The Cost of Fuel is commming down in the next 2 weeks

Think about this a minute.
Would you instantly take a multi million dollar hair cut on that tanker with 100,000 tonnes of crude on its way to Aus which when it sailed a couple of weeks ago you paid the equivalent $145- per barrel and today its cargo could be bought for $130- per barrel??

I forgot how many barrels to the tonne but work out the maths and its not rocket science as to why the price takes time to filter down as you have to recover the cost paid for the product bought many weeks ago and coming through the system.

I agree with your comments regarding the Fuel Commissioner or any public or political servant who lays claim to influencing world oil prices.

But what is the reason behind a rise in the pump price, when the fuel in the tank that is bought at a lower price before the world price rise, rises? I've see the pump price change by a bit, yet no new tanker has filled the tanks.
That's the bit that get under my skin.
I fully understand how the market works and what influences it. Supply and demand and so forth.
But it is always quicker to rise than what it is to fall.

You are dead right Jon. The Bastards enjoy a one way street and its all their way.

Hairs this was discussed awhile ago in this thread so no real point in explaining the pricing cycle once more other than to say you need to maintain margin to remain profitable in any business, not just oil.

John, I really don't have a problem with a business, yes even oil companies being profitable. A business that is profitable and competitive helps to lower prices. Unless there is a Cartel Operating with collusion, but that's another discussion for another time maybe?. What I object to is being feed horse S$#@ from these multinationals.

Unfortunately we all use it, we all need it, we have a hunger for it and atm there really isn't many alternatives, for the majority of us.
And a lot of us feel we are at their mercy.

This subject will be in these threads for a long time to come because it effects so many people in so many different ways.

So what horse $hit are we referring to??

I think Landy summed up the perception very well with his post below.

Ok, maybe horse $#@ was a bit strong of a term.
Have a read of this How Oil Companies Use BI to Maximize Profits
Producing fuel is only one part of making money for oil companies.

Its all based on sound economics related to the price per barrell of oil. When oil prices fluctuate the formula is applied.

Up by whole down by half with immediate increases and carefully assessed and delayed decreases.

There is absolutely no evidence of that if you look at the facts, although it makes for a popular story.

Oil is the major cost input for petroleum products, so over time it is fair to assume that any change in the price of a barrel of oil will eventually feed into petroleum product pricing. However, supply and demand for individual refined products is the key to determining prices, especially in the short-term, not the cost of crude oil.

Increases in the price of crude oil will increase the costs of refining into petroleum products, however those increased costs may not always be fully passed on if there is an excess supply of refined product in the region. Equally, if there is a shortage of refined product, prices may increase even without an increase in crude oil prices. We saw this recently when there was a shortage of diesel in the region (and globally) which led to sharp increases in its price, despite a relatively stable oil price at the time.

Importantly, retail fuel prices follow the price from Singapore refineries (the regional benchmark) with a lag of 1-2 weeks. I posted a link to a chart below that debunks the myth that prices are quick to rise, but slow to fall.

Perhaps looking at the facts isn't the most poplular way to go, but they present the true picture versus a lot of the myth that permeates many of the discussions on fuel pricing.

And I fill my vehicles regulary so rest asssured like everyone else I want the cheapest price possible.

The link follows.

Lag in pricing

Sounds like more bull$hit from our populist, Rudderless PM who likes to think the inquiry is something important.

Wesfarmers who own Coles say its not going to influence the way they do business.

Yankee doodle do!!

yeah,

like the Former pm who thought he was all important.

leave it alone now John, it's getting a bit boring, anyone would think rudd fiddled while you burned, watching him.

not like me to pass such comment but your blue ribbon is on the nose sorry mate.

Fair comment but the problems of today need to be handled by the government of the day.
Its easy to continue to blame the past whilst sitting on your hands.

John,

You are so biased, such that to have lost any semblance of objectivity.

Your view Jim, but its obvious you don't know me well enough to even come close to substantiating the claim.

John,

I only know you by what you post. I'm just giving you the feedback that you incessantly post disparaging remarks, which lack substance, about our current government.

Your recent remark about Garret that he was the worst Environment Minister in the history of Australia was equally based on bias rather than fact. The bloke hasn't been in the job long enough to be judged.

Like Bushfix said, it is getting boring. We're just bringing it to your attention, take it or leave it.

Jim.

In that case they had better get someone who can keep accurate statistics. LOL

Some good info there Landy.
The Diesel price facts sheet is a very good read.

Hi John

I try to keep to the factual evidence..

I said recently that the fuel debate takes on the 'earth is flat' argument that was going around back in Columbus's day. The argument sounds logical, enough people believe the story so it must be right?

My main beef with incorrect assumptions (fiction becoming fact) in the fuel debate is that it leads to wrong policy responses by government; FuelWatch is a classic example.

Nobody wants to pay more for fuel than they need to, but equally if we want continuity of supply than those selling it need to make a return, we need to accept that. In fact Mobil shutdown Port Stanvac for that very reason; the returns generated did not warrant the capital cost of upgrading.

Too many people continue to look for the 'smoking gun' but despite inquiry after inquiry into fuel retailing in Australia it still hasn't been found. Perhaps that's because there isn't one.

Off my soapbox....(for now!)

Well summed up mate.
Mobil are still flagging the possible closure of the Altona Refinery due to continued losses in refining in this country and as the links above show the better margin and capacity available to them as refiners in Asia.

I guess the "smoking gun" debate is influenced by the perception of the average person of big money being made, but proper examination shows, yes they turn over huge $$ but the balance remaining at the end of the day is very small as a percentage of that turnover.

now now, you'll get our Detective Inspector all worked up again...

Yeap it's still planned
Qld truck drivers threaten two-week work stoppage

Hi Landy,
'this will pressure retail fuel prices lower'

By how much do you think it will fall and in what time frame will it drop?
As of writing this Oil was $124.46US per barrel.

Hi Hairs…..

The conditions exist for a fall in retail prices – increasing inventories in the US and a lower crude price. Baring in mind that the US is outside our region, however it will impact pricing.

Importantly, as I pointed out earlier, a change in the price of crude is not necessarily the only pre-condition required for a change in the price of a refined product, especially in the short term. Increasing supply is key to a fall in prices at the pump.

Clearly, in the medium to longer term falling crude oil prices are key to cheaper fuel prices. My opinion is that oil has plenty of scope to fall further and I feel we are more likely to see it trading at US$110-115 per barrel, before we see it back at US$ 145-150 per barrel. This is a shorter term view; longer term oil is set to trend higher, but not necessarily at the pace we have seen over recent months.

I posted earlier in the thread a chart that shows the price lag between the Singapore Regional price and our retail prices, this is around 1-2 weeks, but I suspect with discounting prices will start to fall sooner than later.

I also expect to see some reasonable falls in the price of diesel; the shape of the forward price curve (was steeply in backwardation – the future price lower versus the price for current delivery) has eased over the past couple of weeks with the price for current delivery falling. The lower oil price is also adding downward pressure on the forward price, and the refinery margin has also narrowed. Couple all this with an increase in supply and prices at the pump will definitely start to fall.

To answer your question; I can’t put numbers on it, but if pressed for timing I would be surprised if we don’t start to see a response by early next week. I am actually quite optimistic that we will see retail fuel prices (ULP) much lower than current levels over the next 2-3 months; back into the region of AU$1.30/1.35 in the major cities, if not slightly lower.

Cheers

Hopefully it will drop enough to give some breathing space for those that have felt the pain of the higher price, eg, Tourism, Transport, Fishing fleets.
Thanks for your reply Landy.