Fuel pricing

[prydey]

I can see everyone cringing now. not another fuel thread!!

this is actually a genuine question so i don't want it to deteriorate into a 'we're being royally screwed' thread, even though that always seems the case on the surface. perhaps this thread can erase some of the myths.

is anyone able to tell exactly how the price of fuel is worked out. i know it is based on the singapore exchange or something but it seems any world event in america or mid east is an excuse to raise prices.

before the GFC the price of oil per barrel was $160?? and fuel prices here got to around $1.60 for regular unleaded. the aussie dollar was somewhere around 80cents us. (most of these figures are pure guesses from memory). at the height of the gfc, the barrel price plumeted to as little as $30? barrel, and fuel dipped under the $1 mark in most cities. our dollar was still trading at similar value. now post gfc, the oil price has surged back to $100+/barrel, but our dollar is also on par with america now, and yet we see bowser pricing already back close to $1.60L for regular.

is it a supply v demand thing. can someone decipher all the ins and outs as to why it seems to have risen back to previous levels much quicker given the barrel price has some way to go before it gets back to where it was.

obviously the unrest in the mid east isn't helping at the moment, but 6 months ago that couldn't be used as an excuse.

are we being bent over? or is there a logical reason for it all? <- serious question.

[csv8]

"are we being bent over"...sure are..and no KY Jelly either to ease the pain!!!!
Brisvegas today I saw ULP $154.9 and my Fez runs on PULP which is 15cl more!!!!! Diesel Fez ??? maybe!!!!

[Kryton]

I think they just make it up as they go.
Its hot in the U.S, its cold in Russia, someone farted in Yemen etc.
Theres always some excuse to raise the price of Petrol.
Look back over the Aussie dollar and barrel prices and there is no pairing of the 2 - one is just an excuse for the other.

[MAGPIE]

Cracks me up how in our summer when the price goes up it is because the Northern Hemisphere is in winter so there is more demand for oil for heating.

Then in our winter when the price goes up it is because it is the Northern Hemisphere summer and there is more demand because it is their driving season.

Whatever

[aussie muscle]

Originally Posted by csv8

"are we being bent over"...sure are..and no KY Jelly either to ease the pain!!!!
Brisvegas today I saw ULP $154.9 and my Fez runs on PULP which is 15cl more!!!!! Diesel Fez ??? maybe!!!!

ouch, that's high for a city. here in 'middle of nowhere' last i bought it was $1.52, and 1.69 for 95.

edit: just noticed you put $154 rather than 1.54

[burnz]

Originally Posted by csv8

"are we being bent over"...sure are..and no KY Jelly either to ease the pain!!!!
Brisvegas today I saw ULP $154.9 and my Fez runs on PULP which is 15cl more!!!!! Diesel Fez ??? maybe!!!!

$154 a litre and your complane about another 15c...ha ha

they recon it would be $1.80 per litre if the oz dollar was weaker..
their allso blaming gadaffi for the price hike, yet libiya exports around 3% so im lead to beleive..

[csv8]

Sorry!!! typo $1.54.9 at Shell Truck Stop Rocklea

[bobthebilda]

Originally Posted by prydey

I before the GFC the price of oil per barrel was $160?? and fuel prices here got to around $1.60 for regular unleaded. the aussie dollar was somewhere around 80cents us. (most of these figures are pure guesses from memory). at the height of the gfc, the barrel price plumeted to as little as $30? barrel, and fuel dipped under the $1 mark in most cities. our dollar was still trading at similar value. now post gfc, the oil price has surged back to $100+/barrel, but our dollar is also on par with america now, and yet we see bowser pricing already back close to $1.60L for regular.are we being bent over? or is there a logical reason for it all? <- serious question.

Theres probably a few "assumptions" made when people think of what petrol prices should be. Firstly, when people see Oil prices on the news, they see the WTI (west texas intermediate) price, which is just one classification of oil. One other is the Brent price. WTI prices are really only applicable to certain parts of southern and mid US. Most of the world operates around Brent pricing, which is currently averaging about $10 a barrel more ($115 a barrel) (and other sweet oil calassifications can demand other premium prices due to ease of refinery) Thus if you look at it like this, $115 a barrel (158 litres a barrel) equals 72 cents a litre. (1 barrel of oil will make 80 litres gasoline, 40 litres deisel, 20 litres jet fuel etc etc).

