Myth Busters: Diesel prices explained

Myth #1: Australians should not need to pay international prices for oil because we have enough to be self-sufficient

In fact Australia is not self sufficient in oil or oil products. Australia must import crude oil and refined products to meet total domestic demand. All of these imports are valued at international prices. Furthermore, if Australian prices were lower than international prices, then domestic refiners would be inclined to export products rather than supply the local market, resulting in Australia not having enough fuel for its needs.

Myth # 2: Diesel is easier to refine, therefore is should be cheaper

In Australia, Automotive Diesel Fuel requires as much refining as petrol. Diesel fuel sold in Australia is of a very high quality. Current Australian standards require a very low sulphur content (50 parts per million or less). This low sulphur standard helps to lower the emissions from diesel vehicles, but requires extensive treatment in the refining process to remove the sulphur from crude oil. Fuel standards also control other parameters, such as particulate matter and black smoke production. Hence modern diesel is a sophisticated fuel and requires at least as much processing as unleaded petrol.

Myth # 3: Petrol companies must engage in price collusion because all the board prices move at the same time

Companies do not collude with any other companies to set prices. Competitor prices are readily available as pump prices are usually displayed on boards. In addition we supplement this information with other competitor information we buy from an independent price monitoring company (who send us information on a very regular basis). We can be aware of major competitor price movements within 15 minutes. This intelligence gives us the ability to make pricing decisions very quickly. We have computer links to our agency sites allowing us to provide them with pricing instructions within minutes of making a decision.

Myth # 4: Fuel prices always go up in time for weekends

Fuel prices do not always go up for weekends. In most capital cities fuel price rises tend to occur midweek, and discounting commences prior to the weekend.

Myth # 5: Petrol companies use world events as an excuse to increase petrol prices

In order to maintain a healthy, profitable business we will vary our prices in line with international prices. Companies produce only a small percentage of the world’s oil and gas, and are exposed to movements in the world oil market. Sometimes world events (e.g. supply disruptions like hurricanes, or political instability) will force up the cost of products, hence our prices will increase.

Related websites:

Find further information on fuel pricing in Australia
Australian Institute of Petroleum (AIP)
Royal Automobile Club of Victoria (RACV)
Australian Liquefied Petroleum Gas Association