What's affecting current prices?

Average Australian retail petrol prices reached a 26-month high of 140 cents per litre at the end of January 2011, reflecting the US$25 a barrel or over 30 per cent surge in the Singapore unleaded petrol price since September 2010.

Economists such as CommSec forecast that petrol prices around 140 cents per litre or higher are likely to remain in the coming months, due to the recovery of economies around the globe, and in particular the sustainable improvement in the US economy.

Oil industry analysts Energy Security Analysis, Inc .expect that product demand will increase with further economic recovery in 2011, but believe that this growth is not enough to fully absorb rising regional supply in the short term, suggesting that the market will remain bearish for some time.

The continuing recovery of China and India is likely to impact regional petrol prices, which will flow through to Australia.

Geopolitical instability in the Middle East has the potential to continue to impact oil prices. This was demonstrated in late January 2011 when oil prices increased by 4 per cent in one day following the onset of civil unrest in Egypt.

Updated: February 2011

The Singapore price factor

The price of all fuel sold by Caltex is calculated using an import parity price as a basis - that is, what it would cost to land fuel from Singapore refineries into Australian terminals. This includes the Singapore benchmark price for refined petrol or diesel, the addition of a quality premium to take into account Australia's high fuel standards, plus shipping costs and cargo insurance. This is then converted from US dollars per barrel into Australian cents per litre. Australian refineries must compete with this import parity price.

How Caltex calculates petrol prices

	US$ PER BARREL (31/1/2011)	AUSTRALIAN CENTS PER LITRE
Price of petrol from Singapore refineries	110.41
Add negotiated quality premium	2.75
Add shipping costs Singapore to Australia	2.04
Add cargo insurance	0.28
Subtotal - convert to Australian cents per litre	115.48	70.45
Add Australian port costs		0.2
Import parity price		70.65
Add government fuel excise		38.14
Subtotal - import parity price + excise		108.79
Add wholesale margin		varies
Subtract wholesale discounts		varies
Add freight		varies
Add retail margin		varies
Subtotal (indicative only)		125.45
Add 10% GST		12.55
Retail price (indicative only)		138.0

Notes to chart:
* One barrel holds 159 litres
* The Singapore refinery price is estimated daily by Platts, an international information service
* The margins above are inclusive of operating costs, wages and any loan payments and are not indicative of profit margins

Don't forget the fuel excise and tax

For every litre of petrol or diesel, whether it is imported from overseas or made here in Australia, an excise of 38.14 cents is collected by the Australian government. GST applies on top of the total price, including the excise.

The wholesale level

Once the import parity price plus excise is determined, Caltex adds a wholesale margin, which allows us to stay in business and continue to invest in the future, as well as the cost of any freight to deliver it to customers. From here, wholesale price discounts may be offered to meet competition.

At the bowser

In a Caltex-branded network of about 1650 service stations, Caltex sets the price at less than 300 sites. Woolworths sets the price at more than 500 Caltex-Woolworths and Caltex-Safeway co-branded stations, and franchisees, resellers and independent retailers set the price at the remainder of retail sites. When setting prices, retailers need to consider the wholesale price they paid and price competitively according to other retailers in the local market. The final price also includes 10 per cent GST.