Understanding Wholesale Fuel Prices
- 26 November 2019
To many drivers, the reasons behind the continual rise and fall of fuel prices is a mystery. However, there is a method behind the apparent madness, albeit quite a complex one. There are many factors that come into play in current and long-term fuel pricing.
One of the key facts to understand about fuel pricing is where the fuel is sourced. While Australian fuel providers are running at full capacity, around half of the bulk fuel we require comes from Asia. As Singapore is the primary refining and market centre for the region, the prices set by that market have a big impact on what we pay locally.
Import Parity Pricing (IPP) is another part of the puzzle. The IPP states how much the fuel costs when it arrives in Australian terminals - in other words, it’s the “landed cost”. This includes the costs of fuel set in Singapore, how much it costs to transport it by ship, variations of the Australian Dollar to Singapore Dollar currency conversion and insurance and fees.
After the IPP is determined, local fees such as government taxes and the operating costs of shipping terminals are added, before a small wholesale margin is applied. This creates the Terminal Gate Price, or TGP.
Terminal Gate Prices
The TGP has a close relationship with the IPP. it’s estimated that 95% of the TGP is simply the IPP and government taxes added. The Australian Competition and Consumer Commission estimates that the difference between the Terminal Gate Price and what the wholesale consumer pays is, on average, about 0.7 cents per litre. This indicates that the margin applied on top of the IPP is relatively small.
To keep the process as transparent as possible, Terminal Gate prices are published regularly. At Bulk Fuel Australia we maintain a Terminal Gate Price page with the latest information for our customers.
The time it takes to process and send fuel from Singapore to Australia is the reason why market changes in that country can take weeks to be felt locally. This is why it sometimes doesn’t make sense that falling fuel prices aren’t immediately carried over to local retailers.
Reasons for price changes can include unseasonal lowering or increasing of demand, volatile weather conditions that impact refineries or shipping paths, or any number of unforeseen fuel processing costs that can arise.
At Bulk Fuel Australia we’re about providing surety of supply to our customers no matter where they are or what they need. With our published Terminal Gate Pricing and growing capability, we know we can meet the needs of any business. Contact Bulk Fuel Australia today to find out more.