Motoring

Why petrol prices are soaring in Melbourne

Melbourne unleaded fuel prices are hurting motorists

Craig Duff

Posted January 13, 2022

City motorists are being hammered as the price of unleaded fuel climbs by more than 23 cents in the past month.

Melbourne’s volatile fuel price is at a premium with an average of 171.4 cents a litre on 13 January - that’s a jump of 17 cents a litre since January 1, when the RACV’s Fuel Tracker reported an average metropolitan price of just 154 cents a litre.

The RACV recommends motorists currently do not pay more than 169.1 cents a litre for unleaded fuel, with many outlets across the city selling within the 166.5 to 171.5 cents a litre price range.

Fuel Tracker reports the cheapest retail price is 146.9 cents a litre, and the highest at 179.9 cents a litre.

Motorists are advised to shop around for the best deal wherever they are by using the Fuel Tracker on the RACV website, or in the arevo journey planning app.

While it's not uncommon for retailers close by to be selling fuel at different rates, it’s important to keep an eye on our Fuel Tracker or arevo app to get the best deal.

Motorists are paying up to 179.9 cents a litre in Melbourne.

Surging fuel prices are hitting Melbourne motorists. Source: RACV Fuel Tracker

 

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.

 

Locate the cheapest petrol near you with RACV’s Fuel Tracker
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