One-Way Traffic: Why Some Gasoline Prices Are On The Road To $ 2 Per Liter | Australia News

Gas stations are a new source of angst for the public, with their red neon signs burning the psyches of drivers worried about how much their next filling will delay them.

Oil prices are also becoming a political touchstone again, with $ 2 per liter in major cities on the horizon for certain qualities.

It’s a real chance as the summer driving season approaches and the desire to lock the rearview mirror adds to the allure of the wide open pavement.

Here’s what you would like to know:

What happens to the prices?

Remember those beautiful days last year when oil prices averaged 129.7 cents per liter in our five largest cities?

No, neither were we, as we were either locked up or feared we would get lost in a Covid ambush.

But at such prices, you could brag that gasoline in real terms (after deducting inflation) was at its best price in 22 years, according to the Australian Competition and Consumer Commission. (Hint: when the Holden Commodore ruled the roads.)

Ah, the nostalgia.

Since then, it has mainly been one-way traffic. As the Australian Bureau of Statistics told us earlier this month, the maximum average daily price of unleaded gasoline hit a record high of $ 1.65 per liter in the September quarter, thus contributing to increase the broader inflation index of consumption.

What is driving the increase?

For ABS, the push to higher prices came from “rising global oil prices amid economic recovery and supply disruptionsâ€.

Let’s take this at face value for now.

Yes, Australian oil prices are indexed on international markets, in particular the Singapore benchmark known affectionately as Mogas 95 for some oil companies.

Prices fluctuated a bit, such as during a brief period when oil futures first turned negative in April 2020. At the time, contract holders briefly had to pay people to take the money out of them. fuel because demand had plunged into the big economies.

A pickup in demand and some supply issues related to Covid have pushed oil prices down to around US $ 75-80 a barrel lately, depending on your crude mix.

This is a little less than double the average price in 2020, so you would expect to see additional costs increase at the Bowser level.

Supply issues are also essential. Opec meets regularly to set production levels for its cartel members, and overnight the United States and other countries agreed to coordinate the release of some of their strategic oil reserves with the aim of to lower crude prices.

Refuel with local charges

In addition to the shipping costs to bring it here, the government charges an excise duty of 43 cents per liter, indexed twice a year.

This is a flat tax that all road users pay (unless you’re a mining company or an electric vehicle owner – we’ll talk about that later).

The Australian Automobile Association, representing the various motorist groups in the states and territories, said fuel excise would put $ 11 billion into Commonwealth coffers this year and $ 49.3 billion over four years .

The cost of transportation for the average metropolitan household has now exceeded $ 400 per week for the first time, the AAA said this week. The tally of $ 401.86 increased by $ 58 per week from 2020.

For those in Sydney, for example, the cost was $ 477.56 per week, while Wagga Wagga managed to keep its domestic transportation bill at $ 309.41.

Regional variation

Wagga’s wonder, however, hints at a flaw in the “it’s just the free market (plus taxes) at work†answer to what drives gasoline prices one way or the other.

The ACCC has launched numerous oil price surveys over the years. It lists a range of influences, including changes in the value of the Australian dollar against the greenback (in which all major commodities are valued).

It also publishes a neat picture of oil price cycles for major cities, updated twice a week.

The results, however, suggest that something else is at stake, otherwise price trends would move more in parallel than they do.

An ACCC spokesperson said that “like many markets, the degree of competition varies by location, and some locations have more competitive markets than others.”

“Competition is influenced by a number of factors, including market size, market location, number and type of firms in a market, and firms’ pricing strategies,” the official said. “The degree of competition changes over time.

Not sure, however, that this explains these city-by-city changes, nor what gives Wagga.

Go the extra mile

Gasoline and other fuels are unusual because the seller is required by law to make public prices.

That alone triggers unusual behavior among consumers that does not occur with, for example, asparagus, where prices are more difficult to compare according to Richard Denniss, head of economics at the Australia Institute.

Denniss, himself a former “petroleum transfer engineer†(AKA servo engine employee) in his youth, says it was not uncommon to see a driver turn around on double lines, braving fines, for save a cent a liter by not filling up at a gas station across the road.

“They would save 40 cents and then pay $ 10 for bottled water,†he says.

The same price signals that drivers see are also evident for rival gas stations.

As with airlines that increase seat prices as the day of the flight approaches, gas stations do the same as a weekend or public holiday approaches. “Gas stations do the exact same thing because they can,†Denniss said.

Shopping around can save money and various apps can help, he adds.

Yet, over time, the switch to electric vehicles should leave consumers less at the mercy of the market.

For example, driving 100 kilometers on 10 liters of gasoline costs this author about $ 16 in fuel, while his electric vehicle can do it in about $ 3 at current prices. (Servos are handy for inflating tires, but that’s about it.)

And for those who charge from their own solar panels, fuel is indeed free.