GLOBAL PETROL PRICES

It's the steepest rise in global petrol price in two years. Over the past five weeks, the national average price of unleaded petrol has climbed 8.4 cents per litre.
The average household is now spending $200 a month to keep the tank full. That's an increase of $25 in the last four months. They're starting to approach the highs of late 2008 before the global financial crisis took the heat out of the oil market.

ELEANOR HALL: The unrest in Libya and the surrounding region is fuelling sharp rises in petrol prices around the globe.

Here, the price of unleaded petrol rose by half a cent per litre last week to its highest level in 29 weeks. That means the average household is now spending about $200 a month on petrol.

But on the upside, it will give the Reserve Bank board more room to hold off raising interest rates, as Ashley Hall reports.

ASHLEY HALL: It's the steepest rise in petrol prices in two years. Over the past five weeks, the national average price of unleaded petrol has climbed 8.4 cents per litre.

The average household is now spending $200 a month to keep the tank full. That's an increase of $25 in the last four months.

MICHAEL ROTH: They're starting to approach the highs of late 2008 before the global financial crisis took the heat out of the oil market.

ASHLEY HALL: Michael Roth is the executive manager of Queensland's motoring organisation the RACQ, and he says it's unclear exactly how high petrol prices will rise.

MICHAEL ROTH: If the problems don't spread to other Middle East countries we wouldn't expect prices to go up much higher than they are now. If problems spread to other areas then who knows what's going to happen.

ASHLEY HALL: At about $1.50 a litre, drivers in Canberra and Brisbane paid the highest prices last week. Prices in most other capitals were a few cents lower, although Adelaide motorists paid much less - about $1.35.

Michael Roth says drivers in his state are suffering from a lack of competition.

MICHAEL ROTH: We don't have large independent retailers who are trying to pinch customers off the big supermarket chains.

ASHLEY HALL: And that competition means a difference of around 10 cents per litre?

MICHAEL ROTH: Well, 10 cents is what we've seen this week. This is the biggest we've ever seen.

ASHLEY HALL: But the biggest driver of the latest sustained price surge is the unrest in Libya.

IVAN COLHOUN: Which has added somewhere between $10 and $20 to the price of oil prices globally.

ASHLEY HALL: Although it's not the only factor. Ivan Colhoun is the head of Australian economics and property research at the ANZ Bank.

IVAN COLHOUN: Before that, the move up from around $70 to between $85 and $90 - so probably about half of the move - has been due to the indications of stronger economic growth out of the US economy.

ASHLEY HALL: Japan's earthquake and tsunami had an impact on the oil price as people thought there would be a reduction in demand. How has that flowed through?

IVAN COLHOUN: Yes, it did. There were quite a few market moves in the short term, including just a general position reduction trade, which saw the Aussie dollar temporarily weaker. It saw oil prices, as you said, fall temporarily. Both of those moves have actually reversed.

ASHLEY HALL: With the US economy beginning to show signs of recovery, it's likely the US dollar will also gain ground against the Australian dollar. And Ivan Colhoun says a weaker local currency will make petrol more expensive.

IVAN COLHOUN: It really will be only when the market starts believing that US interest rates are about to move up - or really sees that as a more likely scenario - that the Aussie dollar- or that the US dollar could gain some strength.

ASHLEY HALL: A report released by the OECD overnight looked at the impact of rising oil prices on growth and inflation. And it found a $25 increase in the oil price could wipe-out half a per cent of global GDP growth, and add about three-quarters of a percentage point to inflation.

IVAN COLHOUN: Part of it, I think, probably wouldn't be as negative on the growth front as the OECD is suggesting, but we will still get those increases in the CPI, which I think will pressure the RBA and make them think a little bit about some further interest rate rises.

ASHLEY HALL: But in the short term, the RACQ's Michael Roth says the best tactic drivers can use to keep prices down is to shop around for the cheapest price.

He says only then will the more expensive petrol stations drop their prices to match.

ELEANOR HALL: Ashley Hall reporting.