Why Are Petrol Prices so Expensive?

Thursday, June 14, 2018

There is no sign of respite from Australia’s high petrol prices. Prices hit a four-year high recently on the back of surging international crude oil prices. And with the price of oil breaking through the $US80-a-barrel mark for the first time since November 2014, worldwide petrol prices are predicted to rise further.

There are many complexities in global oil prices. However the oil price increase is partly related to OPEC and non-OPEC nation agreements to manage global supply. This follows several years of competition in supply between regular oil and shale oil producers.

The higher oil prices have also been blamed on potential supply disruptions, with Venezuelan production plunging, and concerns about lower Iranian production with the reintroduction of US sanctions.

The majority of Australia’s crude oil supply comes from the Middle East and is then processed at refineries in South Korea, China and Singapore. From there, it is turned into diesel, aviation fuel and petrol, and transported by ship to Australia.

The Singapore fuel price is the benchmark for Australian prices and it, in turn, is dependent on the international crude oil price. With Australian petrol prices generally a week behind the Singapore price trend, early indicators are for even higher local prices in the short term.

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