DIESEL fuel prices across regional and rural parts of Australia have continued their sharp descent, reaching six-year lows recently.

As has been well-telegraphed in mainstream media, world oil prices have continued to plummet into January, as rising oil supplies collide with weak international demand in China, Europe and elsewhere, and OPEC oil-producing countries maintain their commitment to not cut production.

Combined with this, recent lower prices do not yet appear to be stimulating demand growth, energy analysts say. Other factors, including weak currencies in consumer economies, consumer tax hikes, lower spending in consuming countries and mounting deflationary concerns, have kept demand in check. Analysts suggest the oil market is undergoing an historic shift, and is unlikely to turn around any time soon.

In essence, lower levels of economic activity means lesser demand for fuel, which is now being reflected in price.

If anything, the graph published here of pump price trends for diesel across regional and rural Australia suggests the rate of decline in price is gathering pace, not slowing down.

Prices for diesel in rural and regional areas of Australia averaged 134.5c/litre for the week ended Sunday, January 18 – down a whopping 16.4c/litre since our last report in late November.

It means prices for diesel have fallen close to 30c/litre since the decline started back in July-August last year. This time a year ago, diesel prices in regional and rural areas were stubbornly high, at close to 164c/litre.

Australia is only about 40 percent self-sufficient in transport fuels, meaning international market trends and currency have a direct impact on local pricing.The Australian cattle industry is heavily reliant on diesel fuel, used for livestock transport, water pumping and power generation.

The latest Australian Institute of Petroleum survey for the week ended January 18 shows that based on current average diesel price for regional/rural areas of Australia, filling a Toyota Landcruiser 200 series (138 litres, main and auxiliary tanks) today would cost more than $41 less than the same fill this time a year ago, and $22 less than in late November.

Collectively, all states logged some of their biggest monthly declines ever recorded, but the biggest reductions were seen in the Northern Territory, South Australia and Tasmania.

Regional non-metro diesel prices in the latest AIP report for the week ended Sunday included:

• Victoria 131.4c/litre (down 16.6c/litre since late November)
• NSW 134.5c (down 16.7c)
• Queensland 135.6c (down 13.7c)
• WA 140.2c (down 16.4c)
• SA 128.8c (down 19.3c)
• TAS 137.8c (down 18.9c), and
• NT 145.2c (down 23.1c).

Notes:

AIP’s reported prices are calculated as a weighted average of retail diesel fuel for country regions in each state/territory. All values include GST.

Variation in fuel prices can have a considerable impact of cost of production across the Australian beef industry, impacting on livestock transport, cost of shipping in live cattle and boxed beef exports, pumping stock water and providing station electricity in remote locations.

Crude oil, diesel and petrol prices are closely linked, as the price of crude oil accounts for the majority of the cost of producing a litre of petrol or diesel. Crude oil is purchased in US$, meaning that changes in the value of the A$ against the US have a direct impact on the relative price of crude oil in A$ terms.