Michael Janda, 22 December 2015

Motorists are set to save on fuel bills this holiday season with oil prices hitting an 11-year low, but record petrol profit margins are set to limit the savings.

Futures for the benchmark Brent crude fell to their lowest level since July 2004 in London trade overnight, while West Texas crude oil briefly dropped below $US34 a barrel before closing at $US34.50 in US trade.

Those price falls are gradually feeding through to retail prices, with Australian Institute of Petroleum data showing unleaded petrol prices down 0.3 cents to average 123.9 cents a litre.

However, fuel companies are taking a growing cut along the way: CommSec analysis finds that Singapore gasoline prices have fallen around 15 cents a litre since early October, but Australian wholesale prices are only down 12 cents, while the retail pump price is less than 10 cents lower.

Australia imports the majority of its fuel from Singapore’s refineries.

CommSec’s chief economist Craig James said that has left average retail profit margins at record highs and drivers should shop around.

“The smooth margin – and we’ve looked at the five-week average – stood at a record 15.1 cents a litre,” he told ABC News.

“It does pay you to shop around the place, use some of the apps which are available now to be able to record where the cheapest price is, and hopefully that puts pressure on the petrol marketing groups to reduce their prices a bit.”

Huge gaps in capital city petrol prices

There is good reason to shop around when filling up the tank, with the RACV’s website reporting a 36 cent difference between the cheapest premium unleaded price in Melbourne and the most expensive and a 34.1 cent gap for regular unleaded.

The big differences are good, they show that there is competition out there.

Rod Sims, ACCC chairman

Sydney’s price gap for standard unleaded was a more moderate, but still significant, 23 cents.

While the large difference may annoy motorists paying the higher price, the Australian Competition and Consumer Commission’s chairman Rod Sims welcomes it as a sign of competition.

“When prices are all the same, people complain that there must be some form of collusion going on and when there’s these big differences people say, ‘well how could that be?'” he said.

“I think the bottom line is that the big differences are good, they show that there is competition out there, and we would just urge consumers to shop around.”

If petrol buyers are in danger of being ripped off, the situation is even worse for diesel users.

Wholesale diesel prices have followed oil to an 11-year low, below $1 a litre, but the fuel remains more expensive than petrol at an average 125 cents per litre.

Regional Australia set for diesel, tourism boost

Craig James said these huge profit margins are eroding the economic benefits to Australia from falling fuel prices, especially in regional areas.

“The wholesale price of diesel is actually at an 11-year low, at 99.1 cents a litre, so good news for the rural industry in particular, regional areas, transport sector,” he observed.

“The complication though is the fact that the gross retail margin on diesel is quite high – petrol marketing groups are getting around 23 cents a litre.”

Despite the soaring retail profit margins, Mr James forecast that a weak Australian dollar and cheaper fuel should boost domestic tourism this Christmas.

“Last year we had an Aussie dollar up around about 85, 90 cents US, this year it’s round about 72 cents, so it does look like it’s holidays at home,” he said.

“The good news is that the petrol price is still cheaper than what it was 12 months ago and at the lowest levels in 10 months, and potentially could go lower.”

Extracted in full from ABC News.