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WEEKLY DIESEL PRICES REPORT

Week Ending 25 July 2010

All data, charts and tables in this Report are based on the latest available market data to Sunday, 25 July 2010.

Use the following links to see more detailed information on:

Pricing Facts www.aip.com.au/pricing/facts.htm
Terminal Gate Prices (wholesale) www.aip.com.au/pricing/tgp.htm
Pump Prices (retail) www.aip.com.au/pricing/retail.htm
International Fuel Prices www.aip.com.au/pricing/international.htm

Should you have any questions about the material in this report, please contact AIP at aip@aip.com.au.

This report has been prepared by ORIMA Research Pty Ltd on behalf of AIP. Whilst AIP has taken due care in ensuring the accuracy of the information or material in this report, the report is made available for general use only and is provided without any express or implied warranty as to its accuracy, completeness or currency.





THE AUSTRALIAN FUEL MARKET - AN OVERALL SNAPSHOT

Understanding Movements in Key Diesel Price Indicators

The Chart below provides an overall 'snapshot' of movements in key market indicators relevant to the price of diesel in Australia.

The Australian refining sector is a price taker. Domestic prices are closely linked to international prices. The Singapore benchmark price of diesel (Gasoil 10ppm sulfur) is the key diesel price benchmark for Australia. As the chart below shows:
  • the Gasoil price plus shipping costs and Australian taxes represents almost the entire wholesale price of diesel (around 95%)
  • there is no retail discounting cycle (ie. sawtooth pattern) for diesel, as only 25% of diesel is sold through retail outlets and most of this goes to contract or fuel card customers rather than private motorists; most diesel is sold in bulk to commercial/industrial customers (eg. mining, transport and farming) on long term contract; such contracts are subject to rigorous competition under regular market tenders.

NOTES
(1) INTERNATIONAL DIESEL PRICE: the international diesel prices are provided by Platts (Copyright © 2009 The McGraw-Hill Companies, all rights reserved), and represent the end of day assessment for the price of Gasoil (50ppm sulfur from 1 January 2006, and 10ppm Sulfur from 1 January 2009). No portion of the publication may be photocopied, reproduced, retransmitted, put into a computer system or otherwise redistributed, without prior written Authorisation from Platts. Platts is a trademark of the McGraw-Hill Inc. Information has been obtained from sources believed reliable. However, because of the possibility of human or mechanical errors by sources, McGraw-Hill or others, McGraw-Hill does not guarantee the accuracy, adequacy or completeness of any such information and is not responsible for any errors or omissions or for results obtained from use of such information.
(2) SHIPPING: is the weighted average of daily market shipping rates (Australian cents per litre) for journeys from Singapore to major Australian ports (weighted by the volume of fuel sales in the relevant State). Source data include Platts, Worldscale, Australian Petroleum Statistics and the Reserve Bank of Australia.
(3) TAXES: is excise and GST less any relevant state rebates weighted by fuel volume consumed in each State.
(4) NATIONAL AVERAGE WHOLESALE PRICES: are derived from capital city prices weighted by fuel volume consumed in each State.
(5) NATIONAL AVERAGE RETAIL PRICES: are calculated as the weighted average of each State/Territory's metropolitan and non metropolitan retail diesel prices, with the weights based on the number of registered diesel vehicles in each of these regions.





INTERNATIONAL MARKET TRENDS

FIGURE 1: COMPARISON OF SINGAPORE DIESEL PRICE (GASOIL)
WITH CRUDE OIL PRICE (TAPIS)

NOTE: Australia is part of the Asia Pacific fuel market (Singapore is the regional refining/distribution centre) and the current market benchmark is Tapis for crude oil and the Singapore price of diesel (Gasoil 10ppm sulfur). Tapis crude oil and Gasoil prices are provided by Platts (McGraw-Hill Inc), see Notes on page 2.


FIGURE 2: DIFFERENCE BETWEEN MARKET PRICES
Singapore Diesel price minus Tapis Crude Oil price

NOTE: The refiner margin above is the difference between market prices for Gasoil and Tapis. It is not a figure determined by refiners.



 TAPIS CRUDE OILCents per
litre (A$)		    GASOILCents per
litre (A$)
 Average: Last Week (to Friday 23/07/10)56.0    Average: Last Week (to Friday 23/07/10)62.8
 Average: Previous Week (to Friday 16/07/10)55.9    Average: Previous Week (to Friday 16/07/10)62.4
 Average: Last 4 Weeks56.1    Average: Last 4 Weeks62.8
 Average: Last 12 Weeks56.6    Average: Last 12 Weeks64.1
 Average: Last 12 Months55.4    Average: Last 12 Months60.5


PLEASE NOTE
Differences/margins between market prices or benchmarks are used as indicators of general trends in the petroleum market, they do not represent profits accruing to oil companies at the refining, wholesale or retail segments of the market. For each market segment, a range of costs would need to be deducted to determine actual profits.





