Petrol prices explained

IT'S A MYSTERY TO MOST OF US BUT JUST HOW IS THE PRICE OF FUEL DETERMINED IN AUSTRALIA?

- MIKE COSTELLO

PETROL AND DIESEL costs are an infuriating mystery to many of us. Why are pump prices so hard to pin down, and to what degree are we all being gouged by profiteering service station owners?

It turns out costs are determined, for the most part, by macroeconomic forces such as supply-side factors courtesy of OPEC, as well as local inflation and taxation. A mere sliver of the price you pay is a product of retailer mark-ups.

The key point is this: most of Australia’s automotive fuels are imported from Singapore, South Korea, Malaysia, India, Brunei and China – all displacing local facilities from the supply chain.

Just a couple of Australian refineries are in operation today, down from four sites just a few years go, and they receive taxpayer assistance to stay in business. These are run by Ampol in Brisbane and Viva Energy in Geelong, supplying about 20 percent of Australia’s petroleum.

Most automotive fuels we use are therefore shipped across the sea from these Asian mega-refineries, where they are then stored in coastal import terminals, piped to storage sites, and sent to service stations by truck.