I was writing the Morning News Wrap today and I found myself writing this comment:
Hey remember when oil was $130 a barrel and petrol was costing us $1.60 a litre. Now it’s $30 and petrol is costing us $1.30 a litre…..Someone is getting screwed here.
It got me thinking.
So I did a bit of research and this is what I found. We are being screwed. By three different groups of people.
First up we are being screwed because of the fall in the currency. When the Aussie dollar drops it makes out exports more competitive (aka cheaper) and our imports more expensive. So as the oil price has fallen, the cost of our imports has risen. This is due to the fact that our fuel source is mostly through Singapore, so the drop in the oil price has been offset by the 30cent drop in the Australian dollar. So we are getting screwed here by the Reserve Bank of Australia who orchestrated the fall in the currency. Thank you Mr Stevens.
Secondly we are being screwed by the Australian Federal Government. The excise (aka tax) on petrol is 38.6 cents a litre. Whether fuel is 60 cents a litre or $1.20 a litre you need to add the 38.6 cents. As the tax is not a percentage, it is immaterial what the oil price is or what the currency is. So there is large part of the petrol price this is unaffected by the oil price. Thank you Mr Turnbull.
Thirdly we are being screwed by the Petrol companies.
Read this quote from the website Business Insider Australia. (Its six months old but still relevant)
Crude oil fell 9% in July. That’s taken it back toward the lowest levels of the year, which are the lowest levels since 2009.
But even though the Aussie dollar only dipped 1 cent in July, that drop in the implied price of Aussie crude hasn’t filtered through to the prices we’re all paying at the pump.
That’s a conundrum which Westpac senior economist Justin Smirk highlighted in a note to clients on Friday, saying:
“Australian fuel prices are holding at a much higher level that what you would expect compared to the level of crude oil prices, even when adjusted for the AUD depreciation.”
If you look at that relationship and ask why it has suddenly broken down and Australian prices have surged, it’s hard not to reach the conclusion “because they, refiners, can”.
Smirk say that perhaps some of the increase can be explained by “the closure of most of Australia’s oil refineries has led to an increase in demand in Singapore for particular standards of gasoline that are specifically required for the Australian market”.
“And that this increase in demand has caught the market by surprise, pushing the price higher due to limited supplies of gasoline of that standard.”
But he says you can’t blame the move on freight prices because “shipping never accounts for more than a few cents a litre on the final pump price”.
Crucially, Smirk says what we can’t be sure of is if it is a market driven (i.e. demand greater than supply) lift in the premium for Australia standard petrol, or is it a lift in retailer/importer margins.
“We don’t have the data to be able to confirm or refute such assertions,” he said. “(In) the last few weeks it does, however, appear that gasoline margins may have peaked.
“We also know that Chinese refiners have been maximising gasoline output and that a number of Chinese and Korean refineries are set to return from maintenance.
“As such, we expect that the supply of gasoline in Asia is set to strengthen through the second half of this year which should squeeze refining margins.”
So, refiners are simply making hay while the sun shines.
Thank you Mr BP, Mr Caltex and Mr Seven 11
So I hope that makes you feel better about life as your fill your car up next.
Ps Peter Pilt
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Categories: Australian, Current Affairs, Financial, Political Commentary or Thoughts
peterpilt 
I would like to know why petrol is cheaper in the rural areas than it is in the urban areas. Any idea?
I lived in Nowra for 15 years. Trust me it wasn’t cheaper in this rural area
A couple of things Peter:
I drove approx 39K last year and excise was 3.64 cents per K.
a) Is this too much and
b) How else would this money be raised? (Remember our socialist inclined population expect the govt. to supply everything “for free” and the only way to pay for it is through taxes).
What %age of the petroleum company’s costs is the cost of the raw material?
What is their ROI?
How much profit does a petrol company make from each $ spent on pterol? At a store I was at recently a dept. manager said their store was expected to make 6c profit on each $ spent in the store but a competor worked on 1c in the $.
Adrian you need to separate oil refineries from Petrol Stations.
So are you suggesting that it is socialistic of me to inquire as to why when oil falls 70% why doesn’t the consumer price move? Because your suggestion would appear Orwellian in origin.
No, the question is valid, it’s our society that wants the goverment to be it’s provider that is moving towards socialism.
The comments below the line were based on an old FAQ page which is around but not directly linked to by Caltex and is probably 5 years old. After writing all that I found the current FAQ pages and I find that:
“The net profit for all products and services in the downstream petroleum industry in 2013-14 were around $1.16 billion. This means the downstream fuel industry (which includes Australian refineries, fuel suppliers, terminals, depots, pipelines and service stations) made on average just 1.30 cents per litre of profit when all operating costs were taken out.”
That’s about 1% profit in all the “downstream fuel industry”, not much room there for savings are there?
Where does the other 99% go though?
Source: http://www.caltex.com.au/LatestNews/FuelPricing/Pages/PricingFAQsformotorists.aspx
————————————————————-
But starting with my average petrol costs over the last decade of $1.30 where does the money go?
Caltex in it’s FAQs says “for calendar year 2008 averaged out to a profit of just one cent per litre for all petroleum products sold”. Now that may be a worst case but if we work on that we’re down to $1.29.
It also says “Fuel retailers achieve very small gross margins on petrol, typically up to three-and-a-half cents per litre in metropolitan areas” so we’re now got $1.25 to chase up.
Well we also have “the government collected more than fifty cents in excise and GST for every litre of petrol and diesel sold to motorists” so I’ll round that up to 55c leaving us $0.70.
******************************************************* Tax
*** Fuel Retailers gross margin
* Caltex’s profit
********************************************************************** Unaccounted for so far
Now as we all know there’s lies, damn lies and statistics, but the above is just to show that the Govt gets a lot more per litre than the petrol companies and service stations get as profit.
Also “supply and demand for refined petrol and diesel is what drives their prices” not crude oil prices.
Source: http://www.caltex.com.au/LatestNews/FuelPricing/Pages/FAQsOld.aspx