Using a base 72 cents a litre, you then have to add, transport of crude from mid east to asia for refinery (3 cents), refinery costs (4 cents) , transport of petrol from asia to australia (2 cents), storage costs (1 cent) , excise and GST (50 cents), wholesaler margin (3 cents), retailer margin (3 cents).

These are relatively rough figures, but when you get petrol under $1.36 (or so) a litre, you are buying it below cost. If you are paying $1.50 a litre, you are just making up for when you paid for it below cost.

I think one just has to look at the ages of the refineries still left in australia (most if not all over 40 years old) and the quickness in which petrol stations close down then start up somewhere else to see that selling petrol gives very little reward for all the work and investment that it requires.

But (and this sounds silly), pricing of oil plays less and less of a role in petrol prices as we go further into the future. Australia might produce 500k barrel of oil a day, but most is from the north west shelf, making asian refineries the closest (and oddly enough, most australian refineries arent set up to refine australian oil), so if singapore wants to add 1 cent a litre tax to australian oil that is refined to make petrol to sell to australia, then you pay for these little oddities too.

Then theres the fact that fixed costs increase each year, but crude oil production hasnt actually increased since 2005 (we are on the plateau of peak oil). So the 20% wage increases of oil and refinery workers (has been more, but just being conservative), wages which have occurred in last 5 years, cant be made up by productivity improvements, and just gets added to down stream pricing.

The important thing to remember, is that if the world needs 80 million barrels of oil a day, and it can produce 79 million barrels at $115 a barrel, but one million barrels is going to cost $200 a barrel to produce, then all 80 million barrels a day are going to be sold at >$200. And you dont go drilling for oil in 10 kilometre deep waters in the Gulf of Mexico, if their is plenty of oil to satisfy demand.

[OzJavelin]

Originally Posted by MAGPIE

Cracks me up how in our summer when the price goes up it is because the Northern Hemisphere is in winter so there is more demand for oil for heating.

Then in our winter when the price goes up it is because it is the Northern Hemisphere summer and there is more demand because it is their driving season.

Whatever

Yep .. lucky we're at US$1.03 for AU$1 or we'd be paying AU$3/L for ULP by now with that reverse-engineering logic ..

[XR6_661]

Don't even look at the price now, just fill up and go...Not worth whinging about haha

[prydey]

thanks for that bobthebilda.

like i said, this wasn't meant to be a whinge about the price but how that price is reached. some missed that point.

[Revolver]

After working in Servos for 6 years, I still cant work out how the actual Pricing structure works. Thanks for the work on that one Bob. Good explaination.

The one thing I cant work out is, when the physical "barrel" trundles out on the line, & its at $100, when the barrel that came out exactly 24hrs earlier was $90, why the price IMMEDIATELY jumps here.

It takes months for that "barrels" product to reach the tanks of the local servo.

Mind you when the price comes down, the price drops excruciatingly slow.....

Really, we should be seeing the price fluctuations months down the line. Not on the product that came out of the ground months ago.........

[bobthebilda]

Blue Beast II]The one thing I cant work out is, when the physical "barrel" trundles out on the line, & its at $100, when the barrel that came out exactly 24hrs earlier was $90, why the price IMMEDIATELY jumps here.
It takes months for that "barrels" product to reach the tanks of the local servo.

Another misconception, the gap between oil coming out of ground to petrol going into car would only amount to 3 weeks at the most. With a world use of 80 million barrels a day, you would need alot of storage capacity around the world to be storing months worth. The biggest time delay is obviously transport, but going thru the refinery process etc would be in and out as fast as they could (any slower and you end up paying more for petrol) . The biggest holdings of oil in the world are the US's strategic petroleum reserves, which hold about 700 million barrels (which is only equivalent to 35 days of US oil use, and are stored in case of emergencies etc)

Mind you when the price comes down, the price drops excruciatingly slow..
Really, we should be seeing the price fluctuations months down the line. Not on the product that came out of the ground months ago.........

In all fairness, refiners operate in a very fast moving environment. If they buy oil at $100 a barrel, and it falls to $80 overnight, you cant wear too many of these drops, so you tend to make it up when oil prices move positively for you. And its the same right along the production chain.

I dont think people really comprehend what is going to be hitting the world in the next few years, and the logic of even buying a V8 or 6. Even if the world is still able to produce oil at its current rate in 5 years time (and we currently only make 1.4 litres of petrol / deisel / bio fuel etc per person in the world each day), nett importers like australia are going to be screwed. Nett exporters like saudia arabia, iran, russia etc, may hold production steady, but as they get wealthier, they are also using more of the oil they produce, thus leaving less for export. Doesnt matter how much you are willing to pay for petrol, if you cant get your hands on it.

