Diesel prices continue to soften

Jon Condon, 18/07/2011

A further easing in political unrest in the Middle East and weakening demand for energy products in China have contributed to softer diesel fuel prices in Australia again this month.

Other factors behind the trend include renewed financial troubles in Europe which is slowing fuel demand in that region, and a withdrawal of funds from the international raw materials market, energy market analysts say.

The Australian Institute of Petroleum report for the week ending Sunday, July 17, shows a national average retail diesel price in regional (non-metropolitan) areas of Australia of 149.9c/litre. That's down 1.5c/l on Beef Central's corresponding report last month, and 4.7c/l on May figures. Several regions recorded drops between June and July of more than 2c/l.

With cost of production pressures rising and livestock returns currently in decline, any savings in diesel fuel costs will be welcome relief to beef producers – particularly those in more remote regions where transport distance and freight costs are higher.

At a state-by-state level, country and regional diesel prices in this week's report ranged from 145.7c/l in Victoria (down 2c/l), to 150.7c (NSW); 149.3c (Qld), 152.2 (WA), 149.7c (SA); 153.5c (Tas) and 167.8c (NT).

As the accompanying graph shows, national prices reached a high point around 157c/l in early April, before beginning to ease in early May around the time the A$ value softened off extreme levels above US109c.

Crude oil, diesel and petrol prices are closely linked, as the price of crude oil accounts for the vast majority of the cost of producing a litre of petrol or diesel, AIP says. Crude oil is purchased in US dollars, 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.

The big rise in regional prices evident in the graph started around the end of February, when diesel was worth around 140c/l – still 7 percent below where prices currently sit. Today's price is still more than 12pc above the market at the start of December. 

The AIP national regional average price is calculated as a weighted average of retail diesel fuel prices for non-metropolitan regions in each State/Territory, where the weighting is based on the number of vehicles using diesel fuel. All values are in cents per litre and are inclusive of GST.

Energy market commentators suggest there is still further downside likely in diesel fuel prices, particularly if pessimism about the global economic prospects linger.

  • Click on the image here for a better view of recent regional Australian diesel price trends.


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