Motorists could soon see the cost of fuel fall below $2 a litre, but diesel remains stubbornly high despite a slump in the price of crude oil used to manufacture both.
Analysis from petroleum price consultants FuelTrac shows that there’s an increasing gap between the wholesale price in Singapore and what you pay at retail. Particularly for diesel that means retailers are earning more per litre.
“The longer they hold up their retail pump prices, as the Singapore and wholesale prices are falling, they increase their retail profit margins,” says Geoff Trotter, general manager of FuelTrac.
Most of the fuel pumped in Australia comes from Singapore and the island’s terminal gate price – the wholesale cost – affects what you pay as a consumer when it’s sold at service stations here. But the margin between the Singapore price and retail prices has rocketed in the past month, from below 10-cents a litre to almost 35-cents a litre for diesel.
One explanation is that there is a lag – what you pay at the pump today isn’t linked to the price in Singapore yesterday. But the lag is generally only two weeks, and retail prices are remaining high even as prices in Singapore and globally have fallen.
“Yes, a fortnight should allow for stocks to move through the supply chain and we are seeing evidence of (unleaded) petrol price drops in some capital cities, such as Adelaide, Brisbane, Melbourne, Sydney and Perth, but not in Darwin or Hobart. At the same time, (the price of) diesel is being held up just about across the board, in capital cities and regional towns.”
Retailers retaliate
But retailers contend that’s not true and that the falling prices are coming as supply moves through the system bought at the newer, lower prices.
This graph from the Australian Institute of Petroleum shows the difference between the average wholesale price paid by service stations and the average retail price paid by motorists.
The blue line shows the ups and downs of the weekly movement, but the long-term average remains around 15 cents a litre. (This data is for petrol prices, not diesel). Worth noting is that ‘margin’ in the context of petrol doesn’t mean clear profit for service station owners. There are costs to running any retail outlet including transport, marketing, rent and wages.
Petrol may fall
Last week the national average unleaded petrol price fell by 8 cents to 204.1 cents a litre, according to data from the Australian Institute of Petroleum.
If you like paying less at the bowser, there’s another bit of good news. The wholesale price fell by 17.5 cents a litre. If you convert to Australian dollars, the price in Singapore fell by $25.66 or 13.7 per cent last week, taking it down to a 20-week low of $161.52 a barrel or 101.58 cents a litre. The Singapore price has fallen 40 Aussie cents a litre in the past five weeks.
“National average pump prices have fallen just 8 cents a litre, so savings lie ahead for consumers and transport companies,” CommSec chief economist Craig James said in a note to the market. “The key uncertainty is whether the price falls will be sustainable”.
Diesel holds up
Mr Trotter says retailers are holding up the price of diesel given the significant fall in the prices from Singapore.
“Given that diesel represents some 20 billion litres per annum and is the key fuel in road transport, rail, agriculture, mining and marine (industries) it arguably has the biggest impact on price inflation as it feeds through into significant percentage of all deliveries in Australia”.
The gap between falling petrol prices and static ones for diesel sees those consumers “significantly disadvantaged” as a retail price gap blows out to near 40 cents a litre.
Drive around
Whatever you put in your tank, fuel prices are still wildly different around the nation. The unleaded pump price in Adelaide yesterday was near $1.68 a litre. In Melbourne petrol was selling for $2.13 a litre.
In March the then-government announced a temporary cut to fuel excise – 22 cents a litre for six months – and tasked the Australian Competition and Consumer Commission (ACCC) to make sure it was passed on to consumers.
The watchdog, examining prices in capital cities and almost 200 regional locations, repeats that many factors go into what consumers pay: international prices, the US exchange rate and petrol price cycles in our largest capital cities.
“When wholesale prices decrease by large amounts in a short period, lags between changes in wholesale prices and retail prices often have the effect of increasing gross retail margins (i.e. the difference between wholesale and retail prices) in the short term,” an ACCC spokesperson said in a statement.
The temporary cut to fuel excise will not be extended.
Treasurer Jim Chalmers said the relief for motorists would cost $3 billion over six months.
"My expectation, and the expectation I would encourage people to have, is that we can't afford to continue that petrol price relief forever," he said.
