DIESEL fuel prices across regional and rural Australia have continued to fall sharply, driven mostly by reduced global demand as expectations over economic growth in regions like China and Europe are adjusted downwards.

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

The lower demand trend has overwhelmed the effects of a softer Aussie Dollar against the greenback, which under other circumstances would have pushed diesel prices higher.

International oil prices fell for a fifth straight month in October on abundant supply, slowing demand growth and a stronger US dollar. Brent crude oil prices are now at a four-year low below $80/barrel, down 30pc from their June peak.

The global demand estimate for the September quarter has been revised down to its lowest level on close to five years. Demand growth was particularly weak in OECD Europe, OECD Asia Oceania and China.

The softer demand side of the equation has swept away any lingering concerns about supply out of the troubled oil producing regions of the Middle East, North Africa and the Ukraine.

Prices for diesel in rural and regional areas of Australia averaged 150.9c/litre earlier this week, easing a further 4.2c/litre since our previous report a month ago, and back close to 10c/l since July.

The prolonged easing trend follows three months of stubbornly high diesel prices at or around 164c/litre at the start of the year.

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 latest survey for the week ended November 23 conducted by the Australian Institute of Petroleum 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 $19.30, or 9 percent less than the same fill back in January.

Biggest declines in regional diesel price this month have been seen in the Northern Territory, NSW and South Australia.

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

• Victoria 148c/litre (down 3.6c/litre since late October)
• NSW 151.2c (down 4.7c)
• Queensland 149.3c (down 4.1c)
• WA 156.6c (down 3.8c)
• SA 148.1c (down 4.7c)
• TAS 156.7c (down 2.7c), and
• NT 168.3c (down 5.6c).

Notes:

• The 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.