Petrol prices plunge - big cut tipped for tomorrow

AA is expecting another drop in national petrol prices at around 4 cents per litre tomorrow.

Petrol prices have been slashed for a second time this week, taking the drop to a 12-month low, and market watchers are tipping another bit cut tomorrow.

Following an announcement from BP this morning, prices were cut an additional 3 cents per litre for petrol, with the pump price at many stations now at $1.77 per litre.

Earlier this week, Z Energy slashed its prices by 2 cents per litre, but has since matched BP's 3 cent discount. A further drop of 3 cents per litre on petrol was announced this morning.

AA spokesperson Mark Stockdale says diesel prices should have dropped at least 2 cents per litre this week.

He says the AA is expecting another drop in national petrol prices of around 4 cents per litre tomorrow - to make the total drop of 10 cents expected for this week.

Z Energy spokesperson Jonathan Hill said the recent fall in petrol prices was the result of international refined oil prices trading at a lower rate than usual.

"There are two key things that contribute to the price consumers pay at the pump - tax, the exchange rate and the price of refined oil in the international market," he said.

Most recently, we have seen a drop in international markets overnight and have passed it on to consumers quickly.

Z Energy's Jonathan Hill

Hill said some people saw a correlation between refined oil and crude oil, but said this was not necessarily the case.

"The real impact affecting the drop in pump prices has been in the refined fuel market."

He said it was hard to say if this price level was here to stay, following extreme market volatility, both dropping and gaining unexpectedly.

Too much surplus oil globally had also contributed to lower fuel prices. The plunging oil price has helped airlines' balance sheets and has pushed down air fares.

The International Air Transport Association said today that if the current low prices were sustained, airlines could collectively save US$18 billion this year alone.

After adjusting for the impacts of a the rise in the US dollar, global air fares fell by around 5 per cent in 2015.