Regional differences in Australian petrol prices

(January 27, 2016)

The retail fuel market in Australia is liberalized and the changes of the domestic fuel prices follow the changes in the crude oil price on international markets. However, tracking only the national average fuel prices could be misleading. A detailed research of the Australian fuel market reveals a significant regional variation in pump prices.

Retail gasoline prices in Australia have been falling since mid-2015 due to the cheap oil, reaching 1.15 AUD (80 US cents) per liter in January 2016. The quoted price is an average of pump prices at various service stations across the country but these pump prices vary widely. The chart below presents the gasoline retail prices in 50 of the most populated cities in the country as of January 2016. The price difference between the first city (Adelaide, South Australia) and the last city (Alice Springs, Northern Territory) in the ranking is 35 percent. If we also include smaller towns in the ranking the variation becomes even greater. For example, in Fitzroy Crossing, Western Australia the retail gasoline price was 1.64 AUD per liter in January 2016. Such regional differences are also observed in the prices of other petroleum products (Diesel and LPG).

What factors explain these differences? Unlike the US, where individual states impose different fuel taxes, the excise taxes on gasoline are the same across Australia. The main reason for the fuel price variation by city and region is the cost of distribution and marketing. In Australia, these costs vary widely due to the large area of the country. Transportation, storage, and handling costs can be significantly larger in locations that are distant from refineries and liquid fuel terminals or are less populated. Retailers' margins also vary across the country depending on the level of competition and retailers' pricing policy.

See the current gasoline prices in Australia.

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