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WEEKLY DIESEL PRICES REPORT - Australian Institute of Petroleum

WEEKLY DIESEL PRICES REPORT - Australian Institute of Petroleum

AUSTRALIAN WHOLESALE

AUSTRALIAN WHOLESALE MARKET TRENDSFIGURE 3: COMPARISON OF AUSTRALIAN DIESEL TGP (OR ‘WHOLESALE PRICE’)WITH SINGAPORE DIESEL PRICE (GASOIL)2001801601401201008060Cents per litre ($A)4015/06/2010 15/09/2010 15/12/2010 15/03/2011 15/06/2011 15/09/2011 15/12/2011 15/03/2012 15/06/2012Gasoil Gasoil Plus Shipping & Taxes National Diesel TGPNOTE: The Gasoil prices and Shipping rates are provided by Platts (McGraw-Hill Inc), see Notes on page 2.FIGURE 4: DIFFERENCE BETWEEN MARKET PRICESNational Average Diesel TGP minus Singapore Diesel Price (plus shipping & taxes)20Cents per litre ($A)151050-515/06/2010 15/09/2010 15/12/2010 15/03/2011 15/06/2011 15/09/2011 15/12/2011 15/03/2012 15/06/2012Difference / MarginPeriod AverageGASOILCents per litre(A$)DIESEL TGP (National Average)Cents per litre(A$)Average: Last Week (to Friday 15/06/12) 72.6 Average: Last Week (to Friday 15/06/12) 133.2Average: Previous Week (to Friday 08/06/12) 73.3 Average: Previous Week (to Friday 08/06/12) 136.5Average: Last 4 Weeks 75.4 Average: Last 4 Weeks 137.0Average: Last 12 Weeks 79.8 Average: Last 12 Weeks 140.9Average: Last 12 Months 78.6 Average: Last 12 Months 138.4PLEASE NOTEDifferences/margins between market prices or benchmarks are used as indicators of general trends in the petroleum market,they do not represent profits accruing to oil companies at the refining, wholesale or retail segments of the market.For each market segment, a range of costs would need to be deducted to determine actual profits.For example, at the wholesale level, a range of costs (including ‘landed costs’ and ‘wholesaling costs’) would need to bededucted to determine actual profits at the wholesale level. These ‘landed costs’ include the costs of the quality premium(market cost) for Australian fuel standards, insurance and loss, and local wharfage costs. The standard ‘wholesaling costs’include terminal operating costs, administration and wholesale marketing costs and corporate taxes and government charges onwholesaling activities.4

AVERAGE DIESEL TERMINAL GATE PRICES (TGPs)ACROSS AUSTRALIAN STATES/TERRITORIESWeek ended 15 June 2012DIESEL (cents per litre $A)Monday Tuesday Wednesday Thursday Friday11 June 2012 12 June 2012 13 June 2012 14 June 2012 15 June 2012Sydney 134.5 134.1 133.0 132.8 132.3Melbourne 133.8 133.4 132.3 132.1 131.6Brisbane 134.0 133.6 132.5 132.3 131.8Adelaide 134.4 134.0 132.9 132.7 132.2Perth 134.5 133.9 133.1 133.0 132.2Darw in 137.7 137.4 136.3 136.1 135.5Hobart 138.2 137.9 136.8 136.5 136.0NOTES: Daily TGP data are published by all wholesale fuel suppliers. AIP’s website presents average TGP data for each weekday –see www.aip.com.au/pricing/tgp.htm. This data has been prepared by ORIMA Research Pty Ltd on behalf of AIP, using information fromBP Australia, Caltex, Shell Australia, and ExxonMobil Australia. Prices shown are the average TGP for diesel across each of these companiesfor the day.EXPLAINING THE TIME LAG BETWEEN CHANGES IN SINGAPORE PRICESAND CHANGES IN AUSTRALIAN WHOLESALE DIESEL PRICESGenerally, there is a short time lag of 1-2 weeks betweenchanges in Singapore prices and changes in Australian prices.148Cents per litre ($A)Cents per litre ($A)140 The lag can be seen in FIGURE 3 on the previous page. That is,see the slight delay in the peaks and troughs in the pink line(National Average TGP) compared to the purple line(Gasoil 50ppm sulfur plus Shipping & Taxes). Importantly, this time lag occurs whether:prices are going up (when the lag slows price rises to consumers)or prices are going down (when the lag delays price falls). The lag is a result of using a rolling average of Singapore pricesas part of the wholesale pricing methodology (very similar to thatused by the ACCC when wholesale prices were regulated bygovernment). The pricing methodology is called import paritypricing (IPP). The use of rolling averages smooths day-to-day price volatility. Not accounting for this lag, introduced by the rolling average,leads to incorrect conclusions about how Singapore prices flowthrough to prices in Australia.The very close relationship between changes in Gasoil pricesand changes in Australian TGPs can be seen by applying arolling average to the Gasoil price data (a 7 day rolling averageis used in the Chart to the right to illustrate this).1401321241161081321241161081001009215/06/2011 15/09/2011 15/12/2011 15/03/2012 15/06/2012Australian Average TGP (Left Hand Scale)Gasoil Plus Shipping & Taxes - 7 Day RollingAverage (Right Hand Scale)5

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