The global price of crude oil is once again climbing, with Brent crude settling at US$100.21 a barrel today. This inevitably raises the question for Australian drivers: why are petrol and diesel prices so much higher than the raw cost of oil? The answer is far more complex than simple math, involving refining, regional benchmarks, taxes, and the unique structure of Australia’s fuel market.
The Raw Cost vs. The Pump Price
At US$100 a barrel, crude oil equates to roughly 90 Australian cents per liter before processing. However, this is just the starting point. The price at the pump is driven by multiple layers of cost, starting with refining and transportation. Australia, with only two operating refineries (Ampol’s Lytton and Viva Energy’s Geelong), is heavily reliant on imported refined fuels. This makes the local market vulnerable to fluctuations in Singapore’s refined fuel benchmarks, with a typical one-to-two-week lag before changes are reflected at Australian pumps.
How Refining and Regional Pricing Stack Up
The Australian Institute of Petroleum (AIP) indicates that local petrol pricing follows Singapore Mogas 95, while diesel tracks Singapore Gasoil. This regional influence adds significant cost:
- Crude oil: 90 cents/liter
- Singapore Mogas 95: 123.6 cents/liter
- Average wholesale petrol: 194.4 cents/liter
- Average retail petrol: 219.5 cents/liter
For diesel, the jump is even greater:
- Crude oil: 90 cents/liter
- Singapore Gasoil: 160.6 cents/liter
- Average wholesale diesel: 227.8 cents/liter
- Average retail diesel: 245.6 cents/liter
The Role of Taxes and Government Revenue
Australia’s fuel prices are also heavily influenced by government taxes. Currently, excise duty stands at 52.6 cents per liter for both petrol and diesel, with an additional 10% GST applied on top. This means roughly 30-33% of the pump price goes directly to government revenue:
- Petrol tax: 72.55 cents/liter (approximately 33.1% of the average price)
- Diesel tax: 74.93 cents/liter (approximately 30.5% of the average price)
Beyond the Basics: Refining, Logistics, and Retail Margins
The remaining cost covers refining, shipping, terminal operations, wholesale margins, and retail overheads. The Australian Competition and Consumer Commission (ACCC) reports that retail margins are not excessive; they must cover wages, rent, utilities, and other operating expenses.
Why Diesel Costs More
Diesel tends to be more expensive than petrol due to its different market dynamics. Most diesel is sold in bulk or through contracts, with limited retail discounting. As of the latest data, diesel is about 26 cents per liter more expensive than petrol.
The Bottom Line
While a barrel of crude oil may cost around 90 cents per liter, the final price at the pump reflects a complex chain of costs. From refining and regional benchmarks to taxes and retail margins, the journey from crude to fuel is far from simple. As global events like geopolitical tensions in the Middle East impact crude prices, Australian drivers will continue to feel the effects at the bowser.
The current numbers show that a $100 barrel of oil translates into a much higher price for Australian motorists, due to the multiple layers of costs and taxes involved. This is not a matter of pure profit margins but a consequence of Australia’s reliance on imported refined fuels and its tax structure.
