The Saudi Arabia drone attacks have sent global oil prices surging.
The Saudi Arabia drone attacks have sent global oil prices surging.

Reason petrol prices are so high

PETROL prices were quick to rise after a major oil plant in Saudi Arabia was attacked by drones but have been slow in following the oil price back down.

NRMA has warned motorists to "stay out of servos" as petrol prices in Sydney surge to an 11-year high.

As Aussies hit the road for the long weekend, NRMA spokesman Peter Khoury said prices in Melbourne, Adelaide and Perth had peaked, but Sydney prices "are going to get to 166 cents in the next day or so, an 11-year high."

Motorists in Brisbane aren't doing much better, with Mr Khoury calling the cost of petrol in Queensland "daylight robbery".

The average price for regular unleaded is 168.9 cent per litre in Brisbane, 165.9 cents in Sydney, 148.6 cents in Melbourne, 154.7 cents in Perth, 149.4 cents in Canberra, 149.1 cents in Darwin and 155.3 cents in Hobart.

 

A petrol pump displays fuel prices at a service station in Sydney on Wednesday.
A petrol pump displays fuel prices at a service station in Sydney on Wednesday.

The drone attacks on facilities at the Abqaiq and Khurais oilfields over the past two weeks caused the biggest supply disruption in the history of the oil trade, demonstrating just how exposed Australians are to the volatility of world oil prices, explained Mr Khoury.

The attacks in Saudi Arabia, along with the ongoing trade war between the US and China and a weaker Australian dollar have worked against motorists.

WHAT INFLUENCES THE COST OF PETROL?

Petrol prices in Australia are determined by three main components - product cost, Australian Government taxes, and industry operating costs and margins.

Because Australian refineries cannot produce all of Australia's petrol needs, some of it is imported. Australia's regional market for petroleum products is located in Singapore, where the Singapore price of petrol - known as Mogas 95 - is the key pricing benchmark for Australian petrol and determines the product cost.

The Mogas 95 price is influenced by the international price of the crude oil from which it is made - and when the world price of this changes, it generally flows through to retail petrol prices in Australia.

Changes in Singapore's prices can take around two weeks to work their way through the supply chain in Australian cities and longer in regional areas - which is why petrol prices are only now skyrocketing despite the Saudi attacks happening a fortnight ago.

Sydney petrol prices are set to peak ahead of the long weekend. Source: ACCC
Sydney petrol prices are set to peak ahead of the long weekend. Source: ACCC

Oil and petrol are traded internationally in US dollars, so their price is also influenced by the value of the Australian dollar (which is currently weak).

According to the Australian Institute of Petroleum (AIP), product cost contributes to 47 per cent of petrol's overall price when you're filling up your car. This includes shipping costs, a quality premium for Australian fuel standards, insurance and wharfage costs.

AIP reports that 38 per cent of your fuel price is made up of excise and GST.

The excise is fixed at 38.14 cents per litre, regardless of the retail price, and GST is 10 per cent of the retail price.

The final component contributing to the retail price of fuel is industry operating costs and margins at 15 per cent.

This includes wholesale operating - terminal operating costs, admin and wholesale marketing costs, and charges on wholesaling activities, retail operating - admin and retail marketing costs and the costs of running a service station, and land transport - getting fuel from the fuel terminal to the bowser.

The price motorists pay for fuel is influenced by a number of factors.
The price motorists pay for fuel is influenced by a number of factors.

Pump prices can also be influenced by local factors and competition between retailers.

In larger cities around the country, prices also typically follow a price cycle that generally occurs on a regular basis and in two stages.

The first stage is a relatively sharp price rise over one or two days followed by the second stage when prices begin to fall over a longer period.

Motorists have been advised to delay filling up over the long weekend. Falls in world oil prices over the last 48 hours - from $US84 a barrel to $US11 a barrel - should bring some relief in the next cycle and drop average prices almost 10 cents per litre.



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