Melbourne petrol prices spike by 40 cents per litre

Close up of the tip of a petrol pump

Sue Hewitt

Posted October 21, 2020

Victorians should shop around for cheaper fuel as prices spike at many service stations.

Melbourne motorists going out for one of the four permitted reasons are urged to shop around their extended 25-kilometre radius for cheaper fuel as petrol prices spike at many service stations.

RACV’s senior engineer for vehicles, Nicholas Platt, says unleaded petrol has jumped by as much as 40 cents per litre (CPL) in Melbourne, but says there are still service stations with lower prices.

Find your cheapest local fuel price.

“Last week unleaded petrol was commonly being sold for 107 cents per litre but prices started to rise over the weekend and early this week,” he says.

“Now 43 per cent of Melbourne service stations are selling fuel for 147.9 CPL, however that means there are still plenty of outlets selling cheaper fuel – but not for long.”

He says as of Tuesday, 20 October there were two service stations selling fuel for under a dollar. “These businesses might be using cheap fuel to draw customers into their on-site shops,” he says.

The price rises come just before two long weekends but Nicholas says it’s unlikely that the public holidays triggered the price hike.

He says prices started to move up last week when there was talk about easing Melbourne’s COVID restrictions but really took off after Premier Daniel Andrews increased the five-kilometre radius people were permitted to travel within to 25 kilometres.

“The first service station raised their prices last Tuesday then it rapidly gained momentum,” he says.

“The price rise coincides with the easing of travel restrictions when you leave home for one of the four essential reasons – shopping for food and supplies, medical care and care giving, exercise and recreation and study or work you can’t do from home.” 

Nicholas says increasing the travel limit from 5 to 25 kilometres has increased the demand for petrol. "It is demand, not public holidays, that leads to price rises."

He says the price hike will add about $24 to the cost of filling up a 60-litre tank. “Many families are doing it hard and that $24 has to come out of their budget,” he says.

Nicholas says that conversely the wholesale price of fuel has dropped slightly from 103.5 CPL on 13 October to 102.7 CPL on 20 October. 

“By the time most of the fuel stations have put their prices up over the coming days we expect they will be charging an average margin of well over 40 cents per litre. That’s well over the 25-cent margin that is the normal figure at peak,” he says.

“Historically, it has been independent service stations that are the last to increase their prices and the first to drop them and we look for them to take the lead and keep prices fair.”

Regional prices have remained steady and, although they vary greatly from town to town, most follow the underlying wholesale trend. "At the moment this means regional towns are enjoying cheap fuel prices compared to Melbourne," he says, however he reminds Melbourne motorists they are not permitted to leave the metropolitan area.

Nicholas says COVID had an almost immediate impact on petrol prices with fuel costing 164.2 cents per litre on 13 February and dropping 43.5 cents per litre by March as the demand for fuel and the cost of crude oil plummeted. (More: Biggest winners and losers in the COVID fuel price plunge.)

He says Melburnians then saw fuel prices fall to under a dollar as the coronavirus-induced economic slowdown caused the demand for oil to plunge worldwide.