Petrol has not been this cheap since 2004, but many motorists watching the global price of oil plunge feel like it should be lower still.

Figures from the Australian Institute of Petroleum, quoted by CommSec, show the national average price of unleaded petrol last week fell to 98.3 cents per litre.

Metropolitan prices fell to an average of 94.9 cents, while regional prices dropped to 105.1 cents a litre.

But wholesale fuel prices have been dropping even more, into the low-80s – the lowest levels in around two decades.

That means the retail petrol margin — the difference between what the retailer pays for fuel and the pump price the motorist pays — is now at a record high of 24.6 cents according to CommSec.

‘Fake’ fuel cycle

And fuel prices in some areas have surged, even as oil and wholesale prices have remained low.

CommSec senior economist Ryan Felsman said it was due to the retail discounting cycle in many markets.

“Queenslanders that were making the most of an easing in COVID-19 restrictions over the Labour Day long weekend would’ve noticed that petrol prices in some suburbs and towns hit $1.20 a litre,” he observed.

“Unleaded pump prices have also lifted to around $1.20 a litre in Sydney’s inner-west, eastern suburbs and north shore.

“Why? Fuel retailers have begun lifting prices as discounting cycles finally ended early last week.”

Mr Felsman noted the particularly extreme example of Adelaide, where prices surged 33 cents in a matter of days last week, before easing back somewhat.

For many years, Geoff Trotter has run petrol-price-monitoring company FuelTrac and he feels Australian motorists are being uniquely gouged by the big fuel companies.

“The difference in some capital cities between petrol stations relates to where they are in the pricing cycle,” he told ABC News.

“It’s helped oil companies achieve a higher margin than they otherwise would have achieved.

“The price cycle is unique to the Australian petrol market. It doesn’t exist in any other market that I’ve ever seen.

“It’s fake to the extent that the increases don’t bear any relationship to any change in the underlying wholesale price.”

Mr Trotter said motorists should generally be paying less than a dollar a litre for unleaded fuel or $1.10 for diesel at the moment.

“I consider anything above 99 cents a litre over the top in terms of profit margin and anything below 99 cents would be a fair price for the oil company, for the dealer and certainly for the motorist,” he said.

Service stations suffer COVID-19 hit

But while many motorists may view the record retail profit margins as straight out gouging, service station owners say they are simply trying to stay afloat during the COVID-19 disruption.

Stan Karalis owns three roadhouses in South Australia, and said petrol turnover had plunged between 60 and 70 per cent because tourism and other traffic had fallen sharply.

One of his truck stops, in Blanchetown, is the biggest employer, with 25 staff out of a population of just 300.

Mr Karalis, like many other business owners, is struggling with cash flow due to collapsed revenues and the need to pay staff out of his own pocket for more than a month until the business is reimbursed by the Tax Office through the JobKeeper scheme.

He is upset that he, like many other business owners, has had to take out bank loans to bridge the gap, incurring significant interest costs on his wage bill of more than $100,000 a fortnight.

Mark McKenzie, the chief executive officer of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), represents thousands of service station owners like Mr Karalis, and said many of them were hurting badly.

“In recent weeks, we’ve actually seen service stations in areas like regional WA, regional NSW and regional SA that have reported falls of between 75 per cent and 80 per cent of their revenue, most of those are located in tourist areas,” Mr McKenzie said.

Fuel sales have halved during the COVID-19 lockdown.
Fuel sales have halved during the COVID-19 lockdown.(Supplied)

“Those businesses are now having to go back to their banks and actually secure new financing facilities that are above and beyond what they would normally be seeking and they’re very much now on the edge and are looking to the banks and the various mechanisms provided by government and the stimulus measures to stay alive.”

Older, more expensive fuel in tanks

Mr McKenzie said those financial pressures made it very difficult for independent service stations to pass on fuel price reductions in full to their remaining customers.

He also noted most service stations, especially in lower-turnover rural and regional areas, did not immediately benefit from falls in the wholesale price because they got stuck with older, more expensive fuel in their storage tanks.

“Petrol stations don’t pay the spot price for fuel,” he argued.

“They tend to pay a smoothed price based on a rolling average of prices over a two- or three-week period.

“Because we’ve seen such substantial falls, and they’ve been week on week, what actually happens is the rolling average tends to be distorted by the prior weeks and so the price we’re paying for fuel in the ground that people are purchasing … is actually 8 to 10 to 12 cents a litre — depending on where you are — higher than the instantaneous spot price.”

Extracted from ABC