AUSTRALIAN WHOLESALE MARKET TRENDS

FIGURE 3: COMPARISON OF AUSTRALIAN DIESEL TGP (OR 'WHOLESALE PRICE')
WITH SINGAPORE DIESEL PRICE (GASOIL)

NOTE: The Gasoil prices and Shipping rates are provided by Platts (McGraw-Hill Inc), see Notes on page 2.


FIGURE 4: DIFFERENCE BETWEEN MARKET PRICES
National Average Diesel TGP minus Singapore Diesel Price (plus Shipping & Taxes)



 GASOILCents per
litre (A$)		    DIESEL TGP (National Average)Cents per
litre (A$)
 Average: Last Week (to Friday 23/07/10)62.8    Average: Last Week (to Friday 23/07/10)119.1
 Average: Previous Week (to Friday 16/07/10)62.4    Average: Previous Week (to Friday 16/07/10)119.0
 Average: Last 4 Weeks62.8    Average: Last 4 Weeks120.3
 Average: Last 12 Weeks64.1    Average: Last 12 Weeks121.6
 Average: Last 12 Months60.5    Average: Last 12 Months116.8


PLEASE NOTE
Differences/margins between market prices or benchmarks are used as indicators of general trends in the petroleum market, they do not represent profits accruing to oil companies at the refining, wholesale or retail segments of the market.
For each market segment, a range of costs would need to be deducted to determine actual profits.
For example, at the wholesale level, a range of costs (including 'landed costs' and 'wholesaling costs') would need to be deducted to determine actual profits at the wholesale level. These 'landed costs' include the costs of the quality premium (market cost) for Australian fuel standards, insurance and loss, and local wharfage costs. The standard 'wholesaling costs' include terminal operating costs, administration and wholesale marketing costs and corporate taxes and government charges on wholesaling activities.





AVERAGE DIESEL TERMINAL GATE PRICES (TGPs) ACROSS
AUSTRALIAN STATES/TERRITORIES

Week ended 23 July 2010

DIESEL (cents per litre $A)
  Monday
19 July 2010		 Tuesday
20 July 2010		 Wednesday
21 July 2010		 Thursday
22 July 2010		 Friday
23 July 2010
 Sydney 118.7 118.8 118.9 119.1 119.3
 Melbourne 118.1 118.2 118.3 118.5 118.7
 Brisbane 118.4 118.5 118.5 118.7 119.0
 Adelaide 118.8 118.9 118.9 119.1 119.4
 Perth 119.4 119.5 119.5 119.7 120.0
 Darwin 122.3 122.4 122.5 122.7 122.9
 Hobart 122.9 123.0 123.1 123.4 123.6

Notes:  Daily TGP data are published by all wholesale fuel suppliers. AIP's website presents average TGP data for each weekday – see www.aip.com.au/pricing/tgp.htm. This data has been prepared by ORIMA Research Pty Ltd on behalf of AIP, using information from BP Australia, Caltex, Shell Australia, and ExxonMobil Australia. Prices shown are the average TGP for diesel across each of these companies for the day.





EXPLAINING THE TIME LAG BETWEEN CHANGES IN SINGAPORE PRICES AND CHANGES IN AUSTRALIAN WHOLESALE DIESEL PRICES

Generally, there is a short time lag of 1-2 weeks between changes in Singapore prices and changes in Australian prices.

  • The lag can be seen in FIGURE 3 above. That is, see the slight delay in the peaks and troughs in the pink line (National Average TGP) compared to the purple line (Gasoil 50ppm sulfur plus Shipping & Taxes).
  • Importantly, this time lag occurs whether: prices are going up (when the lag slows price rises to consumers) or prices are going down (when the lag delays price falls).
  • The lag is a result of using a rolling average of Singapore prices as part of the wholesale pricing methodology (very similar to that used by the ACCC when wholesale prices were regulated by government). The pricing methodology is called import parity pricing (IPP).
  • The use of rolling averages smooths day-to-day price volatility.
  • Not accounting for this lag, introduced by the rolling average, leads to incorrect conclusions about how Singapore prices flow through to prices in Australia.

The very close relationship between changes in Gasoil prices and changes in Australian TGPs can be seen by applying a rolling average to the Gasoil price data (a 7 day rolling average is used in the Chart shown above to illustrate this).






