Australians are used to petrol prices fluctuating around school holidays, but just who gets what from the price of petrol in Australia?

PETROL PRICING IN AUSTRALIA is one of the key talking points of Australia’s motoring clubs and one of our key grumbles, as motorists, when it seems to fluctuate one day to the next for seemingly no reason. Like any product/commodity, the cost to find, dig and then pump crude oil, refine it and then supply it as fuel to Australian petrol stations is very tightly controlled. So, what are the costs involved and what effects the price of fuel in Australia?

There are a number of forces at work that set the price of fuel in Australia but the main driver is, wait for it, the price of fuel in Singapore and South Korea. Yep, because Australia imports around 40% of all its petrol and diesel, the price of fuel in Singapore and South Korea is used as an benchmark for pricing petrol here.

The lingo used to describe this benchmark is Terminal Gate Price (but it should really be, the cost of fuel in the country that refines our fuel, but that probably sounds a little bolshy) and it is set at 95% of the cost of a litre of fuel, leaving just 5% for retailers and wholesalers to share in – a further breakdown is below. So, while it might seem empowering to watch the morning news and hear that a barrel of crude oil costs less today than it did yesterday and predict that petrol prices will drop, it doesn’t quite work like that. More than that, most media outlets report the West Texas crude oil price; Australian crude oil is the Tapis variety out of the Middle East.

Crude oil, petrol and diesel are entirely different products and are traded as different products accordingly. So, unless Australia is importing a barrel of oil to refine it here, then the international cost means almost nothing to the cost of a litre of petrol at the pump. Rather it’s the price of petrol and diesel that matter most.

And, like all in-demand products the price can go up and down depending on who wants it most and how much of it is available. So, why the lag in prices going up and down. Well, it’s all to do with how much fuel is on the sea at the time, see, if the price goes up while there are a bunch of ships at sea then the price of fuel in those ships will be set at the pre-spike amount, and so on. Hence there’s a lag in pricing.

But, who actually makes what from a litre of fuel? Well, let’s base this breakdown on a litre of unleaded petrol costing around $1.32.

• Refined Product Cost (including refining, and shipping) = 75 cents;
• Taxes = 44 cents (includes 10% for GST); and
• Wholesaler and Retailer = 11.8 cents.

The wholesaler generally takes around 2 cents per litre and while they grumble they take the smallest piece of the pie, they also take that two cents from every single litre of fuel sold, so, it adds up to billions of dollars in revenue.

But, your local petrol station makes very little and, out of its cut has to take costs like utilities and processing charges so, in the end, makes less than the nine or so cents per litre of fuel it sells. And this is why petrol stations are fast redefining themselves and adding things like firewood, cafes, food lines, hats, magazines and more… it’s all being done to eke out a little more money.