Disparity in fuel prices.

I suspect part of the price difference between now and 10 years ago is the fact the now we have low sulphur diesel which is more expensive to make.

The increasing popularity of diesel vehicles would actually decrease the price.

On hedging, many companies hedge fuel costs on a regular basis, mostly to have a fixed known cost for their underlying business. And you’ve highlighted trucking companies as one example.

This is usually done with a financial intermediary like a bank, not with the refining company (another topic altogether). Noting, you can’t hedge the full pump price, as it includes freight and government charges, the only component that can effectively be hedged is the Singapore Gasoil price (diesel), and in need the exchange rate.

Mind you, this is a double edged sword, if you hedge your cost today, and the price subsequently falls than you end up paying a higher price than you would have had you not hedged. Hedging, or fixing the price, isn’t a ‘magic’ panacea and has adverse ramifications if you get it wrong.

Oil and petroleum products are hugely commoditised products that are traded on financial markets daily, either using futures contracts or over-the-counter hedging products, both oil companies, and refiners use these instruments to either fix the price they can receive for oil produced, or a refiner can fix his oil input costs for the refining it will undertake.

But whether they do or don’t is irrelevant to the extent that prices we pay at the pump in Australia are determined by market forces, not the cost of producing it or what they might have hedged the underlying costs at (what if they hedged at a higher cost?).

Volumes could be written on this topic, but the constraints of the forum make it difficult to have any meaning discussion (debate)...

Enjoy the long weekend....

That's not the way I remember it. For years us diesel owners used to write letters and moan because in Oz diesel cost more than petrol whereas overseas diesel was cheaper than petrol. Then, I think it was about 5 years ago when small diesel cars started to sell here the way they have in Europe for years, , it evened out and diesel for a while was less than petrol.

Hi MFewster,
I can remember back when they could hardly give diesel away. Back when petrol was 2/6 pence per gallon or 5.5 cents per litre. A pack of cigarettes was about 3/- or 30 cents a pack of 20

Nearly all trucks were petrol and there were very few diesels on the road in Australia. Even most semis were petrol back then. Diesels were cheap to run but snails crawling up hills, nothing like today. It was the cheapness of the diesel fuel which eventually bought about the popularity of diesel.

This was up till the late sixties and toward the mid seventies.
But it was around that time (mid seventies) as i recall that Japanese trucks and 4 wheel drive diesels started appearing and ever since the cost of diesel has been steadily rising, relative to petrol.

Along came the rise in popularity of the 4 wheel drive diesel recreation vehicles and diesel started to rise again, in relation to petrol. There may have been some troughs in there but that is pretty much how it has been.

In the fifties and sixties there were very few diesel trucks. Most suburban haulage and general duty delivery trucks were petrol.

I have on farm here a 1972 model TK bedford 10 tonne tipper which is a 6 cyl petrol unit and quite a reasonable power plant it is too. I rebuilt the engine as it was seized when I got it a few years ago and I was still able to buy new pistons and bearings for it from Repco (ACL).

For the last 25 years I have been buying diesel (Excise exemption not withstanding) for the farm vehicles and equipment while having a petrol car and have observed closely the relationship in price between petrol and diesel and I have seen in that time diesel come from a lower price point than petrol to a point where it is consistently dearer than petrol and frequently around 10 cents or more dearer. At one stage it was nearly 50 cents dearer per litre.
I attribute this increase to the rise of popularity of the diesel RV. It appears to to be a case of whatever the traffic will bear, in my opinion.

Not every body has had the same experiences as myself, that I understand but these have been my observations in NSW and especially here on the Mid North Coast.

Cheers, Bruce.

Thanks Bruce, I really enjoyed the read.
It still all seems a bit iffy and I think you are right re. what the market can take. It's just odd that around 3 years ago, for a while, diesel was actually cheaper here (Adelaide) than petrol (for the first time I remember) and now it is more expensive than petrol again. I'd have thought the percentage of diesels was increasing and so economies of scale etc should have kept the lower relativity of diesel. As far as I am aware, diesel in Europe has always been cheaper than petrol and they use the same high grade stuff that we now use. Again, as far as I am aware, diesel should be cheaper to produce than petrol as it is cracked off at an earlier stage of the refining process.l

Someone told me a couple of years ago that the oil companies had worked out where the tipping point was and that was around $2.50 per litre. At that price point people are predicted to seek alternative cheaper fuels.

As the government is trying to wean us off carbon based fuels and anything else to do with carbon, I would think that that tipping point will be reached much sooner than later.

If successive governments were really concerned about the environment then they would convert the entire commonwealth fleet over to LPG as it is purported to be a more environmentally friendly fuel and according to some commentators we have plenty of it.

This carbon tax, whether you agree with it or not, is going to effect every one of us in the hip pocket because there is nothing we consume that does not have a carbon input in one form or another.
The only sector to really suffer will be the consumer because the manufacturing and transport sector and every thing in between will not pay this levy/tax because they will have to pass it on.
They will not absorb it and ..... nor should they.

Ill get down off the soapbox now and give someone else a go.

Cheers, Bruce.