Diesel pump price pain, companies allegedly make millions

An analyst has claimed the retail price of diesel is not reflecting a recent drop in wholesale prices, as petrol companies allegedly pocketed hundreds of millions in profit late last year.

A leading fuel analyst claims the retail price of diesel is not reflecting a recent drop in wholesale prices, as petrol companies allegedly pocketed an extra $250 million profit late last year.

Sky-high diesel prices have stung the farming sector recently, with the latest ABARES data predicting producers will spend an estimated $7.3 billion of fuel in 2022-23 – an increase from $6.2 billion in 2021-22 and almost double the $3.5 billion of 2020-21.

Fueltrac general manager Geoff Trotter said that while national diesel wholesale prices peaked in late October 2022, they had fallen “quite substantially” since and stabilised in late December at a lower level.

A motorist takes fuel at a gas station. (Photo by GUILLAUME SOUVANT / AFP)

“However, average retail diesel pump prices in both metropolitan and regional areas have lagged those wholesale price falls,” Mr Trotter said.

“This has led to substantially higher than average retail diesel margins over the period.

“In mid-December 2022 the average retail diesel margins were in the range of plus-30 cents per litre to plus-35 cpl. This compares poorly to the long-term average diesel margins of plus-15 cpl to plus-20 cpl.

“The difference gives an additional margin over the two months, on 1.667 billion litres sold, of over $250 million.”

The impact of the Covid pandemic, Europe’s demand for heating fuel, Russian oil export bans, and the previous federal government’s temporary fuel excise cut created a volatile market throughout 2022.

The Australian Competition and Consumer Commission, which used Fueltrac data to compile its September quarterly petrol monitoring report, has subsequently stepped up its surveillance of fuel prices.

In its report, released in December, the watchdog found for the first time in two years, average retail petrol prices in Australia’s five largest cities fell by 10.3 cpl from the June quarter, to 177.7 cpl in September.

“While international factors drove up prices steeply earlier this year, they contributed to price drops in the September quarter,” ACCC Deputy Chair Mick Keogh said.

However, it also found “average retail diesel prices were significantly above average retail petrol prices”.

“Six weeks after the full excise restoration, amid rising wholesale diesel prices, daily average diesel prices in the capital cities increased by between 29.0 cpl and 37.6 cpl. The average increase in all regional locations was around 32.0 cpl,” the report read.

There is generally a short time lag of 1-2 weeks between changes in Singapore benchmark prices being reflected in Australian wholesale prices, according to the Australian Institute of Petroleum.

The lag may be longer during times of significant international price volatility.

The AIP found the national average retail price of diesel was $2.21 cpl on December 11, 28c cents higher than the national average wholesale price and $2.15 cpl on 18 December, or 29c higher than wholesale.

However, the margin between average wholesale and retail was 15.9 cpl in mid-November, when diesel sold for an average of 235.4 cpl.