Tuesday, October 21, 2008

Could we be paying too much for our petrol?

Australian petrol prices have fallen by less than 14 cents a litre at a time when the international oil price has more than halved.

The figures, provided to The Age by Australia's petrol prices commissioner designate Joe Dimasi, suggest that Australian retailers and oil companies have been dramatically widening their margins - although the commissioner is not ready to jump to that conclusion.

Tapis crude, the price benchmark most relevant to Australia, peaked in July at $US147 a barrel and on Sunday was just $US70 a barrel. The investment bank JP Morgan says $US60 a barrel is likely sometime next year.

Adjusted for the slide in the Australian dollar, the crude oil price has fallen from a peak of $A153 a barrel in July to $A100.

The move suggests that the Australian retail price of petrol should have fallen 57 cents a litre since July. Instead, it is down 13.9 cents...

...hovering just under $1.50.

Had Australia's petrol price fallen in line with the international oil price we would now be paying around $1.05 a litre.

But Mr Dimasi says the comparison is misleading.

"People get mixed up on this all the time," he told The Age ahead of his official appointment as petrol prices commissioner next month.

"What you need to look at is Mogas 95, which is the average daily Singapore price of refined unleaded petrol. It's that that determines the Australian price because it is imported in Australia.

"Its price is down only 16.6 Australian cents from the peak. The average five-city retail price in Australia on Thursday last week was down 13.9 cents.

"It is true that the Australian price hasn't come down by as much as the Singapore price. Our price appears to have fallen by about 2 to 3 cents per litre less, depending on which day you measure it."

Mr Dimasi last week wrote to the big four oil companies and to Woolworths and Coles seeking an explanation.

"Their initial response is that things are very volatile, that they look at things on a daily basis and that their pricing practices haven't changed.

"I have asked them for more detailed explanations."

Asked what he and the Competition and Consumer Commission could do if they were unsatisfied with the answers Mr Dimasi replied there was "quite a lot we can do".

"The first step is to just be confident of all the facts. Right now we are through their books and looking at their costs and prices and profits.

"But in the meantime I would like to do away with some myths. People think that it's the crude oil price that matters, but it is really Mogas 95. I'd like to get that price in the paper every day, so that people can get a better sense of what's going on."

Asked why Mogas 95 didn't move in line with the crude oil price, he said there were all sorts of reasons.

"You might get a refinery that might be out, you might get a holiday season, demand is different during winter and summer ...

"At the end of the day, in the long term, the refined petrol price moves will move with the crude oil price, but it's not a parallel link."

Going down:

Since July

$US crude oil

down 52%

$A crude oil

down 35%

$A Singapore unleaded

down 16.6 cents

$A Australian unleaded

down 13.9 cents


Anonymous said...

That is a good point that the Petrol Commisioner raises about the Mogas 95. The media regularly reports the US oil price but not the price that is relevant to Australian petrol prices. It'd be good if they did report the Mogas 95 price on a regular basis.


Vee said...

1. We shouldn't index our oil petrol with Singapore because
2. Singapore keeps their price artificially high to discourage excessive motor vehicle usage

Apocalypse Lao said...

If you follow the Pigou Club then discouraging excessive motor vehicle usage would be a good thing.

Probably politically unfeasible though. Turnbull should drop the 5c policy and stick with his original assessment of it being a populist but ineffectual idea.

Anonymous said...

Mogas95 is 95 octane. however, what i have noticed, if that the unleaded 91 prices is often compared to mogas95 in singapore? if we compare a similar 95 octane petrol, it is 8 cpl higher.

singapore keeps its petrol artifically high to discourage driving, with 35% of the pump price is government tax...

Anonymous said...

The government tax on petrol in Singapore is for local consumption only. For exports, there are no taxes. Prices are based on supply and demand.

Peter Schuback said...

We in Australia only import 20 % of our ULP unleaded petrol so why do we pay an import duty ( Excise ) on the products that are made from australian oil . Also why does the mining industry , forestry industry , fishing indiustry and farming industries pay no excise on their fuel when the rest of us do

Peter Schuback said...

Where do I find the MOGAS 95 price every day and current
Please email info to me ; jamfig@austarnet.com.au

Anonymous said...

Oil Down Again to $ 59.38 a barrel . Australian Dollar at 66.02 cens against USD a 33.98 % difrence . Add the 33.98 % as dollrs to the barrel of oil price and you get what we pay per barrel in Austraian Dollars AUD = $ 93.36 . You shoud not be paying any more than 93.36 cents per litre in all states except Queensland. In Queensland you should be paying 85.36 cents per litre . So why ar you members of parliment allowing you to be screwed by the oil producers

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