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Checking the government websites (Australia) regarding the fuel prices and what influences them:

  1. International benchmark prices
  2. Taxes
  3. Other costs and margins

Additionally there is this strange phenomenon of the weekly price changes, where the price of fuel fluctuates within a week or even within the same day. This, according to the website, it can be attributed to

  1. The level of demand for petrol on different days of the week
  2. The level and extent of competition in particular locations
  3. Pricing arrangements between suppliers and retailers.

Over the last months the Australian dollar has significantly increased its value over the American dollar and the price of crude oil has also dropped quite a bit. Yet the price of fuel at the pump has not only failed to dropped but it has increased every single week over the last couple of months.

Is this price normal or is it artificially maintained at that level? Is there something additional behind these prices that I fail to understand? Should we expect it to drop any time soon?

  • 1
    I fear that this question is a bit localized. However, it is the basis for a great question many of us face about fuel prices. I suggest you generalize it somewhat, using Australia as an example instead of the subject. – George Marian May 16 '11 at 6:16
  • "So high" is relative. In USD, Oz looks like it's paying 5.66 USD per US gallon. Ireland is paying USD 8.06 per US gallon. YMWV! I'm paying about USD 4.05 per US gallon here in Connecticut. – Peter K. May 16 '11 at 13:44
  • @user210. And then there's the Top Gear take on oil prices - that's it's a miracle it's so cheap when you consider what it took to get it. – gef05 May 16 '11 at 13:48
  • Note: Australia's fuel price is determined by the price of Tapis. – Victor Apr 21 '13 at 23:22
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First price isn't artificially maintained at a level. When a refining company signs a contract to buy crude from a supplier, it promises to buy at a certain price with options for increase and decrease due to the fluctuating prices in the market. And it buys crude to build up a certain buffer to supply itself for a certain duration, in case of supply problems. As it had bought oil at a higher price, it would be reluctant to lower the prices even if the current crude it buys is at a lower cost.

If it buys oil from the open market, it has no other option than to pass on the hike on to the consumers, so a more intense fluctuation in the prices of oil at the point, where you buy it. Some airlines used hedging to take care of the spurts in the price of oil, to mantian their operating margins.

And moreover refining and distribution is a very low margin business, so the company has an incentive to sell at a higher cost if required.

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Fuel prices are regulated in most countires. The way its regulated differs. Essentially the idea is once the retail prices are up, they are normally kept that level so that a buffer profit is built, now if the fuel prices increase beyond the retail price can still be kept same using the buffer built up.

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    [accc.gov.au/content/index.phtml?itemId=11938&Go=] Petrol and other fuels Australian petrol, diesel and automotive LPG prices are no longer regulated in Australia. Automotive LPG prices were deregulated in 1991 and petrol and diesel prices were deregulated in 1998. Although fuel prices are no longer regulated, in the interests of consumers and competition, the ACCC monitors fuel prices in Australia's capital cities and over 150 country towns. – o4tlulz May 16 '11 at 11:07
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(disclaimer: I don't answer specifically about Australia)

As long as people don't question car usage and urban sprawl, and thus are willing to pay a premium for being stuck in traffic jams every working day, I don't see any reason why fuel producers wouldn't increase their prices.

Given increasing demand from China and other rapidly growing countries, given state of remaining world resources, I think that fuel is a bargain nowadays.

  • This is slightly ranty, and not very informative. – Andrew Grimm Jan 21 '13 at 9:06

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