AUSTRALIAN RETAIL MARKET TRENDS FOR DIESEL

FIGURE 5: COMPARISON OF AUSTRALIAN PUMP PRICE WITH AUSTRALIAN TGP
Average Retail Diesel Price versus Average Wholesale Diesel Price


FIGURE 6: DIFFERENCE BETWEEN MARKET PRICES
Australian Average Retail Price minus Average Wholesale Price



 Wholesale: Diesel TGP
(National Average)		Cents per
litre (A$)		    Retail: Diesel Pump Price
(National Average)		Cents per
litre (A$)
 Average: Last Week (to Friday 23/07/10)119.1    Average: Last Week (to Sunday 25/07/10)131.5
 Average: Previous Week (to Friday 16/07/10)119.0    Average: Previous Week (to Sun 18/07/10)131.9
 Average: Last 4 Weeks120.3    Average: Last 4 Weeks132.1
 Average: Last 12 Weeks121.6    Average: Last 12 Weeks132.5
 Average: Last 12 Months116.8    Average: Last 12 Months127.5


PLEASE NOTE
Differences/margins between market prices or benchmarks are used as indicators of general trends in the petroleum market, they do not represent profits accruing to oil companies at the refining, wholesale or retail segments of the market.
For each market segment, a range of costs would need to be deducted to determine actual profits.
For example at the retail level, a range of standard retailing costs would need to be deducted to determine actual profits.
These costs include:
  • land transport costs (of getting fuel from the terminal gate to the petrol bowser)
  • administration and retail marketing costs
  • the costs of running service stations like wages, rent and utilities
  • corporate taxes and other government charges on retailing activities





SUMMARY: RETAIL DIESEL PRICE TRENDS ACROSS STATES/TERRITORIES

Week ended 25 July 2010

'NATIONAL AND STATE' AVERAGE DIESEL PRICES (cents per litre $A)
 Weekly Average Weekly ChangeLowHigh
 National Average 131.5 -0.4 131.2 131.6
 NSW / ACT 132.0 -0.5 131.5 132.5
 Victoria 127.6 -0.8 127.4 128.0
 Queensland 131.1 -0.3 130.9 131.3
 South Australia 130.8 -0.3 130.5 131.4
 Western Australia 134.3 -0.4 134.1 134.5
 Northern Territory 141.1 -0.4 140.9 141.3
 Tasmania 135.9 0.1 135.6 136.1



'METROPOLITAN' AVERAGE DIESEL PRICES (cents per litre $A)
 Weekly Average Weekly ChangeLowHigh
 National Metro Average 129.7 -0.6 129.5 129.9
 Sydney 129.3 -0.6 128.5 130.5
 Canberra 133.0 -0.6 132.9 133.1
 Melbourne 126.7 -1.0 125.8 127.5
 Brisbane 130.0 -0.6 129.8 130.2
 Adelaide 128.8 -0.5 128.2 130.1
 Perth 131.6 -0.3 131.4 131.9
 Darwin 136.8 -0.5 136.6 137.0
 Hobart 136.0 0.0 135.8 136.5



'REGIONAL' AVERAGE DIESEL PRICES (cents per litre $A)
 Weekly Average Weekly ChangeLowHigh
 National Regional Average 132.7 -0.4 132.4 133.0
 NSW / ACT 133.5 -0.5 133.1 134.0
 Victoria 128.5 -0.5 128.2 128.9
 Queensland 131.6 -0.2 131.4 131.7
 South Australia 132.3 -0.3 132.0 132.4
 Western Australia 136.9 -0.5 136.7 137.1
 Northern Territory 146.4 -0.2 146.2 146.5
 Tasmania 135.8 0.1 135.6 136.1


For more information on average weekly retail (pump) prices for diesel across Australia, please see www.aip.com.au/pricing/retail.htm.


NOTES
(1) The National Average Retail price is calculated as the weighted average of each State/Territory's metropolitan and non metropolitan retail diesel prices, with the weights based on the number of registered diesel vehicles in each of these regions.
(2) The National Metropolitan Average price is calculated as the weighted average of the retail diesel prices across each capital city, where the weights are based on the number of vehicles using diesel registered in each city.
(3) The Regional Average prices (including the National Regional Average) are calculated as the weighted average of the retail diesel prices for the non metropolitan regions in each State/Territory, where the weights are based on the number of vehicles using diesel.
(4) The vehicle data source is ABS Motor Vehicle Census, 2005, Cat No 9309.0..
(5) 'Weekly Low' and 'Weekly High' are based on the lowest and the highest average daily prices in the relevant area.
(6) Weekly Average prices are a straight average of the seven days.
(7) Weekly Change is the change compared with the Weekly Average last week.
For more information on data methodology, please see the AIP Website (www.aip.com.au/pricing/retail.htm).





DIESEL PRICES & TAXES IN OECD COUNTRIES

September Quarter 2009

The Chart below shows Australia has among the lowest diesel prices of all OECD countries.


Diesel Prices and Taxes in OECD Countries

Source: Australian Petroleum Statistics, Department of Resources, Energy & Tourism



 

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