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Cheaper petrol provides relief to motorists

It’s good news for motorists, with a report from Commsec that the petrol price will continue to fall further. Last week, the national metropolitan average price for petrol was 138.3 cents per litre. Melbourne residents were even better off, with the average fuel price in the Victorian capital a relative bargain at 133.9 cents per litre.

It looks like Commsec’s forecasts are accurate so far with a check of Fuel Watch, an initiative of the state government of Western Australia showing the Metro average in the west is down to 132.4 cents per litre. This is great news for consumers; however the drop in oil and petroleum prices isn’t so good for shareholders exposed to associated industries.

With the oil price (WTI) hovering around its recent lows of US$89 a barrel, oil producers including Woodside Petroleum (ASX: WPL) and Oil Search (ASX: OSH) are the most directly affected. If the lower oil price persists, then the producers will begin to feel the pinch as the lower price feeds through to lower revenues.

Caltex (ASX: CTX) is Australia’s largest oil refiner and a leading supplier of oil products. While the company will continue to extract profit margin from customers, the margin undoubtedly gets squeezed at lower price points. Caltex also has a major joint venture with Woolworths (ASX: WOW) for the roll out of jointly branded convenience stores; similarly Wesfarmers (ASX: WES), owner of Coles Express petrol stations has an agreement with Shell. The fuel discount that shoppers enjoy has encouraged many consumers to shop at Coles- and Woolies-linked petrol stores, increasing the supermarket chains’ interest in the price of petrol.

Foolish takeaway

Just like a frugal consumer who will fill up the tank when petrol prices are lower, the best investors also “stock up” on investments when they see a bargain.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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