Cost of Diesel

Having recently purchased a new Turbo Diesel four wheel drive for my wife I have taken more notice of the cost of Diesel and I must admit it just convinces me more that Australian’s are being taken for a ride in almost all aspects of our lives.  Seriously has someone declared us as the suckers of the Global Market?

Historically Diesel has always been cheaper then Petrol where ever you go in the world by at least ten cents per litre, so why is it in Australia Diesel is nearly always more expensive?  Well according to the industry even though Diesel uses less crude oil to produce per litre then Petrol in Australia the reason the cost of Diesel has gone up and continues to go up is that we now have more complex refining methods on Diesel due to new Commonwealth Fuel Quality Standards.

I take exception to this as I contacted a refiner in Singapore to ask them if they process Diesel any differently for Australia as to their other markets and was told that these new refining methods are about reducing the sulphur content to 50 mg/kg (50 ppm) which is aligning Australia with international best practice for sulphur content in diesel fuel.  Ie these methods do not make Australian Diesel more expensive then our oversea’s cousins.  The reason I asked a Singapore vendor is because firstly Singapore accounts for a quarter of Australian Petrol and Diesel supply, with the other three quarters being produced domestically.  Secondly Australian fuel pricing is set via an import parity system governed by the Singapore Benchmark Price (Gasoil).

Which brings me to my next issue why the hell do we allow the Industry to base their pricing on the Singapore benchmark when it only accounts for a quarter of our fuel supply?  Shouldn’t they be forced to base their pricing on local production costs rather then what it costs in Singapore?  I can understand why they want to, they make more money this way, but the ACCC needs to grow some balls and do something about it because it’s just an excuse to bash us based on international crude oil pricing.

But lets look at it from the industries import parity system for a second, lets forget we produce most of our fuel domestically for a moment.  Considering that the Australian dollar is the strongest it’s been in decades with it hitting 0.87-0.88 USD cents this should have a dramatic and felt positive effect on local fuel pricing, yet it continues to go up with the industry claiming they are passing on great discount cycles.. sorry but I call shenanigans.  

Lets do a quick comparison on fuel pricing around our neck of the woods, all pricing is relevant as of 9:30am this morning for today;

  • Auckland, NZ            Diesel 0.88, ULP 1.34
  • Brisbane, AU             Diesel 1.22, ULP 1.18
  • Singapore                 Diesel 0.95, ULP 1.29
  • United Kingdom        Diesel 2.23, ULP 2.28

All pricing above is in AUD based on cents per litre.  As you can see Australia is the ONLY place where the cost of Diesel is higher then ULP, what more telling is the pricing comparison for New Zealand, that’s the type of ratio I’d expect to see here in Australia given that according to Shell 25% of all Diesel in New Zealand in imported from Singapore. Wow that’s exactly the same amount Australia imports from Singapore, so why is there such a dramatic bloody difference in pricing.  Shell also state this Diesel conforms to New Zealands NZPPSR regulations on fuel standards, which are the equivalent of the Commonwealth standards.

Even in Britain where fuel pricing in General is monstrous Diesel is cheaper then ULP, so why then in Australia are we paying more for the stuff?  Think it’s time to write a letter to the minister.

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