Tweed pays top dollar for fuel despite high dollar

Petrol prices around the Tweed. Photo: John Gass / Daily News
Petrol prices around the Tweed. Photo: John Gass / Daily News John Gass

TWEED motorist are paying some of the highest petrol prices ever and, although the Australian Dollar has taken a slight dip and increased the price of imported oil, this move alone does not explain the recent petrol price increases.

Commodity and currency market trader Leigh Grossmith said recent oil price movements did not account for the increase in petrol prices either and the cause might be found in the refining cost of crude oil.

The oil price Australians pay is derived in part from the price of Malaysian Tapis Crude Oil which acts as a benchmark for the imported oil delivered to Australian refineries.

Although the Australian dollar vs. US dollar rate impacts on the price of imported oil, Australian fuel wholesalers employ a methodology know as Import Parity Pricing (IPP) which means that pricing is based on the cost of importing crude oil.

Transportation, government taxes and insurance costs make up the balance of costs to Australian wholesalers, however, do not explain the recent rise in price.

Caltex claimed the recent closure of its refinery in Sydney did not have any impact on local prices, however, commodity traders disagree with Caltex CEO Julian Segal.

They said that unless refinery capacity was replaced by adding capacity elsewhere or regional demand slowed down, fuel prices were likely to (and already have) increase in the short term as a consequence of lower capacity relative to demand.

Singapore refinery margins have increased significantly and the increased demand for top-quality fuels from the Australian market has tightened supply and offered refineries an avenue to maximise their profits.

Petrol companies insist short term price movements are not indicative of real price trends and future price changes remain impossible to predict.

However, Australian motorist should keep one thing in mind, petrol prices follow the 'rockets and feathers hypothesis' which means prices shoot up like rockets but float down like feathers.

Topics:  fuel prices tweed heads

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