People tend to forget, that the middle east may have a fair bit of oil, but if they have to limit the export of it, are they going to use 10,000 barrels of oil equivalent to transport it in a ship to australia, or would they use 1000 barrels of oil equivalent to transport it via pipeline to europe. Not too sure how well other states would cope, but in SA, with no refinery here, they have at most a 2 week supply of petrol at the best of times.

[J.C.]

It doesn't look to good for us I have to agree. A friend has just returned from Bali. Fuel there is 0.45c per litre he was telling me. How can that be so? Seems like alot of hands in the cookie jar to me.

[Yellow_Festiva]

Bexley NSW. $1.339 for ulp.

[Ryan]

Originally Posted by XR6_661

Don't even look at the price now, just fill up and go...Not worth whinging about haha

Same here. I use BP Ultimate, and I try not to look at the $1.68 price tag hahaha. Just fill up, and go.

[Yellow_Festiva]

I can't believe the prices quoted here.

Just drove back to work from the shops and passed several servos on the way. All were at $1.339 for E10. Some also had the 4c discount on top of that.

I filled up the Diesel Focus a few days ago at $1.459 as well.

Not bad at all after seeing some of the other prices.....

[charles_wif_xf]

That's as good an explanation as I have seen Bob.

Now, I have a question of my own.
Let's just say servo X buys 50,000L of 95RON for $1.31 per litre. Why does the price at a servo fluctuate so much over the course of a fortnight when a busy servo for instance would refill every fortnight and buy the fuel at a fixed price???

[geckoGT]

Originally Posted by bobthebilda

Theres probably a few "assumptions" made when people think of what petrol prices should be. Firstly, when people see Oil prices on the news, they see the WTI (west texas intermediate) price, which is just one classification of oil. One other is the Brent price. WTI prices are really only applicable to certain parts of southern and mid US. Most of the world operates around Brent pricing, which is currently averaging about $10 a barrel more ($115 a barrel) (and other sweet oil calassifications can demand other premium prices due to ease of refinery) Thus if you look at it like this, $115 a barrel (158 litres a barrel) equals 72 cents a litre. (1 barrel of oil will make 80 litres gasoline, 40 litres deisel, 20 litres jet fuel etc etc).

Using a base 72 cents a litre, you then have to add, transport of crude from mid east to asia for refinery (3 cents), refinery costs (4 cents) , transport of petrol from asia to australia (2 cents), storage costs (1 cent) , excise and GST (50 cents), wholesaler margin (3 cents), retailer margin (3 cents).

These are relatively rough figures, but when you get petrol under $1.36 (or so) a litre, you are buying it below cost. If you are paying $1.50 a litre, you are just making up for when you paid for it below cost.

Thanks for the explanation.

I may be missing something but there is something that does not make sense to me. In your example you state that at an oil price per barrel of $115 that equates to $0.72/L. Each litre of oil then produces 80 litre of petrol (plus others but lets ignore that for simplicity). If all you got out of that litre of oil was 80 litres of petrol, the cost of the crude oil per litre of petrol would then be $0.009 in base material only (no refining costs yet).

So in your example you outlined the refining cost, transport etc per litre of oil and added onto a cost per litre of crude oil at $0.72/L, this is where it does not make sense to me, by my calculation the cost per litre for that base oil is actually $0.009/L. Then you add the other cost of petrol production and delivery as you outlined, which I will quote below for convenience.

transport of crude from mid east to asia for refinery (3 cents), refinery costs (4 cents) , transport of petrol from asia to australia (2 cents), storage costs (1 cent) , excise and GST (50 cents), wholesaler margin (3 cents), retailer margin (3 cents).

The end figure for the cost of each litre of petrol ends up at $0.669/L, where is the other $0.831/L going (based on a pump price of $1.50L).

I hope that makes sense, basically in your example you said each litre of crude oil is worth $0.72/L and that is the cost that you based your petrol price calculation on, but you said each litre of oil makes 80 litres of petrol. If the crude oil makes 80L of petrol, then the value of the oil in each litre of petrol surely has to be 1/80th of the cost of each litre of oil.

Not trying to be smart, just trying to get my head around this as I am genuinely interested.

[geckoGT]

Originally Posted by Yellow_Festiva

Bexley NSW. $1.339 for ulp.

$1.489/L for ULP at the Caltex down the road from my place today, got to love QLD.

[Franco Cozzo]

$1.429 here in my local servo for 91.

