Wednesday, Mar 08, 2006 at 09:41
I had a whinge recently to Shell about the difference in price of ULP and Diesel ( in my area ULP was 27 cents cheaper).
The reply I received is copied below FYI.
Thank you for contacting Tell Shell Australia.
In regards to your enquiry, both the price of unleaded and the price of diesel are a function of world crude benchmark prices, which as you know have been increasing over time. Last year's average Asian light sweet crude benchmark price was $30.08USD/bbl compared to the 2004 year to date average of $39.35USD/bbl.
Generally you can expect both unleaded and diesel prices to be a premium above the crude price. This is called the refining crack. The size of the crack does depend upon a number of factors such as crude demand/supply, product demand/supply, freight rates, general economic conditions etc. You can therefore expect volatility during the year of the size of the refining crack across the barrel including petrol and diesel, as well as the spread between petrol and diesel.
Over the last few months, we have seen some movement in the differential between the petrol and diesel crack. During August 04, the petrol and diesel crack increased to around $6 above the crude price however the petrol crack was under pressure and averaged a $0.20 premium above crude. The reason for the movement in the petrol/diesel differential is that a weakness in naphtha prices has been putting pressure on petrol prices - so it is actually a petrol story rather than a diesel story.
Retail fuel prices are driven by three things: Import parity price for petrol, Tax and Oil company, distributor and service station dealers share. The total amount shared between the oil company, distributor and the service station dealer must cover: the costs of running oil terminals; costs involved in delivering petrol to service stations; administration and marketing costs; and the costs involved in running the service station such as labour, rent and electricity. Import parity price is essentially the cost of importing, including freight and wharfage, finished product (as opposed to crude oil) to Australia.
The wholesale prices for NSW on Wednesday 11 January 2005 are compared in the table below.
Diesel Unleaded petrol
Wholesale price 97.02 89.61
Import parity price 44.64 40.97
Tax 49.19 46.28
Costs and margin. 3.19 2.36
Note that the costs allocated to fuels with lower sales volumes such as diesel are often slightly higher than costs allocated to fuels that sell higher volumes in the market place, like unleaded petrol. Shell does not set retail prices, which will of course be higher than the wholesale prices and will vary by location.
Why do we use import parity price? The key point is that Australian refineries compete with the Asian region when it comes to oil and fuel. Both oil and finished products (such as petrol and diesel) can be purchased at competitive prices from a number of locations in the region. Prices of fuel types such as diesel or petrol in this regional market are driven by supply and demand of each individual fuel type, resulting in fluctuations of the prices relative to each other. Australian refineries not only compete with imports of finished product in Australia, but also export product to the regional market.
In Asia generally, diesel is a much more common fuel than petrol, so many asian refineries are geared up to produce diesel. This tends to make diesel prices reflect changes in crude prices more closely than petrol prices. It also means that at times there may be "excess" or more supply of petrol than demand across the region, resulting in a dropping of petrol prices relative to crude and the more consistently demanded diesel. Thus we seem to be experiencing the case where petrol prices in Australia are generally lower than diesel prices.
As Shell is a wholesaler of fuels and oils we do not set the pricing of retail fuel at the bowser, this is set either by the franchise holder or by the independent owner and as such if you have further concerns about the pricing at the pump please contact the them regarding your enquiry.
We entrust this assists.
Kind regards,
Tell Shell Australia
end
regards,
Chris
AnswerID:
568159
Follow Up By: Bushtracker - Wednesday, Mar 08, 2006 at 20:49
Wednesday, Mar 08, 2006 at 20:49
da Ranger could just be cynical, so this comes with a grain of salt..
But one of my pet interests has been a unique blend of studies coined: "Geo-Political Economics" that controls world
events, even all the way down to war...
I might just be cynical, but history has a lesson to be learned from, and that is that the Public is often manipulated to the wrong side of the fence so they can be controlled by economic means.... In the past everyone was sold on cheaper diesel, so diesels cars and 4x4s.... Now you sell them a whole 'Wave" of petrol vehicles and cars... So in a short time of a year or two you can re-sell them on the idea of diesel cars and 4x4's again... I could be wrong, but history is on my side.. I think you will find diesel will come back cheaper again, with some excuse that is palatable like that there is a mild recession on so trucking demand is down in 2007 so excess diesel, and then they will be telling you that petrol takes more refining, is more volatile, and more exxy to produce...
I'm staying with diesel, and I think the price swing will come back as soon as the public is back glutted with petrol 4x4s and light trucks again.. Ha!
In 2008 someone will say: "Howd ee know dat?".... da Ranger...
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845618