21 February 2022

Threat of Russian conflict driving Canberra's fuel prices up

| James Coleman
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Coles Express service station.

The good ol’ days when petrol was around $1.50 a litre. Photo: Michelle Kroll.

We all had our fingers and toes crossed that 2022 would be a peaceful and quiet year after more than two years of chaos. But two months in and there is already the threat of all-out conflict between Russia and Ukraine. For Canberrans, the effects can be felt every time you pull up at a petrol pump.

It’s never a good day when the low-fuel light comes on, but since the beginning of 2022, the dread has become even more real. Over the past eight weeks, the average price of unleaded petrol in Australia has risen by 17 per cent and 6.5 per cent in the ACT.

The average price of unleaded petrol in the ACT began the year at $1.68 per litre. As of Sunday (20 February), it had risen to $1.79.

READ ALSO Here’s everything you need to know about fuel

After fuel prices collapsed in April 2020 when COVID-19 first swept across the country, they have risen 96 per cent, reaching a record level in the last quarter of 2021. This due to demand for oil increasing as countries pull out of the pandemic-induced economic slump.

The Australasian Convenience and Petroleum Marketers Association (ACAPMA) is the national peak body representing the interests of Australia’s fuel wholesale, distribution and retail industry. ACAPMA CEO Mark McKenzie says the most recent upward swing is almost entirely to do with the threat of conflict in Russia.

“Russia is the second biggest producer of oil in the world, producing 9.8 million barrels every day. As it now stands on the edge of a conflict with Ukraine, it will be distracted from exporting oil. The global oil market is now factoring in this potential conflict.”

Mr McKenzie says Australia is heavily influenced by the global market, and that the global market has been dealing with “unprecedented conditions”, starting with the first lockdown in 2020.

“Back then, the place was awash with fuel that nobody really wanted.”

READ ALSO Petrol prices are on the rise in the ACT but other cities are hitting record-highs

In Australia, up to 85 per cent of the cost of fuel at the pump is due to overseas production costs. The remaining 15 per cent comprises costs and taxes associated with getting it on tap at local petrol stations.

Mr McKenzie says that since the first shock to the system, global wholesalers have been playing it safe with conservative estimates on global demand.

“You can’t just turn a refinery off like a light bulb. It can take six to eight weeks to spin a refinery up or down,” he says.

“But wholesalers have been consistently surprised by the rate at which countries have recovered from COVID-19.”

He also says that “demand for everything has increased”, leading to shortages across a range of goods and services.

Unlike other capital cities in Australia, Canberra isn’t affected by the fluctuating fuel prices seen in Sydney and Melbourne. As a result, our increase has been more gradual.

“You might go to Sydney and notice it’s 15 to 20 cents cheaper than Canberra,” Mr McKenzie says. “Other times, it will be more. This is due to a bidding war between local service stations, with a typical cycle lasting 28 days.”

In the week ending 13 February, Canberra recorded the third lowest average unleaded fuel price of the capital cities, after Adelaide and Sydney.

READ ALSO Drivers seek compensation from Mobil Yass over fuel error

The Federal Government has tasked the Australian Competition and Consumer Commission (ACCC) with monitoring the national fuel industry. Each company is required to report its income and costs every quarter, so Mr McKenzie doubts price gouging is at play.

But the future may not be bright.

“Trying to predict the future in this situation is impossible,” he says. “But the pressure will continue to trend upwards in the near term if nothing changes.”

He said that if the conflict in Russia does abate, we can expect the price increase to gradually drop off over two to three weeks.

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A bit off topic, but having ventured to Sydney at the weekend the prices there were far higher than what they were in Canberra. I got 95 for $1.85 in Canberra, in Sydney it was over $2.00. 91 in Sydney was high $1.80’s so more than 95 here.

Of course all part of the normal Sydney cycles but does go to show prices are not as bad (comparatively) to Sydney as we always seem to think.

I’ve got a diesel, so off to the chip shop to get their waste and make my own

In Europe a large country with a nationalistic leader moves troops into a neighbouring country to reclaim and ‘protect’ what it says is its own land and people.
In Asia an economically powerful country grows increasingly militaristic and moves armed forces into areas it claims as its own, threatening others who dare to oppose its expansion.
Is the year 1939 or 2022?

Capital Retro9:19 pm 23 Feb 22

But the Asian country is leading the world in their commitment have zero emissions in about 50 years time so they can do anything else they want to.

Always fascinating how future uncertainty immediately flows through to higher petrol prices, but anything that should place downwards pressure on prices, or indeed does reduce short term costs for petrol firms always takes weeks to come through on the basis of ‘existing stocks being bought at x price’ and similar…..

I would of thought you can’t have it both ways – but in a world where the ACCC is the toothless regulator, you can get away with whatever you want it seems.

The ACCC is as useless as a screen door on a submarine

I was going to point out the same thing, but you beat me to it.

But if banks can endlessly get away with raising interest rates by the full whack but lowering them by just a fraction, why wouldn’t fuel companies keep gouging as well.

I wonder if all those people sneering at EV adopters are so smug now.

Capital Retro1:04 pm 23 Feb 22

EV (Eternally Virtuous) owners should get realistic because for their preferred transport to become viable in Australia there will need to be millions of charging points (and the grid infrastructure to support them) in a very short period of time.

https://cleantechnica.com/2021/04/04/the-dutch-plan-to-install-a-million-chargers-by-2030/

Who is going to pay for all that?

Meanwhile, the infrastructure for petrol vehicles is established and paid for. The price of petrol will come down when supply is increased and global tensions are calmed.

The usual dinosaur argument: “We can’t implement 100% of the solution right now for zero cost, so let’s not even bother.” I imagine a similar thing was said when petrol-fueled cars started appearing. Funnily enough, that didn’t stop early vehicles like the Model T becoming popular even though there was no service station infrastructure existing at the time.

You have also tried to apply a report about the Netherlands, where a large percentage of the population only have kerbside parking and do not have access to a private garage or similar, to Australia where this is not the case. Nonetheless, the Dutch have identified a future problem and bottleneck, and are getting on with doing something about it. Something this country could well do to learn.

Maybe you hadn’t noticed, but petrol prices have historically only been going one way, well before this latest geopolitical mess. I also don’t think you have realised that petrol is a product with a profit margin built in. Who paid for the refuelling infrastructure for petrol cars? You did, and you continue to pay it.

Capital Retro3:51 pm 23 Feb 22

Err, petrol prices only going one way?

The petroleum companies financed what they were selling (without taxpayer funded subsidies, too) and of course it has a profit margin (and a lot of taxes) built into it. Next thing you will try and tell us is that electricity prices have been falling for years because electricity is “free”.

Without subsidies? Really?

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