Australian Government
Department of the Environment, Water,
Heritage and the Arts
Clean Green Motoring
Your email of 1 January 2008 to the Minister for Climate Change and Water, Senator the Hon Penny Wong concerning diesel fuel and the environment has been passed to the Minister for the Environment.
Heritage and the Arts, the Hon Peter Garrett AM MP. Mr Garrett has asked me to thank you for your letter on his behalf.
With regard to your concern about diesel fuel pricing, you correctly note that diesel prices are currently higher than petrol prices. The retail price of diesel in Australia is determined by a number of factors including the Singapore benchmark price, global supply and demand and the exchange rate.
Australia's regional market is the Asia-Pacific market. Diesel is the dominant fuel in Asia and in recent years there has been a significant increase in demand, particularly as a result of the economic and industrial growth in China and India. This demand growth has resulted in increased international and wholesale diesel prices. Australian demand growth has also been strong on the back of our growing economy and the higher demand for diesel from industry. Given the high demand. production costs are not having a significant impact on the diesel price in Australia.
It is a commonly and incorrectly held view that diesel is cheaper to produce than petrol. This may have once been the case, but in order to produce the highly refined and low sulfur diesel fuels, suitable for use in modern fuel efficient cars, refiners must purchase high quality crude oil and undertake further steps in the refining process. Given the regional demand for diesel. the price of quality crude oil has also risen.
Despite recent increases in price it is worth noting that the latest International Energy Agency statistics for the September quarter 2007 confirms that Australia has the sixth lowest diesel price out of the 30 Organisation for Economic Co-operation and Development (OECD) countries.
While the uptake of diesel fuel more broadly in passenger vehicles may reduce some greenhouse gas and air pollutants, a diversity of approaches needs to be taken to address this very complex issue. Any change in government policy in this area would need to take into account a whole range of issues including whether lowering the price of diesel would also encourage continuing use of inefficient diesel vehicles in our major cities, leading to higher levels of air pollution. Rather than only targeting particular types of vehicles or fuels, the Government seeks to encourage consumer demand for any motor vehicle with good fuel efficiency and lower greenhouse impact, while encouraging innovation in technology.
Yours sincerely
Kelly Pearce
Assistant Secretary
Environment Standards Branch 29 April 2008
This reply actually addressed every question I had per paragragh (my questions not included)
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Thank you for your emails of 2 and 7 April 2008 concerning diesel prices.
The Australian Competition and Consumer Commission (ACCC) is responsible for administering the Trade Practices Act 1974 (the Act). The main purpose of the Act is to promote competition and efficiency in markets within Australia and to protect consumers from unlawful anti-competitive conduct and unlawful market practices.
Since 1 August 1998 diesel prices have been deregulated and wholesalers and retailers are free to set their own prices based on market conditions. However, the ACCC has a monitoring role and closely monitors diesel prices in metropolitan areas and around 110 country towns. Furthermore, the ACCC follows developments in the fuel industry and will enforce the provisions of the Act if there is evidence that it has been breached.
On 16 February 2008 the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon Chris
Bowen MP, announced Mr Pat Walker as the Government's nominee for the new Petrol Commissioner. He also announced that he was asking the ACCC and the new commissioner to commence a renewed focus on LPG and diesel prices.
Movements in fuel prices in Australia tend to follow international benchmarks. The benchmark for diesel is
the spot price of Singapore Gasoil (with 50 parts per million sulphur content). The benchmark for petrol is
the spot price of Singapore Mogas 95 Unleaded, which is refined petrol and not crude oil. There is generally a time lag of around one to two weeks between changes in international prices and changes in retail prices, due to the averaging formula used by refiners in Australia when setting their wholesale prices.
Increases in the benchmark price for diesel over recent months have been a significant factor influencing the price of diesel in Australia. Between January and March 2008 the benchmark price for diesel increased by over $US20 per barrel. Factors contributing to this increase have included higher international crude oil prices and higher demand for the product.
A significant factor contributing to diesel prices being higher than petrol prices in Australia in recent months is that the international benchmark price for diesel has increased relative to the international benchmark price for petrol. Over the three months January 2008 to March 2008 the price of Singapore Gasoil was around US$ 13 per barrel higher than the price of Singapore Mogas 95 Unleaded.
I trust this information is of assistance to you.
Yours sincerely,
Gary Dobson
Director
Petrol Monitoring Section