In July, Nymex crude oil was trading above $100 a barrel. It has since fallen below $80 a barrel and this morning it sits at $77.29 a barrel.
That’s a fall of around 25%.
So it struck me as passing strange last night as I traveled up the M1 on my way home from Sydney that I paid 149.9 cents per litre for the cheaper E10 petrol.
That didn’t feel like a 25% reduction on the prices I was paying mid-year and reference to the Australian Institute of Petroleum (AiP) weekly fuel price snapshot proved the hunch right.
It raised the question of what is going on in Australia’s consumer fuel market and why haven’t prices fallen further.
It’s a question I put to David Scutt from Scutt Partners.
Scutt told Business Insider that “Australian average petrol prices, compared to the spot price of Tapis crude (the benchmark against which Australian prices are set), remain elevated.”
Tapis is important, as is the Singapore benchmark price of petrol (MOPS95 Petrol), because the AiP says “the Australian refining sector is a price taker”. They even underlined “price taker” to reinforce the point that we don’t set prices domestically.
But while the trend between local prices paid at the petrol pump and Tapis have trended in the same direction lately, there is a yawning gap between the fall in Singapore and the prices paid here in Australia.
“From the first available price reported in 2014, average petrol prices at the bowser have fallen 11.1%,” Scutt said.
But he added that this needs to be judged against the price of Tapis, even adjusted for the Aussie dollar’s fall, which had fallen “28.3% in line with global energy prices”.
So where is the missing 17%?
Scutt said that even allowing for the AiP’s 1-2 week lag between Singapore and local prices “someone, somewhere is making a healthy profit”.