[HSVKILLA]

Over here in NZ the prices as of today are:

unleaded 91 $2.19L

95 $2.27L

98 $2.34L

[vztrt]

Originally Posted by J.C.

It doesn't look to good for us I have to agree. A friend has just returned from Bali. Fuel there is 0.45c per litre he was telling me. How can that be so? Seems like alot of hands in the cookie jar to me.

Its subsidised by the government. You'll find a lot of the Asian countries subsidise their fuel. I remember the uproar in indo when they bumped the price of fuel up by 5c/l (this was back when oil was $1.70 a barrel).

[Winter XR8]

Got a tank of BP Ultimate today in Darwin and paid $1.79/L

[barra265t]

We need grey market fuel, wouldn't impact our economy in any way as none of its produced here anyway.

[thefargo]

still cheaper per litre than vodka

[vztrt]

Originally Posted by thefargo

still cheaper per litre than vodka

Or bottled water.

[GT 160]

As i posted in another thread,

Australia is in the Asia-Pacific market.

Australia's fuel prices are determined by the Tapis crude oil benchmark (Singapore) NOT the West Texas Intermediate (the US market benchmark) that the media loves using.

The Singapore price of unleaded petrol (MOPS95) is the key pricing benchmark for Aus.

The US $ per barrel is only one of many factors influencing Aus fuel prices.

[bobthebilda]

GeckoGT: I may be missing something but there is something that does not make sense to me. In your example you state that at an oil price per barrel of $115 that equates to $0.72/L. Each litre of oil then produces 80 litre of petrol (plus others but lets ignore that for simplicity). If all you got out of that litre of oil was 80 litres of petrol, the cost of the crude oil per litre of petrol would then be $0.009 in base material only (no refining costs yet).

Something was lost their in translation gecko. I said if a barrel was $115 (and there is roughly 158 litres per barrel), then a litre of oil (petrol) base price (before anything is done to it), is going to be 72 cents a litre ie 158/115. Its a rough estimate, as you dont get 158 litres of petrol from 158 litres of crude oil. Depending on refinery setup, you get like 80 litres of petrol, 40 litres of deisel, 20 litres of jet fuel, 2 litres of lubricating oil etc etc. But all things being equal, if a refiner buys 158 litres of crude oil at $115, they at the very least are going to want to be selling those litres at greater than 72 cents each to make a profit. No one should expect an oil refiner to be in the business of losing money.

But really, all this petrol pricing stuff is just small fries when compared to the big picture.

The real problem that is going to hit us is the ROEI (return on energy invested). Take for example one of the biggest oil exporters in the world, saudia Arabia. Years ago, the world used to be able to drill a hole in the ground, and oil would come gushing up. Saudia Arabia now currently produces 10 million barrels a day, uses 3.5 million for petrol (which costs about 20 cents a litre), electricity generation and water desalination, and exports 6.5 million barrels (if you use 15% of this oil in transporting and refining it then you only end up with 5.6 million barrels at end use).

If in 5 years time, production drops 10% and internal oil use grows 10%, then they produce 9 million, use 3.9 million, and only have 5.1 million for export (use 15% for transporting and refining, and you only end up with 4.25 million for end use). Ie a 10% change in some variables, leads to a roughly 26% reduction in end use).

If ROEI ever reaches 1, then you might as well stop drilling for oil. ie its akin to using 10 litres to drive to petrol station, putting 20 litres in, and using 10 litres to drive back home.
Some of the oil projects in the world already have a ROEI of 1, for example some of the oil sand projects in canada. The only saving grace here, is that they are using 1 barrel of oil equivalent of natural gas (which doesnt have a use in middle canada) , to produce one barrel of oil (which can be piped to middle america, causing a lower WTI price).

The Saudis now, have to pump in 2 barrels of sea water into the ground, to bring one barrel of oil to the surface. What comes up is 40% water, 60% oil, which has to be seperated. Every year, the water cut (percentage of water) increases, which requires more energy (ie more oil use), to seperate it. Very small variables can have a huge impact on the price of petrol. One day you wont wake up to find that the price of petrol has gone up 15 cents overnight, you will find it has doubled in price. And it all might be due to a silly thing like the Saudis have started getting 50% water and 50% oil.

[geckoGT]

Ok, thanks as it makes more sense now.

To be honest, I will always have a problem with paying so much for fuel for as long as I read about an owner of an oil company etc buying their son a veyron for his 21st. I mean honestly, they are not doing that bad if they own a fleet of Rolls Royce cars are they?