How does crude oil affect petrol prices?
Average retail petrol prices are generally influenced by increases in crude oil prices and the retail petrol cycle.
The crude oil price is simply driven by supply and demand. The Organization of the Petroleum Exporting Countries (OPEC) cut output in 2020 during the COVID-19 pandemic and have yet to return to pre-pandemic levels of production.
As a result, international oil prices are nearing record-highs.
The Brent crude oil index (for oil sourced from the North Sea) has climbed from $101 a barrel on December 17 to $116 a barrel on January 12 - a 15 per cent leap.
The Tapis index (for Malaysian-sourced oil) has jumped from $108 to around $122 over the same period, and US crude prices are also at two-month highs.
How that impacts pump prices
This is where it becomes more complex. The relationship between crude oil pricing and the cost motorists pay at the pump isn’t always linear.
For example, RACV data shows wholesale fuel prices were 144.8 cents a litre on December 17 and retail prices were 148.3.
The disparity has since increased dramatically.
As of January 11 the wholesale petrol price was 148.4 cents a litre and the retail price had ballooned to 172.7 cents, indicating the change to date is largely being fuelled by our domestic petrol cycle.
That fuel cycle can usually last from four to six weeks and is exacerbated during public holidays.
Retailers tend to lower prices in the lead-up to Christmas to generate business but then recover their profit margins as people return from holidays.
Diesel not affected
The difference between diesel’s wholesale and retail price is nowhere near as marked as the petrol price change, largely because a decent profit margin already exists.
Wholesale diesel cost around 138 cents a litre on December 17 compared to 161 cents at the bowser.
Fast forward to January 12 and the wholesale price was just over 143 cents a litre against a retail charge of 161.8 cents.