director of futures at Mizuho Securities, told international press.

"What it means is there's no available storage anymore so the price of the commodity is effectively worthless. There's no place to put it, so you've got to flush it basically.

"They don't want it. So when it's minus a dollar, they'll pay you a dollar to get it out of there."

According to the Australian Competition and Consumer Commission, the fall spells more good news for national prices at the bowser – even if our petrol prices are more aligned with Brent crude, the international standard which has fallen to $US25.62 a barrel, rather than US crude.

Australian metropolitan prices have begun dipping below the magic $1 per litre mark for petrol in the past week, and could now be driven down further.

“World oil prices have plummeted,” an ACCC spokesperson said. “As a country that mostly has to import oil, this is good news for the Australian economy.

“Changes in international refined petrol prices usually take between one and two weeks to be reflected in retail petrol prices in the larger capital cities, and longer in the smaller capital cities and in regional areas.

“Retail petrol prices are made up of more than oil prices, they also include taxes and the cost of transportation, as well as retail costs, such as the rent of the petrol station sites, so unlike oil prices, petrol prices will not fall to zero or below.”

Although it is specifically West Texas Intermediate crude oil that has been hit hardest by the drop in demand brought on by coronavirus and the ongoing Russia-Saudi Arabia conflict, the ACCC expects that Australia’s fuel supply – predominantly sourced from Sinagpore, Japan and South Korea using distilled crude oil from the Middle East – will be either directly or indirectly impacted by recent events.

“We are looking at the market very closely, to determine if further sustained reductions in international prices are being passed onto consumers, and we will be publicly identifying major fuel retailers that are not passing on reductions,” the spokesperson warned.

We contacted the Australian Petroleum Institute but they declined to comment.