Global oil prices fell sharply after this week’s US midterm elections, but analysts say Australian motorists are unlikely to see a matching fall at the bowser any time soon, with refining margins and shipping costs still well above pre-war levels.
The overnight fall
Brent crude dropped to around US$95 a barrel after the election results. Kevin Morrison, energy analyst at the Institute for Energy Economics and Financial Analysis, told ABC News Breakfast that Brent had traded at around US$60 a barrel before the war in the Middle East began in February.
“While it is falling in one area, we will see high prices for some time,” Mr Morrison said.
The refining premium
Australian fuel prices track refined product prices in Asia rather than crude oil. Mr Morrison said the refiner margin for diesel in Singapore was still around US$165 a barrel, a premium of approximately US$70 over Brent. He said shipping rates had also recently hit record highs.
That gap means a fall in crude takes time to move through wholesale prices, and longer again to reach retail boards.
The retail position
According to Mr Morrison, average retail diesel prices rose from around $1.80 a litre before the war to approximately $2.80 last week. Education Minister Jason Clare said fuel prices had risen 28 per cent over the past year, and that ending the conflict and reopening the Strait of Hormuz would be critical to bringing them down.
“Here in Australia, we didn’t start the war, but we’re copping it,” Mr Clare said.
Three conflicts, one market
Mr Morrison said the Middle East was one of three conflicts affecting oil flows. Houthi attacks have damaged Saudi oil infrastructure, including pipelines, and Ukrainian strikes on Russian refineries have cut exports from what had been the world’s second-largest diesel exporter. That last factor is a key reason diesel has stayed particularly high.
What to watch
The next movement in terminal gate prices will show whether the fall in crude is holding. With three separate supply disruptions in play, the market is likely to stay volatile through to the end of the year.
A note for independent operators
Wholesale prices follow refined product prices and freight, so a headline fall in crude doesn’t change the cost of the next load. Expect customers to ask why prices haven’t dropped, and give counter staff a simple, accurate answer to use.