No respite likely as petrol prices rise

Motorists will be paying more at the pump as petrol prices, already at four month highs, are likely to lift further in coming months.

Motorists can expect no respite from the steady rise in the petrol prices over the past few weeks. (AAP)

Motorists can expect no respite from the steady rise in petrol prices over the past few weeks; in fact, things are likely to get worse.

Petrol prices have jumped to a four-month high, latest figures show, with the average price of regular 91-octane petrol across the country at 119.1 cents per litre.

Drivers in Sydney have felt the worst of the price hike, paying an average of 124.8 cents a litre in the week ending May 29, research from the Australian Institute of Petroleum shows.

"We have seen domestic prices drift upwards, and this is likely to continue," CommSec chief economist Craig James said.

"This means the super-cheap prices we saw earlier in the year, are not likely to be repeated anytime soon."

Average petrol prices repeatedly slipped below $1.10 a litre in February and March, helped by the tumble in international crude prices to below $US40 a barrel.

But the discounting cycle in capital cities, or competition among fuel retailers at a local level, meant some petrol stations actually offered petrol below $1 a litre.

Prices have risen steadily since then, led by a recovery in global crude prices to around $US50 a barrel and an improving US dollar that has put pressure on its Australian counterpart.

Australia's retail petrol prices include shipping costs, taxes such as 39.5 cents per litre excise and the 10 per cent GST, plus administration and supply chain costs and retail margins.

The biggest influences, however, are international crude prices.

Local retail prices are directly linked to benchmark Singapore petrol prices, which in turn reflect trends in global crude prices.

Mike Cochran, senior associate with market intelligence firm EnergyQuest, believes Singapore prices are headed upwards in coming months because of seasonal influences.

"We are now entering the driving season for the northern hemisphere. US demand, in particular, tends to peak around the 4th of July," he said.

The US is the world's biggest market for petrol and fuel demand there has a huge impact on prices globally.

With nearly 60 per cent of Australia's petrol imported, the currency exchange rate also plays a key role.

In the four weeks to June 2, international petrol prices rose 7 per cent in US dollar terms but the weaker Aussie dollar meant the increase was 12 per cent in terms of local currency.

Any further weakening in the Australian dollar will lead to a further increase in local petrol prices, analysts say.

"The fundamentals point to an increase in prices," Mr Cochran said.

So how much difference does it make for an average motorist? Plenty, it turns out.

Ratings agency Fitch calculated that Australian households saved $260 in the year to May, 2016, compared to a year earlier thanks to lower petrol prices.

And Fitch says households saved an extra $540 compared to their spending two years back in the 12 months to May, 2014

Those prolonged low prices helped Australian households cut living expenses, pushed up savings and has led to a better mortgage performance, Fitch said.