Disparity in fuel prices.

Submitted: Thursday, Jun 09, 2011 at 20:25
ThreadID: 86863 Views:1957 Replies:7 FollowUps:6
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I fueled up in Sydney southern suburbs today and unleaded E10 was 128.9 cpl and diesel was 145.9 cpl, why the big difference and don't give me the oil company's excuse , it's to do with global demand.
Makes me think seriously about buying a petrol powered vehicle next time.

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Reply By: Michael ( Moss Vale NSW) - Thursday, Jun 09, 2011 at 21:36

Thursday, Jun 09, 2011 at 21:36
It works the other way also, on a few occasions diesel has been much cheaper than petrol and for longer periods.. I bought Mobil diesel from an independant last weekend for $1.38, good value and today it was $1.42. Diesel seems to have a more stable base price overall and the price range is not as volatile as petrol. Best thing to do is wheel in when you see cheap fuel and top the tank up. regards Michael
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Reply By: Member - Bruce C (NSW) - Thursday, Jun 09, 2011 at 22:49

Thursday, Jun 09, 2011 at 22:49
Hi Racinrob,

I think it has every thing to do with the popularity of the small diesel recreation vehicle.
Before the rise in popularity of said vehicles diesel was cheaper than petrol but then it started to climb as the number of said diesel vehicles increased.

Whatever the traffic will bear.

From several posts on these pages over the last couple of years I have observed people saying that the big trucking companies buy their fuel on contract and those contracts are set at the begining of each year and the litre price is well below street value. This would not surprise me.

I would speculate that the major oil companies in this country would be purchasing fuel under contract as well. If this were the case then I would suggest someone is having a lend of us, so to speak.

Before Easter I heard that the problems in the Middle East were contributing to uncertainty re oil production so the barrel price started to climb. Then 2 weeks later a news broadcast said that the price was falling due to an over production situation.

Guess what, prices in Kempsey and Port Macquarie have remained pretty constant through out. Round the $1.50 per litre. Petrol not a lot cheaper.

Figure that one out, I can't. I think someone is having a lend of me, if no one else.

Cheers, Bruce.

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restless and lost on a track that I know. HL.

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Follow Up By: Rob! - Friday, Jun 10, 2011 at 10:07

Friday, Jun 10, 2011 at 10:07
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.
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Follow Up By: The Landy - Friday, Jun 10, 2011 at 11:16

Friday, Jun 10, 2011 at 11:16
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....
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Follow Up By: Member - Mfewster(SA) - Friday, Jun 10, 2011 at 19:55

Friday, Jun 10, 2011 at 19:55
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.
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Follow Up By: Member - Bruce C (NSW) - Saturday, Jun 11, 2011 at 17:21

Saturday, Jun 11, 2011 at 17:21
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.
At home and at ease on a track that I know not and
restless and lost on a track that I know. HL.

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Follow Up By: Member - Mfewster(SA) - Saturday, Jun 11, 2011 at 18:19

Saturday, Jun 11, 2011 at 18:19
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
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Follow Up By: Member - Bruce C (NSW) - Sunday, Jun 12, 2011 at 11:01

Sunday, Jun 12, 2011 at 11:01
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.
At home and at ease on a track that I know not and
restless and lost on a track that I know. HL.

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Reply By: member - mazcan - Thursday, Jun 09, 2011 at 23:47

Thursday, Jun 09, 2011 at 23:47
hi racinrob
for starter e10 petrol contains 10% ethanol
if it was a woolworths caltex service station the diesel would be xlsd extra low sulphur diesel containing maximin of 10 parts per million of sulphur or 10mg/kg
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Reply By: youngharry52 - Friday, Jun 10, 2011 at 10:36

Friday, Jun 10, 2011 at 10:36
From what I understand, most diesel in Australia is 'contract' diesel, ie bought by trucking, mining, utility providers at a negociated price for bulk purchases for a year or so. We make up the shortfall !!!!!!


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Reply By: The Landy - Friday, Jun 10, 2011 at 10:51

Friday, Jun 10, 2011 at 10:51
It’s an ‘old chestnut’ that re-appears regularly.

Australia uses a very low sulphur content diesel fuel these days, unlike days of old, and the cost of producing this is higher, so it is one cause of higher pricing.

Of interest, Caltex upgraded it Lytton plant over the past couple of years, at a huge capital cost to meet the government requirements for producing the lower sulphur diesel.

But the reality is, petrol has a higher demand in Australia than diesel does from recreational uses, so as a consequence it doesn’t enjoy the same level of discounting that unleaded fuel does. Harsh, but true. So the spread between the cost of unleaded, and diesel, is unlikely to improve to any great extent.

And in an environment where fuel costs are more likely to increase, rather than decrease in the years ahead, the bigger issue is the cost of fuel generally, not the spread between the different products.

But your solution, if you are simply concerned about the differential between the cost of petrol and the cost of diesel, is to buy a petrol vehicle as you’ve canvassed...
AnswerID: 456962

Reply By: Member - Bill B1 (NSW) - Saturday, Jun 11, 2011 at 10:45

Saturday, Jun 11, 2011 at 10:45
Its not a thing to get worried about.
Oodnadatta had diesel at 1.98 and William Creek 2.20.

Bill B

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Reply By: ao767brad - Saturday, Jun 11, 2011 at 21:57

Saturday, Jun 11, 2011 at 21:57
Kings Canyon $2.19ltr
Yulara $1.869ltr
Alice Springs $1.699ltr
Erldunda $1.87ltr
Coober Pedy $1.68ltr
All in the last 10 days.
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