Understanding the Price of Petrol

The price of basic unleaded petrol in Australia is currently as much as $1.50 per litre. Understanding the price, and how it is made up, is actually simpler than many regulators would have you believe.

There’s a lot of speculation about the price of petrol, but the breakdown is broadly this (assuming the price is $1.50 per litre) for every one litre of petrol sold:

• 38.14 cents is Federal fuel excise – a fancy name for a fixed tax on all petroleum-based fuels (not LPG). Excise is imposed upon all the different grades of petrol, and diesel.
• 13.6 cents is GST. GST is one-eleventh of the total price of petrol – which means you pay GST on the Federal Government excise. That’s a tax on a tax, which makes up 3.8 cents on every litre.
• 5 cents is an approximate retail margin, but retailers often slash the margin, and sometimes even sell at a slight loss, just to drive up sales in the convenience store part of their businesses (think: 2-for-1 Kit Kats).
• 62 cents (approximately) is the cost of the crude oil (the raw material). According to the Texas Oil & Gas Association, 46 per cent of a barrel of crude oil becomes gasoline (petrol). With crude oil currently trading at about $100 Australian dollars per barrel, the pro-rata cost of the raw material is $46 for the bit that becomes about 74 litres of petrol. (One barrel is 159 litres.)
• 31 cents is the remainder of the operation: cost of refining the crude oil, global transport by ship, decanting at destination, logistics and distribution to filling station, marketing and operating costs of refiners and distributors, refiners’ and distributors’ profit margins.

 Other interesting facts about petrol price and crude oil:

• One barrel of crude oil produces around 74 litres of petrol, 35 litres of distillate (heating oil & diesel), 15.5 litres of jet fuel, 8.7 litres of heavy fuel oil, 7.2 litres of liquefied refinery gasses, 7.2 litres of still gas, 6.8 litres of coke, 4.9 litres of asphalt and road oil, 4.5 litres of petrochemical feedstocks, 1.9 litres of lubricants, 800ml of kerosene, and 1.1 litres of useful remaining petrochemicals.
• Astute readers will note the total above is more than 159 litres – that’s referred to in the business as ‘processing gain’.
• Australian fuel consumption is a total of approximately 30 billion litres of petrol and diesel (combined) annually for road transport. That represents a taxation windfall for the Federal Government of approximately $15 billion.
• Every $20 per tonne in carbon tax (if it is levied on fuel) will add approximately 4.5 cents per litre to the price of fuel.
• Petrol price peaked in Australia just before the GFC took hold. In July 2008 the national average pump price for basic 91 RON unleaded petrol was $1.67 per litre.