THE PRICE OF FUEL

You've all heard the old adage 'as dear as poison', and if you're an Aussie 4WDer, you could be forgiven for thinking that the refineries have started substituting ULP and diesel for cyanide and arsenic.

The Australian Competition and Consumer Commission (ACCC) tells us there are several factors that influence the price of fuel in Australia. The primary component that determines the cost of our fuel what is known as the international benchmark price. Typically, the international benchmark makes up just over 50% of the price we pay at the bowser. Interestingly, the benchmarks for each fuel in Australia are based on the following:

PETROL – Singapore Mogas 95 Unleaded

DIESEL – Singapore Gas Oil

LPG – Saudi Contract Prices

The popular misconception is that our local fuel prices are based on either US or even Middle Eastern prices, but this is not the case. The Singapore region is home to some of the world's largest refineries, and as a result it is the Singapore market that sets the benchmark for Australia.

The ACCC also tells us that although our fuel prices are largely influenced by these Asia-Pacific benchmarks, fuel throughout the region is traded in US dollars. This should mean that the value of the Australian dollar against the US dollar affects the price we pay at the pump, but more on that in a moment.

Aside from the international benchmark and the fluctuating Aussie dollar, the other big factor in the price of fuel here are taxes. At the time of writing, the Federal Government Excise (a fancy term for another tax) is fixed at an eye-watering 38 cents per litre on both petrol and diesel. The excise does not apply to LPG fuels. And if that wasn't enough, the government also stings you with a 10% GST on the price of fuel.

ARE WE PAYING TOO MUCH?

Okay, so now we have a basic understanding of how the price at the pump is determined, the question still remains: are we paying too much? Let's take a look at a graph that tracks the value of the Australian dollar versus the US greenback throughout the course of 2010, and the average price of fuel for each month over the same period.

What the graph demonstrates quite clearly is that while the Australian dollar has fluctuated from a low of approximately 0.83 cents versus the US dollar to a high of $1.02, fuel prices have remained largely unchanged in relation to the value of our currency. In fact, if the value of the dollar had any reflection of the price of fuel, shouldn't the price of fuel come down as the dollar went up? During the peak of the dollar's surge, the months of September through to December, the price in fuel (which theoretically should have dropped) also rose in each corresponding month!

AN INDEPENDANT OPERATOR'S VIEW

We spoke to the operator of an independently owned and operated Liberty Petrol Station and asked a few questions about his opinion on the price of fuel.

4WDA: As an independent service station operator, what do you think is the major influence on the price of fuel on the display board?

IND: The biggest single influence on my selling price is the majors. When the big boys sell cheap, we need to sell cheap or we miss out. When they increase, we increase. It's as simple as that.

4WDA: Is the government's fuel excise of 38 cents in the litre too much?

IND: Yes. By the time it leaves the depot its price has increased an extra 0.55 cents on our buying price today.